Will Lawmakers Sneak a Gift to Wall Street into the Spending Bill? | WHAT REALLY HAPPENED

Will Lawmakers Sneak a Gift to Wall Street into the Spending Bill?

Under cover of legislative chaos, lawmakers from both parties are working this week to preserve taxpayer-backing for some of Wall Street’s riskiest activities.

The deal taking shape would be slipped into the catch-all federal spending bill that is meant to finance the government in 2015, according to Capitol Hill sources who are not authorized to speak publicly. It would effectively repeal a plank of the Dodd-Frank financial reform law that would force big banks to conduct their most speculative derivatives trades in separately-capitalized subsidiaries, where they would be ineligible for federal deposit insurance, Federal Reserve assistance or other taxpayer-provided support.

The point of the law is to end the “heads I win, tails you lose,” game on Wall Street, in which the biggest banks keep the lavish winnings from their bets while pushing catastrophic losses onto the public, as happened in the financial crisis.

The point of the repeal is to coddle the banks and, in the process, protect the flow of campaign funds from Wall Street. The banks don’t want to set up separate subsidiaries for risky derivatives because it is more profitable for them to operate with taxpayer-backing. They have previously persuaded bank regulators to delay the effective date of the provision. But, at long last, the regulators recently made it clear that there will be no further delay. Hence the banks’ all-out push for repeal.