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Gibson writes: "The omnibus spending bill that Congress is about to pass is just about the most corrupt and dangerous piece of legislation to come out of Washington in a long time."

Derivatives trading contributed to a financial meltdown in 2008. (photo: USA Today)
Derivatives trading contributed to a financial meltdown in 2008. (photo: USA Today)

ALSO SEE: Six Reasons the New Budget Is Bad for America

ALSO SEE: Congressional Budget Welcomes Big Bank Bailouts Once More Despite White House Opposition

Why President Obama Should Veto This Budget and Shut Down the Government

By Carl Gibson, Reader Supported News

11 December 14


shiver is running through Congress, looking for a Democratic spine to run up.

When this Congress works together to get something done, it’s almost always a great deal for their donors and a profoundly shitty one for the rest of us. The omnibus spending bill that Congress is about to pass is just about the most corrupt and dangerous piece of legislation to come out of Washington in a long time. Spineless Democrats are caving to Republican hostage demands, doing anything to avoid a government shutdown. But Obama could send a strong message with his veto pen to the 114th Congress – any deal this bad won’t get his signature, regardless of a shutdown threat from Republicans. So what’s so bad about this deal that a government shutdown is preferable? A lot of things, but one stands out more than the rest.

Last year, House Republicans passed a bill that would’ve repealed the government’s new regulations preventing derivatives trading from being insured by the FDIC, but the Senate killed it. The current spending bill expected to hit President Obama’s desk by Thursday night includes the same language from that bill, and Republicans buried it in the massive document betting on Democrats to pass it rather than have a government shutdown fall on their shoulders. The kicker is that lobbyists working for Citigroup, which received $476 billion in cash and guarantees in the 2008 bailouts, wrote 70 of the 85 lines in the derivatives deregulation bill that was just concealed in the omnibus spending bill.

The previous financial collapse happened largely because Wall Street lost big making risky bets on derivatives, and demanded a taxpayer bailout lest we watch all of our assets go down the drain. Most people who have real jobs and actually contribute value to the economy don’t know what a derivative is, but a layman’s explanation for a derivative is a security that Wall Street trades in high numbers that’s based on the value of another asset, like a homeowner’s mortgage or another nation’s credit. Derivatives were specifically invented to avoid being categorized as something the federal government is tasked with regulating, like securities, bonds, insurance, or gambling, which is why Dodd-Frank's provisions on derivatives regulation are so important. Given all of that, what the House just slipped into the federal budget for next year is guaranteed to eventually cause a financial crash that would make 2008 look like a bumper getting tapped by a moped at a red light.

According to Forbes, the amount of derivatives trading on the global market is valued at over $700 trillion, which is ten times the size of the global economy. The U.S. derivatives market is approximately $230 trillion, and Bank of America and JPMorgan Chase have close to $150 trillion in derivatives. What makes this so dangerous is that 71 percent of BofA’s derivatives are held in the bank’s depository arm, and 99 percent of JPMorgan’s $70 trillion in derivatives are in their depository arm. While a lot of those numbers exist only tangentially, there’s still $12 trillion of actual cash that’s at risk.

The problem with this is that both BofA and JPMorgan have just $1 trillion in cash deposits. The bigger problem is that section 716 of the Dodd-Frank act forbids government bailouts of banks with taxpayer money, meaning the only way the big banks can save themselves in the event of another crash is by seizing the cash in all of our accounts in a “bail-in,” as Public Banking Institute president Ellen Brown covered in this detailed article. The biggest problem is that by sneaking this Citigroup-written derivatives deregulation into the federal budget, Republicans have put the FDIC back on the hook for insuring derivatives trading, which only has $25 billion in its depositor insurance fund.

Obviously, the FDIC’s insurance fund won’t be able to cover the next derivatives crash once the bubble eventually pops. In that situation, the only way to stop the global economy from imploding would be to reinstate the Glass-Steagall Act, which President Clinton repealed in 1999. If reinstated, the act would force banks to separate commercial operations from investment operations. But since this hasn’t happened, all of the money we keep in bank accounts because it’s presumably safer than having it in our pockets will eventually be seized by the banks when they lose at the derivatives casino. And if President Obama signs the spending bill into law as is, it won’t be a question of if this ever happens, but when.

Obviously a government shutdown is a terrible thing. Federal employees and members of the military won’t get a paycheck, leaving spouses and children in the lurch. Low-income families won’t get any food assistance or heating assistance. Early childhood education will stop. Nobody will be on the clock to inspect whether or not working conditions at factories are safe. Nobody will be around to monitor whether or not delicate nature preserves are being used as dumping grounds. Meat and pharmaceuticals won’t get inspected. Nuclear waste won’t get cleaned up. National treasures like the Grand Canyon and the Smithsonian will be closed. But as bad as all of that is, it doesn’t come close to nobody being able to withdraw any money from their accounts.

If President Obama is serious about protecting our life savings from being pillaged by the big banks, he has no other choice but to stand firm and veto any budget deal that includes derivatives deregulation. And we the people must be firm in pushing for a reinstatement of the Glass-Steagall Act that breaks up the big banks for good and prevents any future possibility of losing every cent we own.

Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it , and follow him on twitter at @uncutCG.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News. your social media marketing partner


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+14 # ritawalpoleague 2014-12-11 13:14
Final exam for a pres. I now call Pres. Oh Bomb Ah, the Disappointment of the Century.

Time we, all of us of any and all political persuasions who care one ounce about liberty and justice for all, get active plus, with massive amounts of courage and determination, and do all it takes (peacefully as is possible, please), for the sake of our kids and generations to come, to revolt and implode this dreadful mess, and...

+63 # Barbara K 2014-12-11 14:36
I hope a good Dem puts a hold on the Bill. Of course, another option is to take out the bad stuff, then approve the Bill with changes and send it back to the House. They are just playing politics so they can blame it all on the Dems and the President. The House will end up shutting down congress if they don't accept the Bill with the Senate changes.

UPDATE: The Bill did not pass the House.
+31 # futhark 2014-12-11 16:03
It is time for Congress to activate' s "One Subject At A Time" rule on proposed legislation and stop using omnibus bills to push through programs and policies that would fail if they were subject to independent vote. This would help reduce the amount of toxic legislation being imposed on the nation and improve public confidence in the Congress, at the same time increasing accountability for elected officials.
-20 # James Marcus 2014-12-11 15:18
Why would Obama Veto?
HE is the Chief Pimp for The Big Money!
(or was it 'Chief Whore'?)
+5 # crispy 2014-12-11 16:21
He certainly has more bankers (or former bankers) in his administration than any president before and it goes way deep, not just top positions. An investigation by the Washington Post (radical communist paper as we all know) proved it.
+27 # Buddha 2014-12-11 15:34
No, Obama will certainly sign it...which ALSO will be sending a strong message, won't it? It will be a message of his continual spineless accommodation to the corporatists and Oligarchs and the Congressmen that enable them.
+9 # Eldon J. Bloedorn 2014-12-11 21:17
Our congress people are storekeepers. What is in the store? Votes. You got the money, put it down, walk out the door. you got the vote.
+4 # mmcmanus 2014-12-12 13:54
the "corporatists and Oligarchs and the Congressmen that enable them" are usually referred to as "the Republican Party". Why don't you put the blame where it is due?
+36 # shgo 2014-12-11 15:35
bad bill for all of the 99% and a good demand to make as we continue to take to the streets. down with this racist, corporatized corrupt government NOW!
+21 # tm7devils39 2014-12-11 15:42
Anyone who thinks that we have a democratic government (of, by, and for the people) has as much brains as a nematode.
A majority of politicians in this country do the bidding of the 1% and Wall Street and the remainder are gutless wonders.
We need to get rid of the 535 members of Congress and replace them with 13 judges who are - critical thinkers, objective to a fault, staunch secular/humanis ts and doves.
(Your mission, Jim, should you choose to accept it, is to find the 13 judges and install them in the capitol. As usual, if you or any member of your IMF team are captured before you complete your mission, we will disavow any knowledge of your actions. This tape will self-destruct in 5 seconds - followed by the rest of the country at a later date.)
+15 # crispy 2014-12-11 16:26
The senate can do it's job and remove this bill then we'll see what happens.
I am no longer optimistic about US politics and what corporate interests are pushing is after all NOT resisted but the clueless American majority.
People who have a choice should leave the country, it is obvious.
+35 # MidwesTom 2014-12-11 16:30
According to an interview on NPR's Fresh Air, both Liberals and Tea Partiers are opposed to this bill, but it will pass. They should call it the Wall Street reward bill. Everything that intelligent people who love this country hate about Washington, and the Bankers that own own Washington, is amplified in this bill. What a bunch of money suckers we have representing us.
+7 # crispy 2014-12-11 16:31
more sarcastically, those in power want the financial system to collapse and the dollar with it. They are invested in assets that will gain value in such a debacle that will hurt the majority of us.
It will wipe out the debt as the US will pay back in a devalued money (90% devaluation? who knows).Not if, I think but when?
+18 # Nominae 2014-12-11 17:54
In a country were it is legal to purchase Elections, the laws that result from said purchase cannot be expected to follow the principle of "the greatest good for the greatest number of people".

We had better just get used to it, or contribute our energies to the creation of brand new forms of government that are already in (planning) progress around the Globe.
-13 # Rain17 2014-12-11 18:23
I'm a federal employee, Carl. I would be one of those people caught in the middle of this showdown and would be without a paycheck until they resolved the shutdown. I would be suffering for the political point you want to make here.
+10 # CTPatriot 2014-12-12 03:53
So what you're saying is that your own immediate selfish needs are more important than regulations that prevent another economic catastrophe that could impact millions of people in the long term, including you.
0 # Rain17 2014-12-12 23:26
CTPatriot, I have bills to pay. I have a mortgage, student loan, car payment, condo fee, electric bill, and other expenses I have to cover every month. Not getting a paycheck would hurt me significantly. And I don't think my creditors would care or understand that I was a victim of the government shutdown. It's not "selfish" to want to take care of myself so that I don't lose my home and car.
+2 # crispy 2014-12-12 13:57
I agree with CTPatriot. You are selfish Rain7. You should INSTEAD GO ON GENERAL strike to get the provision removed. A 2nd collapse would crash the dollar and depreciate all you own...
Union workers have power and should show it
+3 # Rain17 2014-12-12 23:27
I need my job. I have bills and expenses to pay. And I doubt that anyone here is going to pay my bills for me. So no thank you.
+24 # Pikewich 2014-12-11 20:13
Time to pull our money out of the bank, isn't it?

That might wake them up a little.
+9 # ericlipps 2014-12-11 20:13
Obviously, the FDIC’s insurance fund won’t be able to cover the next derivatives crash once the bubble eventually pops. In that situation, the only way to stop the global economy from imploding would be to reinstate the Glass-Steagall Act, which President Clinton repealed in 1999.
This canard keeps coming up, repeated by left and right alike.

The Gingrich Congress repealed Glass-Steagall. Clinton's part in it was that he did not veto the repeal, perhaps because he believed (with reason) that Republicans, voting in lock (or perhaps goose) step and joined by the usual DINOs and weak-willed types among the Democrats, would override it anyway.
+3 # Wyliekat 2014-12-11 22:25
So they would be leveraged 12:1 with a guarantee from the FDIC, which can't even cover 1%? During the 2008 crisis, banks were leveraged 10:1. This will be worse if it passes and we have another crisis.
+5 # propsguy 2014-12-11 22:32
i'll be shocked if he doesn't sign it- when has he ever held the line on anything? he just wants to be invited to play golf with them all at their country clubs once his term is over

i have a real serious question though and i trust the people who read this more than i trust anyone in authority to know the answer- what about credit unions? would a "bail-in" affect everyone no matter where their money is held (aside from a shoe box under the bed which is looking more likely everyday)?
+4 # propsguy 2014-12-11 22:33
and if it passes, won't there be massive runs on the banks?
+12 # nogardflow 2014-12-11 23:12
Rain17, while a shut down would cause suffering for many people, it is not to make a political point. If passed this budget would allow Wall Street to continue the same practices that led to our previous economic collapse and that would lead to a much longer period of suffering for almost all Americans, except for the same group that uses that suffering to make more wealth for themselves.
+10 # kevenwood 2014-12-12 01:29
Thank you for writing this article. May i take the opportunity to remind folks that they should consider putting their money in Credit Unions, not the for-profit banks. Do you like paying higher interest rates or lower? Do you prefer higher fees or lower? If you prefer a better deal, then why would anyone living or working near a credit union use a bank?
0 # Scott Baker 2014-12-12 15:02
The president could overcome the debt ceiling too, making that threat a chance to undo the bank-money system too. there are several ways. See here:
+5 # jwb110 2014-12-12 19:19
President Obama has nothing to lose by a Veto of this bill. He's sort of a Arab at a Bar Mitzvah. Any choice he makes will be perceived as the wrong choice.
Who know, he may come down on the side of the very people who elected him. I personally think the whole thing is just bluster and saber rattling. If the GOP got what they seem to want it would be the sorriest day of their lives. Just like taking over the House of Reps is going to backfire in the next elections.
+3 # Activista 2014-12-13 13:12
US sees lifetime cost of F-35 fighter at $1.45 trillion
Mar 29, 2012 - WASHINGTON (Reuters) - The U.S. government now projects that the total cost to develop, buy and operate the Lockheed Martin Corp F-35 ...
compare to:
Present yearly government budget House passes 1.1 trillion spending bill after week of drama

DO you see the absurdity here is US ... greed and militarism is KILLING the EARTH
+2 # Rockster 2014-12-14 09:42
Activists has it right! As long as our citizens can be led around by big Fear so spending that obscene money on a killing machine we can never get out of this death spiral. Wake up. Vote with our whole selves. Move our $$$ . Intelligently boycott. Work together like the moneyed interests do. Act like the patriots we can be not the scared little gerbils they want us to be.

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