TRNN’s Jessica Desvarieux looks at the key bill provisions benefiting Wall Street, and also examines the so-called opposition of Democratic lawmakers


Story Transcript

UNIDENTIFIED: –passage of the bill, if ordered. This is a five-minute vote. JESSICA DESVARIEUX, TRNN PRODUCER: The votes are in. This Wednesday, the House passed bill HR 37, which would change regulations for Wall Street. Some have dubbed it the Franken bill because of its combination of 11 bills, all aimed at weakening regulation of banks and the financial sphere. This bill created an opposition movement in the Democratic Party by leaders like Financial Services Committee ranking member Maxine waters. MAXINE WATERS, U.S. REPRESENTATIVE (D-CA-4): Here debating again about whether or not we are putting our taxpayers and Main Street and our small businesses at risk, going back to some of the same tactics, some of the same ways that were used by the banks that brought us to the point of a recession, almost a depression. DESVARIEUX: Last week the bill failed after not receiving the two-thirds needed for a special vote. But the Franken bill soon came back to life on the House floor this Wednesday. But what does this bill do exactly? For one, it gives banks an additional two-year extension to implement the Volcker Rule. This would be on top of the additional year extension given by the Fed last month. If this bill becomes law, that means the Volker rule wouldn’t go into effect until 2019. We asked economist Bill Black to explain the significance of the rule and its delay. BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Back when the Democrats still had control of the House and the Senate, they got the Dodd-Frank bill passed, which had this Volcker rule that said, you, the banks, are going to have to get rid of these financial derivatives operations in the bank. And if you want to continue them, put them in separate subsidiary that isn’t backed by the Treasury, and we can allow them to fail. Now, of course, the banks hate this idea. And when I say the banks, I mean the people who control the five largest banks. So this is the Jamie Dimons of the world. And the folks, of course, control the trade associations as well, and they have spent a blizzard of money. There’s an article in the Wednesday New York Times that gives the data on just how much the lobbyists are spending to try to defeat the Volcker rule. DESVARIEUX: Second, the bill exempts CEOs from having to disclose certain financial information about their companies. It would change the rule given out by the Securities and Exchange Commission, also known as the SEC, allowing private companies to compensate their employees up to $20 million in company securities without having to provide the employees certain basic financial disclosures about the company. Black says he sees this lack of transparency as being problematic. BLACK: They don’t have to give historical information in the same way that they did before so that they could pick and choose some particular month and say, hey, look, compared to this month, we’re doing really, really well, instead of being required to do standardized comparisons, which would often show that they for the great bulk of their activities weren’t doing well at all. And, of course, one of the great dangers with employees, which we saw in Enron, is these bonus programs, pension programs, in which you’re paid in stock of the company. And if you make it a fraud-friendly environment, more of these companies will be run by fraudulent CEOs, they’ll destroy the company, and they’ll leave the workers and the investors out in the lurch. So instead of creating jobs, this creates fraud, and fraud is one of the greatest destroyers of jobs, as we’ve just seen in the last crisis. DESVARIEUX: Another provision in the bill would exempt hedge fund managers from registering with the SEC. BLACK: We know that what these hedge funds do often falls within the law on Dodd-Frank, would make you a broker and would make you subject to Securities and Exchange Regulations designed to prevent abuses, so you–for hedge funds and only for hedge funds, special rule: you don’t have to be a broker, you don’t have to register, you don’t have to be subject to these rules, go and do evil and become even wealthier. DESVARIEUX: In the last Congress, not one member of the House Financial Services voted against the rule. Both Republicans and Democrats supported it. Black says the committee has become a place for both parties to get donors from finance, and Democrats like minority whip Steny Hoyer and Representative Maxine Waters have supported bills dismantling Dodd-Frank. BLACK: There have been 70 or more Democrats voting for the worst of these bills to begin the process of destroying Dodd-Frank, starting with the Volcker rule and such. And many of them are African-Americans, for example. So part of the black caucus, they’re liberal on many issues, but this, the money has at times talked a great deal. DESVARIEUX: Even if the bill does pass the Republican-controlled Senate, the White House says it will veto it. But if enough Democrats stand for the bill, it could be overwritten, a plan that Wall Street is banking on. For The Real News Network, Jessica Desvarieux, Washington.

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


William K. Black

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.