Progressives celebrated on Wednesday as the U.S. House of Representatives failed to pass yet another Wall Street giveaway, rejecting by a slim margin legislation that would have gutted an important financial regulation embedded in the 2010 Dodd-Frank reform act.
While a majority voted for the bill, rules were suspended, which required the bill to have a two-thirds' majority. The vote was 276 to 146.
On Twitter, Angela Bradbery of the watchdog group Public Citizen said the outcome was good news for the 99 percent:
— angelabradbery (@citizenangela) January 7, 2015
Before the vote, Public Citizen called on representatives to reject H.R. 37, which would have given banks an additional two-year reprieve from unloading some of their riskiest holdings—known as collateralized loan obligations—as part of a larger deregulation package aimed at undermining Dodd-Frank.
"[W]e urge you to Vote NO on the bill deceptively titled the 'Promoting Job Creation and Reducing Small Business Burdens Act'," Public Citizen said in a letter (pdf) sent Wednesday. "Not a month since Congress unwisely pierced a key Wall Street safeguard that would have prevented certain bank speculation with taxpayer-insured funds, the House now considers a package with several measures that threaten the fabric of other protections."
Chief among those measures was one that diluted the so-called 'Volcker rule,' a key reform adopted after the 2008 financial crisis that bans banks from gambling in securities markets with taxpayer money. H.R. 37, sponsored by Rep. Michael Fitzpatrick (R-PA), would have given banks an extra two years to comply with a section of the rule related to collateralized loan obligations.
According to the Huffington Post:
Collateralized loan obligations, or CLOs, are complex contracts similar to the mortgage securities that crashed the economy in 2008. To create a CLO, banks package dozens of risky corporate loans together and sell slices to investors. The Office of the Comptroller of the Currency, a major bank regulatory agency, warned in December that the corporate debt market is overheating and becoming increasingly dangerous.
The nation's largest banks dominate the CLO market. According to an April letter from five federal regulators, banks with at least $50 billion in assets hold between 94 percent and 96 percent of the domestic market, valued at $84 billion to $105 billion.
Already in December, the Federal Reserve handed banks a win with a one-year extension on implementing the Volcker rule.
As Public Citizen put it, the extension under debate on Wednesday "simply lets the mega-banks gamble through 2019 with taxpayer-insured deposits."
Democrats came out swinging against the rule change. On the House floor, Rep. Michael Capuano, a Democrat from Massachusetts, said the bill effectively "guts" the Volcker rule.
Progressive Rep. Keith Ellison, of Minnesota, shared the words of one of his colleagues:
Rep. Capuano: Rhetoric is cheap. Titles of bills don't mean anything. Banks brought the economy to its knees by gambling with our money.
— Rep. Keith Ellison (@keithellison) January 7, 2015
Democratic leader Nancy Pelosi said in a statement: "Later today, Republicans will attempt to pass an 11-bill Wall Street wish list introduced in the dead of night and rushed before the House without transparency, scrutiny or debate. The Republican package to be offered under suspension of the rules represents a brazen attempt to dismantle essential Wall Street reforms and sneak through a New Year’s present to big banks. The last thing large banks need is more help."