Robert A. Levine 12-17-14
The political yahoos finally left for home. But before they did, the House and Senate passed a “compromise” spending bill last week. That had the pundits talking about how Washington was finally working again and that legislation that would not cause a presidential veto in the next session might be possible. But look what these scummy politicians inserted into the spending bill that had nothing to do with the running of the government over significant resistance from the right and the left (for different reasons).
The left, led by Senator Elizabeth Warren, was deeply upset by a provision that rolled back important aspects of Dodd-Frank legislation, giving a gift to Wall Street that will keep giving. Warren called it “a giveaway to the most powerful banks in this country.” Some on the right also voiced their displeasure with this provision. After the last recession, which was initiated by Wall Street speculation that went awry, one would have thought that the politicians in Washington would have been wary of allowing Wall Street to start playing the same game. The particular issue was the reversal of some of the regulations contained in Dodd-Frank, permitting the big banks to speculate in the derivatives market again.
You might ask two questions about this. Why should this kind of action have been inserted into a government spending bill? And why should Congress have given permission to the banks to engage in highly speculative trading, when it almost destroyed the western economic system and was a major factor in the recession?
The first question is easy to answer. Since a spending bill had to be passed to avert a government shutdown, why not add other legislation to it that was not likely to be enacted if it stood alone. Wall Street had been lobbying for the ability to trade in derivatives and the spending bill was an opportunity for those Senators and members of Congress indebted to the big banks for their campaign funding and other perks to get it done. A great show of bipartisanship!
Answering the second question is more difficult. Trading in derivatives by the banks provides no benefits to American citizens and it puts taxpayers on the hook if the banks lose large enough sums of money to threaten the economy. However, derivatives trading can generate large profits for the banks (if they bet correctly and their algorithms are accurate), which could mean big bonuses for bank executives. The bankers claim that given the new higher reserves they are required to keep, there is less risk in any trading they do. This may be true, but why should banks be engaged in speculative activity when it is not part of their core mission, does not benefit American citizens, and does entail some systemic risk. It appears that most officeholders in Washington don’t care about putting taxpayers at risk, as long as money keeps flowing to them from Wall Street. Commercial banks apparently gave over $25 million to candidates for the House and Senate in the 2014 election cycle, and officeholders want that funding to continue.
But lawmakers were not just going after Wall Street money in the spending bill. Also inserted were provisions that allowed wealthy individuals and corporations to give up to $777,600 yearly to party committees and funds, and their campaign arms, and double that in each two year cycle- up to $1,555,200. The current annual cap is $32,400, so this bill is an overwhelming jackpot for the parties and the politicians, wiping out previous campaign restrictions. Again, this was done in a bipartisan fashion, snuck into a bill where it did not belong, with no one willing to take credit for crafting this provision. (Oh, and by the way, there were multiple other agreements slipped into the bill that benefitted particular areas, industries, non-profits, and so forth, which were similar to the earmarks that had supposedly been banned by Congress.)
Bye-bye McCain-Feingold and any attempts to limit money to the politicians and the parties. The Supreme Court opened the spigot in the first place by their rulings equating political funding with free speech. But the provisions in the spending bill turned the money spigot wide open for all the politicians and the parties. Hooray for the Supreme Court and hooray for bipartisanship. Bye-bye democracy.