And Congress does its bloody best to make sure that we get a repeat of the world financial meltdown from 2007.
At issue is the “swaps push-out” rule, which requires banks to move derivatives trading out of taxpayer-backed subsidiaries. Derivatives are risky financial instruments that contributed to the 2008 crash. Allowing banks to conduct those trades on the assumption that taxpayers would bail them out if the deals went sour was not only bad for taxpayers; it also raised the value of the trades and thus effectively acted as a subsidy for the banks. Financial institutions, obviously, weren’t thrilled with the new rule. In 2013, lobbyists for Citigroup gave lawmakers a proposal to exempt a wide array of derivatives, and it subsequently appeared in a bill approved by a House committee that year.
Derivatives are what nearly sank the whole thing the last time around. And now, the Congress has decided, in the same kind of “bipartisan” way that brought us the repeal of Glass-Steagall and the Commodity Futures Trading Act during the Clinton Administration, to let these guys gamble with taxpayer money again. This is such a spectacularly bad idea that it’s hard to believe that its supporters didn’t sneak it into the bill the way they did just as a goof, to see what they could get away with, those scamps.
“Hey, Bob. Let’s see if we can get them to pass the Free Smack Subsidy next! Somebody call Luntz and have him think up a name for it. The Opiate Liberation And Personal Freedom Liberty Act Of 2014, or something.”
The arrangement is the result of a “bipartisan compromise” engineered by Mikulski by which Wall Street gets to oil up the roulette wheel again in exchange for increased funding for the Commodity Futures Trading Commission, which is supposed to oversee things like derivatives training, and which the incoming, and more radical, Republican congressional majority surely will chloroform entirely the first chance it gets. Meanwhile, things are being arranged to put us all on the hook again for Wall Street’s gambling jones.