Last year's Dodd-Frank financial reform bill didn't directly fix the too-big-to-fail problem that necessitated the 2008 bailouts. Instead, it allowed the big banks to grow even bigger, but gave regulators new authority to require the big banks to report more information to the government and force them to follow stricter rules. It also gave regulators new guidelines to consider when deciding whether or not to allow bank mergers that could create new too-big-to-fail entities. Basically, the bill took a noncommittal approach to addressing issues of bank size and interconnectedness. Congress punted the big decisions off to regulators and made it possible for regulators to take drastic action, but gave them a lot of leeway to maintain the status quo if they so choose.
These provisions of the bill are about to get their first test. Capital One, currently the ninth largest bank-holding company in the U.S., has reached an agreement with the Ducth ING Groep to purchase their U.S. arm, ING Direct. They are planning to then turn around and leverage assets gained in that deal to purchase HSBC's subprime credit card division. The acquisitions would make Capital One the fifth largest bank in the U.S., right behind such infamous too-big-to-fail giants as Bank of America, Chase, Citigroup, and Wells Fargo. It would mean that financial assets and power in the U.S. would become even more concentrated in a small group of top corporations.Read Full Article
Back in 2009, one of the first things Congress did to actually start dealing with the causes of the economic crisis was to give the Justice Department more power to detect and prosecute fraud in the financial markets. As part of that bill, the "Fraud Enforcement and Recovery Act," they created a bipartisan commission "to examine the causes, domestic and global, of the current financial and economic crisis in the United States" and laid out 22 specific areas of financial activity for them to investigate. Today, more than 20 months after the bill was signed into law, the commission has released their report.Read Full Article
Rep. Ron Paul [R, TX-14], the most popular member of Congress amongst OC users, is in line next session to take control of the Domestic and International Monetary Policy, Trade and Technology subcommittee, oversees the Federal Reserve, among other things. Paul is well known for being critical of the Fed, having recently authored a book titled "End the Fed" and sponsoring legislation session after session designed to accomplish just what the book title suggests. He has inspired a powerful, Tea Party-aligned grassroots movement around his ideas of abolishing the Fed and changing the fundamental structure of the U.S. monetary system. With the Fed right now at the center of efforts to get the economy back up and running, having Paul take over Fed oversight right now could really shake things up.Read Full Article
The vote that best represents the general anger with Congress these days is passage of TARP, the taxpayer-backed bailout program that rescued the banks and car companies from bankruptcy, but did nothing to help the unemployed or foreclosed. Unfortunately, when asked, most people get the basic facts about TARP wrong. I'm not talking about the impacts of the policy or whether or not it was a good idea, just the basic, verifiable facts like who proposed it and who voted for it.
Given that this is still weighing on voters' minds, and that it's been more than two years since the actual vote, here's a quick refresher.Read Full Article
The real problem with too-big-to-fail is that in a post-Citizens United world there is virtually no limit to the amount of money these enormous companies can spend on making sure their favorite lawmakers get elected. Too big to fail is primarily a political problem. It's a self-perpetuating cycle whereby huge companies are allowed to grow indefinitely (i.e. not fail organically) because they have the financial muscle to buy-off the lawmakers in a position to protect them from regulation and bail them out when they get into trouble.
Not surprisingly, in this election cycle, companies that have taken money from the 2008 TARP bailout are focusing their political giving on candidates who support the bailout, oppose new financial regulations, and are most likely to be in positions of power in the next session of Congress.Read Full Article
On Friday I wrote about a vote in the Senate on an amendment to the Small Business Jobs and Credit Act that sets up the bill for a successful vote on final passage next week. Senate Republicans have been opposing a provision in the bill to create a $30 billion small business lending fund because, they say, it's too similar to the TARP big-bank bailout program that was pushed through Congress by the Bush Administration in 2008. But on Thursday evening, Senate Democrats, with the help of a couple wayward Republicans, were able to secure passage of an amendment to keep the small-business fund in the bill.
So, naturally, I wanted to compare Thursday's vote on the small business lending fund with the 2008 vote on TARP itself. As it turns out, a total of 22 senators voted both in favor of the TARP program, which leant $700 billion to the big banks to do pretty much whatever they want, and agains the small business lending fund, which would lend $30 billion to small banks to loan to small businesses for the purposes of creating jobs. Here's the list:Read Full Article
After passing the unemployment relief bill, the Senate this week finally made some progress on what will probably be the final job-creation measure to be considered this year -- the Small Business Jobs and Credit Act of 2010.Read Full Article
In their attempt to wrangle enough Republican votes to pass the financial reform bill, Democrats have dropped a $19 billion tax on big banks and hedge funds. Senator Scott Brown [R-MA] in particular raised objections to this provision, believing that the cost would be passed on to customers.Read Full Article
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.Read Full Article
Two Senate Democrats are throwing another log on the now-annual firestorm over excessive bank bonuses. Earlier this month, Sen. Jim Webb [D, VA] and Sen. Barbara Boxer [D, CA] unveiled a proposal to tax employee bonuses at certain banks and Wall Street firms that received bailout funds from the Troubled Asset Relief Program (TARP). Dubbed the Taxpayer Fairness Act, Webb and Boxer's bill would impose a one-time, 50 percent tax on the bonuses at those firms and banks that exceeded $400,000 la...Read Full Article
The omnipresent refrain in Washington for the past few months has been “jobs, jobs, jobs.” Possibly terrified of the wrath of the unemployed voter, Senate Democrats are now making progress in crafting a jobs bill.Read Full Article
Despite being one day shorter than usual, this week felt like non-stop parade of big news – almost all of it bad for the Democrats. Click through for a point-by-point rundown of what's happened over the past week and how it effects the biggest issues in Congress going forward.Read Full Article
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.Read Full Article
Drawing upon the growing populist anger at Wall Street, two House Democrats have introduced dueling bills that seek to heavily tax over-sized bank bonuses.Read Full Article
When the Senate takes their vote in January to raise the limit on the national debt by $1.5 trillion, Senate Republicans will be allowed to hold votes on four politically sensitive amendments that will put Democrats on the spot on spending issues.Read Full Article