House Passes Deregulation Bill Written by Citigroup

House Passes Deregulation Bill Written by Citigroup

Bill Black: Both parties support Wall Street's effort to deregulate derivatives -   October 31, 2013
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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.


House Passes Deregulation Bill Written by CitigroupJESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this edition of The Bill Black Report.

Now joining us is Bill Black. He is an associate professor of economics and law at the University of Missouri-Kansas City, and he's a regular contributor to The Real News.

Thanks for joining us, Bill.


DESVARIEUX: So, Bill, what are you working on this week?

BLACK: So I'm dealing with the effort--primarily by Republicans, but with strong support from Democrats--to gut the Dodd-Frank act. So this has multiple parts, but the one I'm going to concentrate on is the passage of or attempted passage of legislation that would remove the protections that Dodd-Frank tried to put in place. And remember, Dodd-Frank didn't put a whole lot of effective protections in place.

So two big things that Dodd-Frank didn't do are coming back to bite it. Dodd-Frank didn't simply repeal the repeal of Glass-Steagall and reintroduce that law that had separated commerce and banking, and in Dodd-Frank they didn't simply repeal the Commodity Futures Modernization Act of 2000, which had created the massive regulatory black hole on financial derivatives. But there were specific provisions that had elements of Glass-Steagall and elements of giving regulatory authority over financial derivatives that were put into the Dodd-Frank bill. And the big banks, working to some extent with the big corporations, are making an enormous effort to get rid of these protective portions of the law.

So the one I'm going to focus on is the one that was driven by Citibank that would allow a wide range of financial derivatives to be done directly by the bank, which is to say, the insured entity, which is to say, the government would be on the hook if there were losses. And Dodd-Frank was designed to prevent or at least dramatically minimize that. So this is a truly awful bill.

And we talked about it earlier. An analysis of the 80 lines of the bill when it was first introduced showed that 75 of them were written by Citicorp, including entire paragraphs in which the only thing changed was to make some words plural by Congress. And this has been adopted by the House of Representatives by a greater than two-to-one margin, with virtually all Republicans supporting it and 70 Democrats supporting it. And there's been a study that shows the people that are cosponsoring this kind of bill get $18 from the banking industry and finance industry for every $1 that goes from that industry to people who oppose the bill. So you get what you pay for type of thing.

And, by the way, this is one of eight bills that the House has passed. This particular bill probably won't become law this year, because the Obama administration has said it's not in favor of it, and simply the time of the year and such.

But on top of that, two things have just happened. The Republicans are now, again, blocking any effective regulators from being appointed. So there was someone with a very good track record who was going to be appointed to run the federal housing finance administration, and Senate Republicans have just blocked him by threatening to keep talking. And, unfortunately, the Democrats don't make them do that.

And the second thing--and this just happened minutes ago as we're taping this--is that they blocked a appointee to the D.C. Circuit. So this is the Court of Appeals for the District of Columbia. And this is the critical place that is being--it is controlled. It has a shortage of judges, because the Republicans have been blocking any appointees to this particular court.

And the reason they do is right now it has a tenuous Republican majority on the court that is going back to those who--our viewers that remember substantive due process, when conservative judges used to overturn legislation 'cause they didn't like it, well, that's what they're doing on regulations. And they are blocking regulations that were to be adopted under Dodd-Frank by the Securities and Exchange Commission and the Commodity Futures Trading Commission in particular that are designed to restrict the big banks. And so the Republicans are desperate to keep the D.C. Circuit as a Republican fiefdom that can block regulation.

And the politics of this is that the Republicans are explicitly running as the anti-regulatory party, saying that Dodd-Frank is a terrible thing, not because it's weak, but because it has too many rules and that's causing the recession, and so we have to gut Dodd-Frank, and we have to keep effective regulators from being appointed, and we have to keep judges from being appointed who weren't, you know, folks who would overturn the regulations left, right, and center on these specious class-benefit grounds. So all of those things are happening.

The key thing for Democrats is that this has substantial support from Democrats, particularly Democrats on the House Financial Services Committee, 'cause that's where they put members of Congress (both parties do this) who are in easily contested elections. And the reason they put them on House Financial Services is everybody knows it's a gold mine in terms of getting political contributions from big finance. But, of course, it's only a complete gold mine, highly productive gold mine, if you support the bankers in this position. So what you see is freshman after freshman after freshman Democrat on House Financial Services is lining up to try to gut Dodd-Frank.

DESVARIEUX: Okay. Bill Black, always a pleasure having you on.

BLACK: Thank you.

DESVARIEUX: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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