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Taibbi writes: "Eliminating the bill was a top priority for Trump. So why did any Dems vote for it?"

When is the next crash? (image: Brian Stauffer/Rolling Stone)
When is the next crash? (image: Brian Stauffer/Rolling Stone)

Why Killing Dodd-Frank Could Lead to the Next Crash

By Matt Taibbi, Rolling Stone

09 July 18

Eliminating the bill was a top priority for Trump. So why did any Dems vote for it?

n the age of Trump, bipartisanship is considered a sin. So one would think that when Republicans and Democrats do pass a law together, it’d be for something so popular, it couldn’t be questioned politically: a nonbinding resolution on the cuteness of puppies, maybe, or a national ice cream giveaway.

Nope. The rare bipartisan bill turned out to be a rollback of the Dodd-Frank financial-reform act. More than 80 percent of Democrats and two-thirds of Republicans want tougher rules on banks. Yet this was our Trump-era kumbaya moment: a bank deregulation bill!

Ostensibly passed to address the causes of the 2008 crash, the Dodd-Frank Act has instead spent more than half a decade now as a hostage to a payola Congress, with both parties taking turns cutting it down and delaying its implementation. The latest indignity is S.2155, a.k.a. the “Economic Growth, Regulatory Relief, and Consumer Protection Act.” Supposedly designed to help some banks by reducing capital requirements and ending regular “stress tests,” the act is really more like helping ships steam faster by allowing them to ditch their lifeboats.

But the bill isn’t just unnecessary – the banking sector smashed records with $56 billion in profits in this year’s first quarter – it’s also a Wall Street handout disguised as an aid to “Main Street” banks.

Ohio Sen. Sherrod Brown, a longtime critic of the “Too Big to Fail” banking system, opposed the bill. He pointed out upon passage that in one section of the act, “the change of just one word . . . forces the Fed to weaken the rules even for the largest banks.”

The microchange Brown refers to is a masterstroke of deregulatory trickery, one that should go in the Hall of Fame of legislative chicanery. The original Dodd-Frank Act said the Federal Reserve may consider weakening safety rules for a particular bank. The single word change of “may” toshall” would mandate the Fed to consider every request for special treatment. If Bloodsucking Bank A thinks it deserves relaxed regulation, it could sue the Fed to consider its request.

Because the rules weakened under this section cover almost all the restrictions in Dodd-Frank, this “may-to-shall” trick could be the mother of all loopholes. “It’s potentially the most damaging thing in the bill,” is how one Senate aide put it.

But why did this bill even pass? Only 50 Republicans backed the rollback, meaning even a few members of a dependably craven Republican caucus hesitated to pull the trigger. That means they needed one Democratic vote to pass this foul thing. They got 17. Why? What made this bill the weak link in the battle line against Trump’s agenda?

The 2008 crash was caused when financial companies, high on greed and the temptations of an irrationally exuberant economy, borrowed beyond their means. Leveraging themselves to the hilt, banks bet your kids’ future on a losing roulette spin known as the subprime-mortgage market. Post-crash, the obvious reform was to make sure banks would have enough assets on hand that they wouldn’t need bailouts the next time they ruined themselves at the tables.

Dodd-Frank told them they had to either borrow less (“reduce leverage”) or have a bigger stack in reserve (“raise capital requirements”). They had to pass regular “stress tests,” create contingency plans in case of collapse, and, through the so-called Volcker Rule, keep their depository and investment banking operations separate.

In recent years, however, lobbyists began to complain that the restrictions were hurting small regional banks. Currently, the rules apply to any bank with more than $50 billion in assets. The new bill raises that to $100 billion immediately, then, potentially, to $250 billion. If the carve-out goes to $250 billion in assets, roughly 99 percent of banks will be exempted from the Dodd-Frank safety provisions. So, yes, it helps out your local bank. And basically all the other banks too.

Still, Republicans and Democrats alike successfully pitched the bill as helping small business – what Elizabeth Warren described as using community banks as a “human shield.”

It’s a huge victory for Trump – eliminating Dodd-Frank was such an urgent need for His Orangeness that an executive order mandating the act’s deconstruction was one of his first policy moves. Like his White House hirings of so many Goldman Sachs vets after loudly campaigning against the bank, Trump showed his true colors when he made killing Wall Street’s most hated law a high priority.

Then again, the Democrats showed their colors when they gave him the win. Nobody will say so, but everyone on the Hill knows why this bill passed. According to the Center for Responsive Politics, three of the bill’s Democratic co-sponsors, North Dakota’s Heidi Heitkamp, Indiana’s Joe Donnelly and Montana’s Jon Tester, are three of the Senate’s biggest recipients of financial-services donations. Quelle surprise!

This would be merely politically disgusting, were it not for the consequences in an overheated economy. Remember how tossing the Glass-Steagall Act during the Internet boom worked out? We should be increasing safety standards, not eliminating them. “With debt levels higher than before the last crash, a stock market bubble and wage stagnation,” says Dennis Kelleher, head of the watchdog group Better Markets, “now is the worst time to deregulate the financial industry.”

We’ve been here before – in an economy that feels shakier than suspiciously swollen stock market numbers would indicate. Either Trump is an economic genius, or we’re in for a correction soon. Who feels like taking off the life jacket? your social media marketing partner


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We too were alarmed at the patterns we were, and still are, seeing. It is clear that the provocateurs are far more savvy, disciplined, and purposeful than anything we have ever experienced before.

It is also clear that we still have elements of the same activity in our article discussion forums at this time.

We have hosted and encouraged reader expression since the turn of the century. The comments of our readers are the most vibrant, best-used interactive feature at Reader Supported News. Accordingly, we are strongly resistant to interrupting those services.

It is, however, important to note that in all likelihood hardened operatives are attempting to shape the dialog our community seeks to engage in.

Adapt and overcome.

Marc Ash
Founder, Reader Supported News

-3 # Farafalla 2018-07-09 23:25
Time to dust off Hilferding.
0 # economagic 2018-07-12 19:09
Had to look that one up.
+1 # trimegestus 2018-07-12 21:37
Farafella - I just read the Wikipedia article for Rudolf Hilferding. Apparently he was a proponent of something called FINANCE CAPITAL, state controlled capitalism. A disturbing feature of this paradigm (in Hilferding's words) is "the policy of finance capital is bound to lead towards war, and hence to the unleashing of revolutionary storms."

Ironically, state controlled capitalism was the economic basis of the Nazi regime, which hunted-down and killed Hilferding.

Maybe there is a lesson here for neoliberal economic theorists and apologists.

Farafella, please correct me if I'm wrong.
Incidentally, I recommend "Confronting Hitler" by William Smalldone (2009).
+23 # RLF 2018-07-10 05:05
I'm sure that senate maestro Schumer was falling all over himself to pass a giveaway to the banks. He is bought and paid for and very obedient. Big capital wants another crash because the government will have to bail the out and they will still get their bonus! What is the big deal about people losing their houses, tax payers getting ripped off to give to the wealthiest? How do the rich get richer? They rip everyone off at the same time with a crash!
+18 # Benign Observer 2018-07-10 06:37
"We should be increasing safety standards, not eliminating them"

Everyone seems to know this but Congress, the theoretical regulators.

Just like most of knew there were no WMDs in Iraq and Democratic voters know we need new leadership.

Then when it all comes crashing down they'll act surprised and start dishing out bailout money -- to everyone but the citizens, who are just about drained dry.

We could eliminate Congress and be better off, or hold a lottery and assemble a random group of citizens who would be better legislators.

Lottery Congress. Perhaps an idea whose time has come.
+26 # economagic 2018-07-10 06:44
"Deja vu all over again" (Yogi Berra). People forget that the Glass-Steagall Act, technically the Banking Act of 1933, was passed in response to the investigation by the Pecora Commission of the causes of the Crash of 1929. Despite its success it was largely repealed in 1999 through the machinations of Texas Senator Phil Gramm, long-time supporter of nearly everything we are fighting against today who never held a private sector job until jumped to Swiss Bank UBS* shortly thereafter, with the blessing of that great Progressive president Bill Clinton.

The original version of Dodd-Frank did not even reinstate the protections of Glass-Steagall, much less update them to cope with the changes in banking and finance of the past (at that time) 75 years.
+16 # wrknight 2018-07-10 07:51
90% of campaign contributions goes to incumbents and 90% of incumbents get re-elected. So if you want to get re-elected, you do as your donors want you to do.

That's how the system works - for Democrats as well as Republicans.
-5 # JCM 2018-07-10 08:12
Montana’s Jon Tester are the three blue dogs that aren't hardly worth keeping. However, I'd still have to say that in order to keep united and lessen the chance of the repubs winning I would still vote for them. A no vote or voting a third party would only be an advantage to the repubs.
+13 # Moxa 2018-07-10 14:16
It is that attitude that prevents change. As long as their constituents keep voting for them they'll keep on taking the corporate money and voting with the Republicans. So what IS the point of voting for them?

Politicians are beginning to learn they are not OWED our votes. Hillary Clinton is one case. Joseph Crowley is another. But they take a lot of convincing. That is up to US.
Not voting for them is how we prove it.
-1 # JCM 2018-07-10 15:31
The most important priority we have now is to unseat the rump and his republicans. Teaching the Dems a lesson at this time is counterproducti ve. A no vote or a third-party vote doesn't change the Party, it only gives the republicans an advantage. Time to change the Party is in between elections by criticizing them (don’t forget to criticize the repubs too) and supporting progressive candidates. But if your Progressive candidate doesn't win, vote for the one who did. We must be united to exiled the republicans to the minority. Don't let rump get to pick another justice.
+4 # wrknight 2018-07-10 18:33
If you want to change the party, you have to do it in the primaries. Once the primaries are over, you are screwed.

Unfortunately, that's when everyone stays home to watch the tube.
0 # JCM 2018-07-11 13:02
And that's one reason why the republicans win, bigger turn out midterm.
+4 # librarian1984 2018-07-11 01:30
You're still just telling us to stay in our abusive relationship, aren't you? Not to demand anything, not to expect anything, to just lay back and enjoy it.

You're speaking from a place of comfort and privilege, with no understanding of what we're telling you and no interest in learning, while haranguing us not to be uppity.

Are you also pressuring the DP to accommodate US? Of course not. Are you suggesting they talk to us instead of attacking us? Or are you, as usual, telling us WE need to conform but THEY -- the people who cheat and lose, lose and cheat -- need do nothing at all -- not even guarantee fair primaries?

Shady as hell.

We're in the primaries. According to you this is when we should push for progressives. But you aren't doing that, are you? Even now, in the window YOU've designated as the time to push left, you can't stop bullying us, no matter what the article's about, to vote for ANY Democrat.

Furthermore, you're focused completely on ONE tiny piece of what's happening all around us, all around the world. Do you remember how the msm and establishment mocked Susan Sarandon when she said that at least Trump's election would 'hasten the revolution'?

Look around. BLM, #MeToo, unionism, progressives v neoliberals. This IS the revolution.

And you've made it abundantly clear where you stand. Not with us.
-1 # JCM 2018-07-11 12:02
There are some who would lie about some people’s position on the Democratic Party and what we can do. Mine is Simply:
To change the Democratic Party, we must support progressive ideas continually as best we can.
We must support progressive candidates during the primaries as much as possible.
We must vote for progressive candidates during the primaries but we must vote for the winner of the primary during the election.
Not voting or voting third party will not unseat the republicans but will give them an advantage to win.
We should criticize the Dems when they go wrong, but not fail to criticize the republicans so not to create the impression that the two parties are the same.
There are blue dogs that I would like to get rid of but are still better than any republican.
Again, we must unite our purpose to remove the rump and his republicans.
+4 # economagic 2018-07-11 20:00
Non sequiturs, and possibly outright contradictions. I appreciate your passion and what appear to be your goals, but I often have trouble following your reasoning, which sometimes seems not to be reasonable at all.
+2 # trimegestus 2018-07-12 21:58
There are 50 distinct Democratic Parties, in each of the 50 states. They are loosely-bound by a media syndicate that defines the "brand" of the fiction that is marketed as "the" Democratic Party.

Progressive voters have the means to work within the local Democratic Party structures and support 3rd party candidates as well.

In contrast, the common man has no voice in the process of defining the "brand" of the ephemeral media-defined Democratic Party.

So, it seems reasonable for us to support (donate to) candidates in local Democratic organizations and 3rd party candidates.
+6 # dquandle 2018-07-10 09:29
Why would the "Democrats" support a Republican/Trum p bill gutting the trivial economic protections we have against Wall Street and the plutocrats?





and throughout the years:
-2 # JCM 2018-07-10 14:36
dquandle: Without reading your references I would guess that money come down to it. As in most things in politics.
+4 # dquandle 2018-07-10 09:31
+6 # dquandle 2018-07-10 09:34
Eliminating the bill was a top priority for Trump. So why did any Dems vote for it?

+5 # dquandle 2018-07-10 09:37
Eliminating the bill was a top priority for Trump. So why did any Dems vote for it?

+1 # Robbee 2018-07-10 09:41
if money is speech we are dumb!
+13 # Porfiry 2018-07-10 10:27
This action is only the final nail in the coffin to assure a depression. The actions leading to the "Roaring 20s" and ultimately the Great Depression were:
1) three tax cuts pushed by Andrew Mellon. Between W. and Trump we've had three,

2) a tariff war,

3) unregulated banking.

Yogi indeed was right: "It's deja vu all over again. The only question is how soon it will happen.
0 # Skeeziks 2018-07-10 15:19
From all that is being said about the Democrats voting for "The Kill" all I can say is now, just where is that fork???
+1 # boredlion 2018-07-10 15:30
What a shell game and supreme con is Crapitalism !
-3 # wrknight 2018-07-10 18:36
The problem is there is no ideal economic system simply because there are no ideal humans. All these wonderful economic theories fail to take that into account.

Bottom Line: humans will find a way to f**k up anything they touch.

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