On Thursday, bank-basher Sen. Elizabeth Warren (D-Mass.) slammed several bills headed for the House floor that would severely weaken Wall Street reform.
The Dodd-Frank Act, the 2010 law aimed at preventing another financial crisis, “put in place a variety of measures that work together as a system to protect consumers, hold big banks accountable, and reduce the risk of future crises,” Warren said in a statement. “It is dangerous for Congress to amend the derivatives provisions of the Dodd-Frank Act.” (Derivatives are financial products that have values based on underlying numbers, like crop prices or interest rates; some economists believe these products helped cause the 2007 financial collapse.)
Warren’s condemnation of the bills, which just passed out of the House Financial Services Committee (HFSC), echoes a May 6th letter from Treasury secretary Jack Lew to House Financial Services Chair Jeb Hensarling attacking the bills. “The derivatives provisions in the Wall Street Reform Act constitute an important part of the reforms being put into place to strengthen our financial system by improving transparency and reducing risk for market participants,” Lew wrote in the letter. “These reforms should not be weakened or repealed.” Last year, former Treasury Secretary Tim Geithner denounced a series of nearly identical bills.
One of the bills now headed to the House floor would expand the types of trading risks that banks can take on. Another would allow certain derivatives that are traded within a corporation to be exempt from almost all new Dodd-Frank regulations. Financial reform advocates say these kinds of trades can still pose a risk to the wider financial system. A third bill would allow big, multinational US-based banks to escape US regulations by operating through international arms.
“Wall Street’s aggressive determination paid off last week” when the bills passed out of committee, Warren said. The bills also have bipartisan support, and have a good chance of being taken up in the Senate. If they do, Warren says she’ll go to battle: “Now is no time to go backwards,” she said. “I will do what I can in the United States Senate to stand up to those who would chip away at reform.”