Another Pyrrhic Victory for Wall Street in the House

Wall Street bribery and U.S. House leadership stupidity combined to give another big “victory” to the big banks over the regulations of the Dodd-Frank bill on Jan. 14. The House voted 271-154 for yet another bill, HR 37, containing sticks of dynamite for bankrupt Wall Street banks to use to blow up the approaching financial crash.

The anti-Wall Street backlash group of leading Democrats which has formed in both Houses against these bills, is demanding that Obama veto this one. But he’s signed two bills in the past month with the same kind of Wall Street regulation-killers and bailout provisions in them, including repeals of derivatives regulations which Obama opposed back when Dodd-Frank was passed in 2010.

The Wall Street strategy, as described in repulsive detail in a front-page New York Times story yesterday morning, is: Pay for massive lobbying ($110 million estimated in 2014); and corrupt Congress with wall-to-wall campaign and PAC contributions, with special largesse to the financial committees of both Houses. All other economic sectors cut back their lobbying expenditures in 2014, the Times reported; Wall Street juiced theirs up.

The Glass-Steagall Act — a simple structural reform which breaks up megabanks on “bankruptcy reorganization” principles — worked for 60 years and will work again. But Dodd-Frank — a thousand little regulations supposed to take effect at various times within 5-7 years (when it was passed in 2010) — doesn’t work. What Wall Street is doing now, with Rep. John Boehner’s GOP leadership, is simply postponing those Dodd-Frank resolutions which cramp their wilder speculations, off into 2019 or later.

Their latest triumph, HR 37, lets them speculate with “CLOs” — collateralized loan obligations — until 2019 at least. One has to read Michael Lewis’s The Big Short to appreciate how destructive CLOs and their evil cousins “CDOs” — collateralized debt obligations — were to the economy in the 2007-08 financial crash. Secondly, HR 37 lets Wall Street banks that own, say, oil or gas operations trade derivatives over the counter (i.e., out of sight and regulation) rather than in central clearinghouses.

These victories by a bankrupt Wall Street, over a sticks-and-straws Dodd-Frank Act which was passed to block Glass-Steagall, brings restoring Glass-Steagall back front-and-center.

This was reported most bluntly in a USA Today column Jan. 13, “Clip Dodd-Frank at Your Own Risk.” It notes,

If the Wall Street-hating general public gets involved, the bipartisan bills in both Houses to restore Glass-Steagall, could prevail, the column concludes.