One might imagine that if there is one thing Democrats have learned by now, it is that derivatives are fresh hell for the economy, but I guess not. It's bad enough that Republicans wanted to gut Dodd-Frank by destroying most oversight measures and handing control back to the SEC, which has proven itself incompetent and without a care in the world about our economy. But no, it wasn't just Republicans.
Seventy-three Democrats. That's SEVENTY-THREE, people. That's how many joined hands and played nice with the Republican tools in the House of Representatives to gut key provisions of Dodd-Frank.
The Swap Jurisdiction Certainty Act, or--as former Golden Sachs programmer and current Occupy Wall Street activist called it---the "Intimidate the CFTC ACT"--changes how derivatives are regulated. One should immediately see warning lights by the word "certainty" with its echoes of the language that banks and polluters always use when they want to gut regulations--in the name of certainty, never self-interest. The bill first would force the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to "harmonize" their rules governing derivatives, i.e., adopt the weaker rules of the SEC. However, there's more danger in the bill because it would exempt foreign trades from regulation. In an article this morning in the Washington Post, Goldstein explains,
It makes a crucial, and dangerous, blanket assumption: If a U.S. bank does derivatives trading in one of the nine largest swaps markets, that country’s rules are assumed to be as strong as the United States’, so the U.S. rules need not apply.This is a ridiculous assumption, because if the rules were truly equivalent, there would be no need for this bill in the first place. In fact, this would allow U.S. banks to dodge U.S. rules in favor of weaker rules overseas. Yet as the last crisis showed, even when banks attempt to hide the risk overseas, that risk remains at home. AIG failed because of derivatives traded out of their London office. More recently, JPMorgan Chase lost more than $6 billion last year due to their infamous “London Whale” trades, which were the subject of a devastating report from the Senate’s Permanent Subcommittee on Investigations.
Really, this does need an explanation and soon, because it wasn't just Blue Dogs who voted for it. It was New Dems and even a couple of members of the Progressive Caucus:
Now, let's move to "name and shame" time. Which 73 Democrats voted with Wall Street and put taxpayers at risk for future bailouts? Almost all of the conservative Blue Dogs and corporatist New Dems voted for the bill. Unfortunately, a few members of the Progressive Caucus (including Raul Grijalva?!) also voted for it. Some of the Democrats in this list are pursuing higher office, e.g. Allyson Schwartz in the 2014 PA gubernatorial race, Gary Peters in the 2014 Michigan senatorial race.
Raul Grijalva is a friend of this site, a true progressive, and fights hard for progressive principles. It's hard to understand why he would have voted for this, unless there's some kind of a tradeoff in the works for votes on immigration reform? I do not believe for a minute he would cast a vote for this unless he knew it was guaranteed to be stopped somewhere else, like right at Elizabeth Warren's door.
Still, it sends the wrong message. Democrats should not be voting to "intimidate the CFTC" or weaken Dodd-Frank. Hopefully someone will explain what appears to be a very strange, unproductive strategy.