Tags: Stephenson | push-out | Dodd-Frank | Warren

Journalist Emily Stephenson Explains Dodd-Frank Flurry

By    |   Wednesday, 17 Dec 2014 07:50 AM

Emily Stephenson, a correspondent for Reuters, appeared on C-SPAN's Washington Journal Dec. 16 to talk about a provision that was included in the budget package that repealed a provision of the Dodd-Frank Act that the banking industry, particularly the largest banks, have been trying to get rid of.

Another way of putting this, from the point of view of this writer, is that this is just another step in the "limplementation" process by which virtually every provision of Dodd-Frank is being nullified, as this writer predicted would happen before it was enacted. This was not as difficult a prediction as it might seem, because the same fate has befallen nearly every other landmark statute that was supposed to bring the financial crisis to an end and make sure it would never happen again.

To be fair, the authorities no longer make that claim. Rather, they now assert that the doctrine of "Too Big to Fail" has ended, and no bank is too big or complex to be put through the resolution process that was enacted as part of Dodd-Frank four years ago. Actually, they admit that this is not quite true, but a lot of agency staff are working on it, even as bank lawyers work to cripple the implementation of these provisions, and lobbyists plan to push for explicit language reaffirming the bailout powers that Dodd-Frank so ceremoniously purported to repeal.

C-SPAN host Steve Scully began by asking what is in the Dodd-Frank amendment and what impact it is having on Wall Street. Stephenson explained that it involves the so-called "swaps push-out rule," which provided that derivatives trades, considered a risky contributor to the 2008 crisis episode, had to be moved out of the banks and into separately funded affiliates not backed by the federal safety net.

Scully noted that the provision elicited opposition to the $1.1 trillion spending deal by Sen. Elizabeth Warren, D-Mass., and that Stephenson's recent article called this just the beginning of a push for more friendly legislation by Wall Street. She mentioned the Volcker rule restricting so-called "proprietary trading," another risky activity backed by the federal safety net, and restructuring of the Consumer Financial Protection Bureau, coincidentally a brainchild of Warren, as other items on the industry list. This writer would add that industry lobbyists are also working to repeal provisions that were supposed to trim the authority of regulators to bail out banks. The industry hopes to take advantage of a two-year window of Republican control of Congress.

Asked why investors should care about these moves, Stephenson argued that the weakening of Dodd-Frank is relevant to ordinary investors because Dodd-Frank was supposed to protect against another crisis episode. Scully played a clip of Warren speaking out against the push-out fix on the Senate floor, complaining that it benefits only Wall Street and calling it by its proper name, "Prohibition Against Bailouts of Swaps Entities." Thus it is the prohibition against such bailouts that was nullified by the amendment. Warren said she had spoken to senators of both parties to ask them to take this provision out if they truly oppose bailouts of big banks.

In further response to Scully, Stephenson said the White House was surprised at the success Warren had in stirring up opposition to the budget bill for a short time, and she added that the Senate Appropriators accepted the push-out repeal as the least onerous of about six or seven ideas Republicans sought.

Scully posted an article crediting JPMorgan Chase CEO Jamie Dimon with calling senators to whip support for the bill concurrent with the White House. Also, the financial regulators chimed in that the push-out provision was costly to banks but not important in protecting the banking system.

(Archived video can be found here.)

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Emily Stephenson, a correspondent for Reuters, appeared on C-SPAN's Washington Journal Dec. 16 to talk about a provision that was included in the budget package that repealed a provision of the Dodd-Frank Act that the banking industry, particularly the largest banks, have been trying to get rid of.
Stephenson, push-out, Dodd-Frank, Warren
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2014-50-17
Wednesday, 17 Dec 2014 07:50 AM
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