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Big Banks Use Revolving Door to Fight FinReg

April 29, 2010 - by Donny Shaw

One of the best ways for a corporation to affect government policy is to hire lobbyists with personal connections to the people they will be lobbying. Not surprisingly, this is one of the technique the big financial companies have been using to fight financial reform legislation. Last year, 71% of the lobbyists hired by the six biggest bank-holding companies were former government officials, the Sunlight Foundation's Paul Blumenthal reports.

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If the pre-funded "orderly liquidation fund" is dropped, the financial reform bill will increase the deficit, not reduce it. According to This morning's Congress Daily ($), Banking Committee Chairman Sen. Christopher Dodd [D, CT] and Ranking Member Sen. Richard Shelby [R, AL] are close to an agreement on dropping the fund, which Republicans have been attacking as a "sluch fund" that "guarantees" future bailouts. In reality, the fund would be used to pay for liquidating (a.k.a. killing) failing mega-banks, not bailing them out.

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The Republicans' claims that the $50 billion "orderly liquidation fund" in the Restoring American Financial Security Act would "guarantee bailouts" have been pretty thoroughly debunked at this point, but I'm reading through the comments on the OpenCongress bill page and there still seems to be some confusion. For example, the highest rated comment right now is an attempt to fight back against the Republican bailout claim, but it still gets it a little wrong. "My understanding is there is a fund, funded by the banks themselves to bailout the large banks. So it doesn't impact taxes and it just means they have to bail themselves out not the government," the commenter writes.

That's not quite right. There is a fund in the bill (the "orderly liquidation fund") that would be funded by the big banks in order to keep taxpayers from being on the hook if they fail, but the fund would be used to put failing banks to death, not to bail them out. With bailouts, banks get rescued by the government and survive. Under this bill, failing banks would be executed by the government. The orderly liquidation fund would provide the working capitol the F.D.I.C. would need to carry out the complicated process of winding down big, failing banks.

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Sen. Bernie Sanders [I, VT] yesterday forced a vote on an amendment on breaking up the big banks in the Budget Committee mark-up of the 2011 budget resolution. The amendment didn't pass, but it came closer than I think even Sanders expected. It was rejected on a 12-10, bipartisan vote, which Sanders in a press release called "a strong signal of the growing momentum behind proposals to dismantle financial institutions that dominate the U.S. economy."

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An Amendment to Break up the Big Banks

April 21, 2010 - by Donny Shaw

There has been an ongoing partisan spat in the Senate recently over whether or not the financial reform bill as prepared by Sen. Chris Dodd [D, CT] would actually end bailouts. Politifact has shown that Minority Leader Sen. Mitch McConnell's [R, KY] statement that the bill "actually guarantees future bailouts of Wall Street banks" is false, but there is more ambiguity over whether the resolution authority provision in the bill is actually strong enough to guarantee that there will never again be bailouts of too-big-to-fail banks.

Sens. Sherrod Brown [D, OH], Ted Kaufman [D, DE], Bob Casey [D, PA] and Sen. Sheldon Whitehouse [D, RI] today announced that they are proposing legislation that I think everyone can agree would end once and for all the problem of having to bailout failing banks that are too big to fail.

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Financial Reform Roundup

April 16, 2010 - by Donny Shaw

The big Wall Street reform bill (S.3217) could hit the Senate floor as soon as next week. The legislative pieces are falling into place, the White House is staking out its position and the Republicans are firming up commitments of opposition from their more moderate members. Here's a roundup of the latest financial reform news out of the Senate.

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Getting Serious About Ending Bailouts

April 13, 2010 - by Donny Shaw

Senate Minority Leader Mitch McConnell [R, KY] went before the Senate this morning and repeated a line from Frank Luntz's financial reform talking points memo that the Democrats' financial reform bill would lead to endless taxpayer bailouts of the big financial firms. Ezra Klein does a good, realistic debunking:

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Getting Tough on Wall Street

April 12, 2010 - by Donny Shaw

Politico reports that some Democrats are preparing a big push to strengthen financial reform legislation when it comes to the Senate floor in a couple weeks:

A group of Democrats, joined by Senate Majority Whip Dick Durbin of Illinois, are planning an aggressive spring offensive to strengthen key provisions of the financial reform bill - and daring Senate Republicans to vote against them.

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When financial reform negotiations broke down a couple weeks ago, Sen. Bob Corker [R, TN] (pictured at right) was the one to stand up and say that a bipartisan bill was still possible. Last week, when the Republicans refused to participate in the mark-up of the bill, Corker called it "a very large strategic mistake," adding that financial reform "is an issue that almost every American wants to see passed." But today he announced that he "absolutely cannot support" the bil.

Senate Democrats, as we know, need to pick off at least one Republican, in addition to holding their own party together, to overcome an inevitable Republican filibuster. They have basically three options -- find a Republican other than Corker who may be willing to vote for the bill, negotiate down some of the provisions to a point that Republicans can support it, or call the Republicans' bluff and just bring the bill to a vote.

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WWGSD

March 17, 2010 - by Donny Shaw

Mike Konczal of the excellent Rorty Bomb blog is a former Wall Street financial engineer. He took a look at the recently unveiled Dodd financial reform bill through the galsses of his Wall Street experience to see what Goldman Sachs might be thinking.

I actually read this bill as if I was a Goldman Sachs lobbyist, looking for all the sections that I hated and made a list of what items I needed to lobby hard on to kill or modify.

My final verdict, by the time I got to the end? If I was a Goldman lobbyist, I’d probably shrug and go “eh, pass it.”

 

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Not to be Missed

March 17, 2010 - by Donny Shaw

Sen. Ted Kaufman [D, DE] gave a widely lauded floor speech last week calling for strong financial reform legislation and an end to "too big the fail." Now that C-SPAN has put their entire archive online, I can post it here:

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Summary of the Dodd Financial Reform Bill

March 15, 2010 - by Donny Shaw

Sen. Christopher Dodd [D, CT] unveiled his long-awaited financial reform bill this afternoon, calling it the most sweeping reform of Wall Street since the 1930s. It's a 1,336-page document, which you can read in full here (PDF). But in case your not in the mood right now to dive into the details of derivatives reform, consumer financial protection and systemic risk regulation in full legalese, I've converted the 11-page summary from Dodd's office into HTML and posted it here. This is no substitue for a thorough, independent analysis, but it at least gives you a sense of the bill's scope -- what's in it and what isn't.

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Who Still Supports TARP?

January 22, 2010 - by Donny Shaw

The Senate yesterday gave the TARP a check-up. More than a year after its creation, they took a vote on an amendment from Sen. John Thune [R, SD] to prohibit the Treasury Department from giving out any more TARP money and require all funds that are paid back by the banks to be used for lowering the national debt. Click through to see how they voted.

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If "Reinstate Glass-Steagall" didn't sound so arcane, it would have been the lead rallying cry for the financial reform movement over the last year. More than any other act of Congress, the 1999 law to repeal the Glass-Steagall Act, a New-Deal-era law separating commercial banking from investment banking, has been named as a main cause of the collapse and, more significantly, the resulting bailouts of "too big to fail" banks.

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House Approves Wall Street Reform Bill

December 11, 2009 - by Donny Shaw

More than one year after the crisis on Wall Street, the House of Representatives today passed a landmark bill (H.R. 4173) to fix some of the regulatory lapses that are alleged to have caused the crisis and puts in place new mechanisms for preventing "too big to fail" banking and the resulting bailouts.

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