There’s a big showdown brewing in Washington over Wall Street regulation written during and just after the financial crisis.
Senator Elizabeth Warren (D-MA), Congresswoman Maxine Waters (D- CA) — all the usual suspects are involved. House Republicans want to roll back some of the regulation that was made back in 2008 and 2009, and Democrats aren’t going for it.
“House Republicans are trying over and over again to water down the financial regulations on Wall Street and give the big banks more time to gamble with taxpayer-backed money,” wrote Sen. Warren in a Facebook post this morning. “Wall Street doesn’t need another giveaway.”
That’s after Republicans attempted to fast-track a handful of tweaks to the Dodd-Frank financial regulation act — and specifically to the Volcker Rule — last week.
The amendments did not pass, but, as the Wall Street Journal points out, they will likely be taken up under regular timetable, rather than fast-tracked, later this week.
Preventing Congress from repealing elements of the Dodd-Frank Act has been a cause célèbre for Senator Warren for months. She even stressed the importance of the regulations while waging her war against Wall Street investment banker Antonio Weiss’s Treasury nomination:
“[Senator Warren] is encouraged that Antonio Weiss supporters are now acknowledging that Dodd-Frank implementation is central to the role,” her press secretary told Business Insider last month.
An Ongoing Struggle
The Senator’s emphasis on protecting Dodd-Frank regulation gained prominence late last year, when she took issue with amendments to the Dodd-Frank Act worked into the 2015 government spending bill.
Those amendments would allow banks to trade potentially risky derivatives rather than “pushing out” that activity to affiliates (which, unlike the big banks, wouldn’t be underwritten by the federal government).
Joining Warren on that front was Democratic Congresswoman Maxine Waters, the ranking member of the House Committee on Financial Services.
Yesterday, in a testimony to that committee, she said that last week’s proposed Dodd-Frank amendment “contains a number of bad provisions.”
“My colleagues on the other side of the aisle are hoping that they can just keep delaying the implementation of Wall Street reform, assuming the public has forgotten just how bad the financial crisis was,” Rep. Waters said.
Democrats objected in particular to proposed changes to a provision in the Dodd-Frank law dubbed the “Volcker Rule,” which prohibits banks from trading risky collateralized debt obligations, or CLOs. Right now, banks have until 2017 to comply, but the tweak would give them until 2019 to adopt the measure. (JPMorgan Chase, Wells Fargo, and Citigroup currently hold the most CLOs, according to the Wall Street Journal.)
Republicans counter that many of the last week’s proposed tweaks had already been approved in individual committees or passed in the House during the last Congress. They claim that Democrats are simply obstructing a Republican-controlled Congress and blocking even minor changes.
The White House took Waters’ and Warren’s side in a statement yesterday:
“The President has been clear about his opposition to legislation that would weaken and undermine the Dodd-Frank Wall Street Reform and Consumer Protection Act… The Administration has significant concerns with provisions that would undermine the Volcker Rule… The Administration also has concerns with other provisions that would roll back important derivatives reforms… If the President were presented with H.R. 37 [the most recently-proposed amendments to the Dodd-Frank law], his senior advisors would recommend that he veto the bill.”
Watch Rep. Waters’ full testimony against the proposed changes here: