Protecting Volunteer Firefighters and Emergency Responders Act of 2014—Continuedby Senator Brian Schatz
Posted on 2014-12-11
SCHATZ. The House is now considering the funding bill for fiscal
year 2015, and the risks of not passing it are extremely high. But
tucked into this must-pass bill is yet another attempt by Republicans
in the House of Representatives to gut Dodd-Frank. What is really scary
about this is that this is just the beginning. We can expect much more
of this in the 114th Congress.
Dodd-Frank was designed to reduce the systemic risks that large banks posed to our financial system. It was meant to prevent another taxpayer bailout of these massive institutions that were and continue to be too big to fail. By chipping away at Dodd-Frank we are once again letting special interests prevail over the safety of the financial system and protection for consumers.
There were many roots of the financial crisis, but economists agree that the unregulated and pervasive trading of derivatives was a major contributing factor. We permitted financial institutions to gamble and regulators looked the other way. When these financial institutions made bad bets and nearly took down the financial system, we had to bail them out on the taxpayers' dime. Working families who are struggling in a slow economic recovery are still paying the price.
So one of the goals of Dodd-Frank was to get the banks to go back to doing the normal business of banks--to collect deposits and extend credit. That means no longer allowing banks to leverage FDIC-insured deposits and their access to the Federal Reserve for speculative trade. In part, Dodd-Frank accomplished this through the swap push-out rule. The swap push-out rule, which is section 716 of Dodd-Frank, makes federally insured institutions move their swap trades into a separate uninsured entity that does not have access to the Federal Reserve discount window or other fed assistance. These trades are incredibly complex and risky, and there is no public policy justification for the government to effectively subsidize them.
Before we even passed section 716, the biggest financial institutions were able to water it down. They wanted exemptions for swaps for ``hedging purposes'' which could be interpreted to mean a wide range of activity. But that was not enough. Now they want to do away with section 716 by making the exemptions so broad that the rule becomes meaningless.
Let's be very clear. This change primarily benefits the five biggest financial firms in the country. They account for well over 90 percent of swap transactions. These activities net them over $4 billion in profits. Before the crisis, swaps brought in over $7 billion. One of these firms actually wrote the language in the House bill. These financial institutions and their lobbyists know what they are doing, and they are doing just fine. They know that when something as important as funding of the government is on the line, they can convince Republicans to slip their priorities into a must-pass bill at the last hour. But again, this is just the beginning. Make no mistake about it. This portends much worse things when it comes to the Republicans taking over the majority in the Senate and the 114th Congress.
This is a big problem because we have been down this path before. We know where it leads. We let risk build in our financial system before, and the fallout was disastrous for our economy and the well-being of working families. It is on us to hold back against special interests. We have a responsibility to protect the public from this attempt to roll back Dodd-Frank. We cannot take our eye off the ball. We have to continue to guard against systemic risks in our financial system, and we have to put a stop to the practice of holding the government hostage over the pet issues of special interest groups.
The House is in a recess subject to the call of the Chair, and they are trying to round up votes for the omnibus spending bill which contains this provision. But they have another option. They can strip this provision. If they find that they don't have sufficient votes, they don't have to pass a 3-month continuing resolution. They can simply remove this provision from the omnibus bill which was negotiated in good faith with both parties in both chambers. Remove this provision, and I have no doubt we will have a resounding bipartisan supermajority in both Chambers. We should remove section 716, and pass the omnibus properly.
Madam President, I yield the floor.
The PRESIDING OFFICER. The Senator from New Jersey.