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Friday, September 30, 2016

How Republicans Would Gut Regulations That Guard Against Another Meltdown

Republicans might not repeal Dodd-Frank outright, but they’d eliminate the system of rules that make it work.

It was just announced that Tim Pawlenty will become the head of the bank lobbying group Financial Services Roundtable. The powerful financial lobbying group, which represents groups like JP Morgan and Bank of America among other big financial sector players, appears to be aligning itself more closely with the Republican Party and betting on the idea that Republicans will control at least part of Congress. But what do they want? Earlier in the year, I argued in Washington Monthly that they’d like to repeal the core parts of financial reform.

Recently, Phil Mattingly had an article at Bloomberg Businessweek about how the GOP and Mitt Romney would approach Dodd-Frank. This is with a hat-tip to Reihan Salam who notes that this article “has confirmed something I’ve heard from well-informed insiders” and makes additional arguments [1]. So it seems well-sourced.

Mattingly’s argument is that it is unlikely that the Republicans will outright repeal Dodd-Frank. “Instead, President Romney would likely try to give the financial industry something it wants more: a diluted financial reform law that would relax restrictions on some of its most profitable—and riskiest—investments but maintain enough government oversight to give the banks cover.”

So what would the Republicans try to dilute and remove? Mattingly:

“Wall Street wants to loosen rules governing the swaps market, which generated $7 billion in revenue in the first quarter of 2012, according to government records. The banks would also get rid of restrictions on bank investment in private equity and hedge funds, pare back the power of the new federal consumer protection agency, and block the Volcker Rule, which bars banks from trading with money from their own accounts, a practice that can put customer deposits at risk. […]

Wall Street doesn’t oppose everything in the law. Banks support the “resolution authority” that spells out how and when the government can seize and wind down struggling banks before they catastrophically fail.”

So they want to go after derivatives rules (swaps), the Volcker Rule and the related law on restrictions on hedge fund investments, and also the CFPB. It’s important to understand this isn’t like removing random parts of the bill, as strict as they may be, but is instead gutting the core logic of the law. It’s the equivalent of Republicans saying they’d keep the Obamacare bill, but stop the exchanges, remove the individual mandate, and lose the ban on pre-existing conditions while getting rid of the means-tested subsidies and Medicaid expansion. We’d understand that all of the parts of this system are interconnected and inseparable; the ban requires everyone to be in the market, which requires subsidies and well-developed markets.

Let’s make sure we understand how derivatives, the Volcker Rule, and the CFPB all work together. Imagine that we’re car engineers, and we want to design a car and road system so that if the car crashes, it does so as safely as possible. There are four things we can do. We can put airbags and seatbelts in the car and other cars so that when it does crash the damage is limited and controlled. We can design the car with things like a brake override system so that if it hits a rough patch the driver can keep control of it and make it less likely to crash.  We can put some speed limits on the road, as well as clear traffic signals to guide cars from running into each other. And we can have some protection for pedestrians, like cops watching for DUIs or barriers to prevent cars from driving into crowds of people. Easy, right?

  • bcarreiro

    aawww the bad itty bitty committee is getting mad……arent we the people too good for u. have u driven a FORD lately???

  • William Deutschlander

    As usual, the Financial Conglomerates, the Insurance Conglomerates and the Republican Cartel want to be free to play loose, fill their personal foreign tax exempt saving accounts and if they go overboard they want the poor, the not as poor and the almost making it, to pay for their ignorant, intolerant greed.

    How anyone could possibly consider voting for the candidates of the Republican Cartel, after the Financial Disaster they caused and then Obstructed Recovery from, is impossible for any logical individual to rationalize.

    It is Rationaly Impossible for a group of individuals, as large and complex as the Republican Majority in the House of Representatives, to ALL have the same exact mindset and vote on issues in a block, that is insane Obstruction and FAILURE to REPRESENT the CONSTITUENTS that voted you into office, FAILURE to EXCERCISE FIDUCIARY DUTY!

    Thank you Obama Administration for saving the U S A from the FINANCIAL DESTRUCTION of the Republican Great Recession of 2008 and putting our ECONOMY on a PATH of RECOVERY, without any assistance, in fact RESISTANCE, from the Republicans in Congress.

    President Obama, Vice President Biden, Senate Democrats and House Democrats you have my vote!

    • I second that!

    • sigrid28

      WD: Where have you been? Glad you’re back!
      I agree with you 100%. You have to ask yourself,
      what are people thinking?

  • CarolO

    Only a small portion of the Dodd/Frank Bill was adopted to start with. Perhaps if all the regulations had been voted on, we would not have had the banks do as they did that got us where we are today.

    The only way to get away from more tax credits to the millionares, more subsidies to big oil, less regulations for the banks, saving our social security and Medicare is to make sure the Republicans can not take control again. Middle aged people also need to pay attention as they may be the ones footing the bill for their elderly parents that have to either live with them in their old age or go into a nursing home.

    I hope Paul Ryan loses his Congressional Seat and he is joined by Joe Walsh and Allen West in the unemployment line. The Republicans never should have allowed the radical Tea Party to take over their Party.

    • Gammaanya

      Joe Walsh is in a fight for his job and his lifehood now. He quiet down for now due to Romney’s gaffe’s and public outrage about the 47% but he still says stupid lies to the ones who are just as stupid and racist as he is. I was in a few of his local meetings before the changes and now he runs agains Tammy. He was in debt, his wealthy father paid rent on his house so he could run, he owed his wife money in childs upport (he denied, but it’s true). Once he got his seat now he is rolling in dough, paid what he owed his wife and he voted against anyrhing that would benefit ALL. He hates Tammy because she is a Vet and he NEVER served, not even in Nat’L Guard. He puts her down to anybody who is not for any Vet benefit . Pathetic little man with an IQ in single digit. He talks but can’t do walk the walk and talk the talk. It’s time to put some REP and some DEM on unemployment lines. Let them revert to the 47% LOL. COngress become NURSING HOME for the OLD and FIBBLE MINDED. I hope that in Ohio, the people will chose wisely in the bit for the Congress, the young one is a loose cannon and know squat about politics, he is in to win it so he don’t have to look for a job. It will be his lifetime achievemnt and and permanent job.
      That’s what happened when so called business peoiple run country thru Senat or Congress.
      Government and private sector are 2 diff. things.
      We don’t need IDEOLOGY.
      As for Allen West, I can’t see the crap on his nose from keeping his nose in Rep. butts.
      I have no idea how he got elected, he needs to go.

  • The man’s a multimillionaire, millions invested in off-shore tax-free investments, why should he care what happens to this country financially, it wouldn’t effect him or any of his multimillionaire buddies. They’d make more money if it happens.

  • dljones

    Existing regulations failed because “mother government” took their eyes off the ball. But no, lets go to Dodd the nod and Elmer Fud and regulate some excuses. Result–nothing changed but Elmer crawling out of the closet.

    Now that the taxpayer sucked up to Harry Reid, Inc. AKA Mr ineptness, were another 2 trillion out and Fannie and Freddie Mac, (government beloved sisters) need another trillion shot in the arm. Maybe Obama can slip a line item for an extra trillion from Bernacke’s federal cash box plus a line item for the IOU due, like a trillion, for 16 failed solar companies.

    How could I forget, when government fails they are not required to repay us, it is only when this happens taxpayers are required to pay.

    • phantomoftheopera

      sorry, but it’s more a matter of greed overtook morality. we wouldn’t need “mother government” if people did the right thing by each other. instead, the rich feel entitled to get richer, and if it’s at the expense of the middle class or poor, oh, well. as romney pointed out, they aren’t important anyway.

      you need to go find a nice, third world country where it’s dog eat dog to live in. then maybe you’d be happy…..as long as you were on the top!

      • dljones

        phantom:: Come on, be a real American. Climb the ladder of opportunity and join all the success of your best efforts. Don’t give me this poor, greedy, entitlement, unimportant, canabilized dog, blame it on Romney bull crap.

        I’ll tell you what is unmoral. It’s your attitude of ineptitude to relinquish the sofa for meaningful education and job opportunities, as many as it takes to curb your third world mentality.

        • phantomoftheopera

          if you are what passes as a “real american” these days, we are in trouble. and it explains why the third world countries will soon by-pass us in most areas. just because i don’t buy into your greed is good, money is god mind set, you believe you can judge what and who i am. you’re wrong, and you are dooming our country to failure with that attitude.

          • dljones

            PHANTOM:: THIRD WORLD COUNTRIES WILL PASS US AS YOUR LEADER IS FROM A THIRD WORLD COUNTRY. Ambassador dies and Embassies burn while weak kneed Obama plays like it’s just another day in the park. What an embarrassment!

          • phantomoftheopera

            rotflmao

            yes, starting wars without paying for them is far, far better! go fight yourself if you think it’s the thing to do.

          • dljones

            phantom:: I understand your point, you have no point!!!

          • dljones

            phantom:: I am a great American with a equally great attitude, and I really don’t care “what and who” you are!

      • ALLLLAMERICAN

        All of you UNEDUCATED morons will see—–

        If Obama stays in other 4-years
        Our country will be going down even further than it is now—–

        ACTUALLY—-I HOPE HE DOES GET BACK IN, JUST TO SHOW YOU IDIOTS HOW STUPID YOU REALLY ARE!!!!!

        Then finally your dreams will come true.

        Obama will have taken all the hard working RICH people’s money and given it to the
        LAZY NO GOODS that don’t want to make nothing of them and won’t take care of themselves and sit around begging for their hand out!!!

        We will allll be equal and be in the bread lines.

        Obama wants the whole world to be equal to KENYA!!!!!!!!!!

        How do you think our country runs????
        It’s from the RICH people that invest their money and makes businesses and trickles down!!!!

        The RICH people give to charity!!!!!
        How much do YOU give to charity???

        The RICH people make jobs!!!!
        How many companies have you put together and supplied jobs!!!!

        How much money do YOU have in the bank so the banks can make money off
        You and grow???

        The RICH people buy stock
        How much stock do YOU buy.

        How much money do YOU invest to help our country??

        WHAT DO YOU DO TO HELP OUR COUNTRY???

        Isn’t your arm getting tired holding your hand out by now????

        WHY DO YOU HATE RICH PEOPLE????

        THEY ARE THE ONES THAT MAKE OUR COUNTY!!!!!!

        Our country CAN NOT survive with all poor people—WE NEED THE RICH!!!!

        WAKE UP!!!!!!!!!!!!!!!

        • phantomoftheopera

          my, my, my. you are an angry, hateful little thing aren’t you.

          if you think you’re a christian (although you clearly worship at the altar of money) i’d suggest you check out what jesus had to say about the rich. and about the poor.

          beyond that, all too many ‘poor’ people are poor because the rich won’t pay honest wages while at the same time paying themselves millions for doing nothing productive. you can’t eat stocks, or wear them, or live in them. the rich are currently sitting on millions and millions of dollars and not hiring–hoping to get even more tax breaks! they could hire people and help us all out, but are too greedy.

          and those wonderful banks led to much of the current economic problems because, you guessed it, greed.

          then there’s all those small businesses. they’re not helping, according to you, since most small business owners aren’t rich.

          we’d all probably do just fine if the rich went away and were replaced by honest people who treated each other fairly. there weren’t a lot of rich in early america. the people who built the country were largely poor–becoming rich in the process and forgetting their roots.

  • quasm

    Mr. Konczal;

    A Republican administration need not take any great effort to set aside Dodd-Frank. It can just follow Pres. Obama’s lead and by executive order (read fiat) just ignore it as the president did with laws concerning immigration and welfare work requirements and defense of marriage.

    Dik Thurston
    Colorado Springs

  • desertdustoff

    If the tea baggin’ (kkk), american taliban, talibangelical, rethuglicans can’t screw the American people one way, the koch suckers will do it another way. I’ll bet they’re not that inventive in bed with their wives…maybe their mistresses…

  • sisterH

    Obama is a failure.
    Face the facts…..time for change.

    • The facts are, you provide no facts. Just lies and hate.

  • howa4x

    Basically Romney just wants to turn the clock back to early 08, and pretend that if we put back in place all the policies that led to the greatest financial collaspe since the great depression, that it won’t happen again. What are the chances of that if the only philosophy in place is greed?

  • howa4x

    The Citi loss of 7 billion was just a little reminder that the banks are still in the casino mood, and need to be regulated further and probably broken up for the good of the country. We can’t bail them out again and that message has to be sent loud and clear. If the republicans water down Dodd-Frank then we are all in trouble. I would advise everyone including States to get out of the stock market.
    I can’t see how republicans, after watching the meltdown, want to vote in the same deregulation policies that brought down the house. Are they stupid or just so corrupt that lining their pockets is more important than the country at large.
    This party is contemptable

    • jarheadgene

      I only disagree with a part of that. The local banks are using Dodd-Frank to choke out
      small businesses making it impossible to have a healthy cash flow with banks as needed. IF OBAMA WANTS to be RE-ELECTED…seal the deal, correct Dodd-Frank to improve relationships with small business and banks.

      • howa4x

        I don’t know if Dodd/Frank is totally to blame on the regulation side. I think where it has some bearing in in the Volker rule that wants all banks to maintain and equity balance and not over leverage themselves

  • ALLLLAMERICAN

    NOBODY in this party can afford Stocks!!!!!!!! ARE YOU STUPID!!!!!!!!!