In one of the most stunning capitulations to date, President Obama has pressured enough spineless Democrats to support Republicans in ramming through a spending bill that contains, among many harmful plans, a special provision that undoes one of the most important regulations enacted by the Dodd-Frank financial regulation law that was enacted as a response to the Great Recession, to prevent future banking crises and bailouts.
Threatened with another government shutdown tonight at midnight, 57 House Democrats voted against the majority of House Democrats and their leader, Nancy Pelosi, to essentially give back to big banks, the right to gamble F.D.I.C. insured deposits in the risky derivatives market. What is shocking about this giveaway to a small handful of “too big to fail banks” on Wall Street – the perpetrators of the financial crisis of 2008 that caused the Great Recession and nearly led to the collapse of the global financial markets – is not that the provision was written by Citigroup lobbyists, which it was, but that it was aggressively lobbied for by the Obama Administration, who made rounds of high level phone calls from Obama’s Chief of Staff and others, to House Democrats, pressuring them to accept the spending bill as a “compromise.”
Just a refresher: the Dodd-Frank financial regulations act was enacted after Obama took office, for the purpose of preventing large banks from recklessly investing tax payer insured deposits into the investment side of the banks’ high risk ventures – derivatives in particular. It was the bundling of high risk real estate loans that were falsely sold in the derivatives market as secure, collateral backed loans, that led to the near collapse of the financial markets. The government bailed out the big banks to the historical tune of almost 700 billion under threat of another Great Depression. After the original Great Depression, the Glass-Steagall Act of 1933 was enacted to make banks more secure. One of it’s key features was to keep the deposits made by ordinary citizens from being gambled away by high risk investments of the banks. Ordinary deposits were guaranteed by the Federal government, a firewall against bank runs in bad economies. The major push by big banks for deregulation began under Ronald Reagan, but arguably the most damaging deregulation was enacted under President BIll Clinton, who undid the Glass-Steagall rule separating the commercial side of banking from the investment banking side. The derivatives market, a new form of investment invented by the banks, boomed, with very little oversight or regulation. Since then, there have been predictable bubbles, leading to crashes, that the federal government has had to step in and bail out, to keep the financial markets functioning, and the economy from collapsing.
Republicans fought tooth and nail against President Obama and Dodd-Frank. The bill was finally approved, but not before much of the law’s teeth and regulatory powers were gutted from it Now, President Obama and his administration have joined pro-Wall Street, screw-everyone-else on Main Street Republicans, in undoing the meaningful and necessary provision in Dodd-Frank to prevent federal government insured gambling by derivatives and hedge fund managers at the big banks.
Perhaps this should come as no surprise, given that President Obama received more campaign money from Wall Street than John McCain did. Perhaps, given the enormous amount of money donated to him by the big banks to help elect him president, it is no coincidence that President Obama immediately filled his cabinet with Wall Street insiders such as Larry Summers and Tim Geithner, among others.
Through all of this, President Obama has been able to talk out of both sides of his mouth at once. He tells voters that he is changing the rules of Wall Street to prevent future financial disasters, and at the same time he is actually lobbying members of his own party to vote to dismantle those very rules. On top of that, President Obama, and his apparent, impotent lap dog, Senator Harry Reid, are saying publicly that they are not happy with that provision in this current spending bill, but that it is a compromise that will be even less attractive when Republicans take control of the Senate as well in January.
This pathetic excuse for actually pushing reluctant Democrats into supporting this debacle of a spending bill, fails to take into account the fact that Speaker John Boehner lacked enough Republican votes in the House to pass without significant support from House Democrats. Tea Party factions and other Republican obstructionists in the House were voting no on the spending bill for different reasons, primarily because they wanted to defund the Department of Homeland Security in retaliation for the president’s recent executive actions of immigration. So the Republicans actually needed Democratic support of the spending bill to avoid a government shutdown, and once again, boom! President Obama and Harry Reid rolled over for Republicans, although this time it remains unclear if Obama sincerely regrets the rollback of the banking rules, or if that is just lip service.
Obama has always been a weak an ineffective “negotiator” when it comes to budget showdowns, willing to undermine his own party and betray his campaign trail promises. Just recently though, it appeared with his executive action on immigration, that President Obama was going to spend his last two years in office fighting for his declared principles and exhibiting backbone against Republican obstructionism. What a disappointing and short lived fantasy that turned out to be.
In addition to the “compromise” in the spending bill on banking regulation that the President is leading his party to support, are other provisions meant to undermine existing laws, such as a provision to allow even bigger individual donations to politicians running for office (though thanks to the Supreme Court, it is unclear how much this will matter anyways), and prohibiting the Environment Protection Agency from regulating lead content in fishing tackle and ammunition, not to mention cuts in the budget to the already underfunded agency. For a more extensive list of the giveaways to republicans and special big money interests, see the New York Times list: http://www.nytimes.com/2014/12/13/us/key-points-from-the-spending-bill.html?hp&action=click&pgtype=Homepage&module=first-column-region®ion=top-news&WT.nav=top-news.
There are good Democrats fighting the Wall Street sponsored Republicans and President Obama. Nancy Pelosi has had the backbone to stand against the White House, and Senator Elizabeth Warren, a bold and tireless crusader against the injustice and power of the financial industry, rightfully opened her statements on the Senate floor with the question: “Who does congress work for?” Sadly, President Obama, most of the Republicans, and enough Democrats work for the billionaires and millionaires and giant corporations. I offer this video of her, to show you how a real politician stands up for the majority of Americans, when the majority of Congress and the President, do the bidding of the Big Banks:
http://www.washingtonpost.com/blogs/post-politics/wp/2014/12/10/elizabeth-warren-fellow-liberals-rail-against-bank-provision-in-spending-bill/