Posted by Josh Zinner
Events in Congress last week provide a painful reminder that the Too Big To Fail banks and their allies in Congress are completely unbowed by the events leading up the global financial crisis. Now more powerful than ever, the big banks will stop at nothing to gut even modest reform.
Last week, banks got their friends in Congress to gut a key a provision in the Dodd-Frank financial reform law, as a condition of funding the government. The provision, known as the Lincoln Amendment, required FDIC-insured banks to move some of their riskiest operations – including dealing in credit default swaps – to separate entities. The provision was meant to stop banks from using public money and subsidies as a backstop for risky trading activities.
Congress held the federal budget hostage for the banks. President Obama capitulated. But why should taxpayers be on the hook for banks’ high-stakes gambling?
As The Washington Post reported, Citigroup lobbyists drafted the bill section to repeal the Lincoln Amendment. And JPMorgan Chase CEO Jamie Dimon, unbowed by endless revelations of fraud and illegality at his bank, made personal phone calls to legislators to urge them to vote for the repeal.
The big banks spend big for their influence: Citi, Chase, and Bank of America are among the top corporations in dollars spent on lobbying and political contributions. Chase spent more than $33 million in the last five years on federal lobbying alone.
With a new Congress flush with industry dollars and eager to enact banks’ anti-regulatory agenda, the frenzy to defeat even the modest reforms gained through Dodd-Frank is likely only to intensify.