Wall Street banks are back, not that they ever truly left.
Citigroup, JPMorgan Chase and the rest of the big players are on the verge of reclaiming some of the power they lost in 2010 when the then-Democratic-controlled Congress passed and President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Congress approved Dodd-Frank in reaction to the 2008 financial crisis and the federal bailout of the too-big-to-fail banks. Evidently, no one in Washington cares to recall four, five and six long years ago when Stockton was ground zero for the housing crash, and the Central Valley suffered with 20 percent unemployment.
With happy days evidently here again, the House and Senate voted last week to approve to a $1.1 trillion spending bill to keep the government operating until the next crisis. Obama is expected to sign it.
To gain sufficient votes, Democrats and Republicans agreed to odious provisions, one of which would authorize a vast increase in the amount of money rich donors can contribute to political parties.
Worse, Congress pushed to a repeal of Section 716 of the Dodd-Frank act, titled “Prohibition against federal government bailouts of swap entities.”
Imagine incumbent members of Congress telling their constituents that they had voted to repeal the “Prohibition against federal government bailouts of swap entities.” It wouldn’t happen. This is one of those dirty acts of Congress over which no member takes ownership.
We don’t presume to fully grasp the significance of the repeal of Section 716. We doubt that members of Congress fully understand it, either. But we are sure bankers and their lobbyists know its implications.
The section describes “swap entities,” “hedging,” “security-based swaps,” “derivatives” and more. The law didn’t ban any of it. Masters of the Wall Street universe could have engaged in all of the above and more.
But under Section 716, the taxpayers would not have been on the hook when they bet wrong, as they have in the past and surely will in the future. Once the bill is signed into law, which seems inevitable, they will be free to roll the dice again.
As has been widely reported, Citigroup lobbyists wrote the provision repealing 716. Since 2011, Citigroup’s employees and political action committees have donated nearly $5 million to federal campaigns since 2011; the company spent $20 million during that period on lobbying in Washington, D.C., the nonpartisan Center for Responsive Politics found.
The Washington Post reported last week that JPMorgan Chairman Jamie Dimon called members of Congress urging the bill’s passage. Our guess is lawmakers took Dimon’s calls.
Since 2011, JPMorgan’s PAC and its employees have donated $7.6 million to federal campaigns, and the company has spent $25.8 million on lobbying, the Center for Responsive Politics reports.
Banks don’t spend that kind of money because they are benevolent. They expect a return on their investments in malleable members of Congress.
That raises the issue of another provision of the spending bill that opens the way for donors to give as much as $1.5 million in every two-year election cycle to political parties, $3 million per couple. Parties, in turn, will spend the money electing their candidates.
The current cap on an individual’s donation is $194,400 every two years. At least mega-donors to parties will be publicly disclosed, which could be good. Voters will be able to see for themselves who rents the political parties.
And it will become more readily apparent why they cast certain votes, such as the one repealing the “Prohibition against federal government bailouts of swap entities.”