Left revolts over funding bill | TheHill

Sen. Elizabeth Warren urged Democrats Wednesday to withhold support for a massive government funding bill, as opposition on the political left mounted over a set of changes to the Dodd-Frank Wall Street reform law buried in the legislation.

“I urge my Democratic colleagues in the House to withhold support for it until this risky giveaway is removed,” Warren (D-Mass.) said during remarks on the Senate floor.

Among the host of provisions included in the $1.1 trillion funding measure is one that would partially repeal a Dodd-Frank rule aimed at ensuring risky derivatives trading happens away from banks that have a government safety net.

ADVERTISEMENT

The last-minute inclusion, hammered out by party negotiators, is outraging several Democrats who have spent years fighting back against GOP efforts to reduce the impact of the 2010 law.

The titular sponsor of the law, retired Rep. Barney Frank (D-Mass.), is calling on his former colleagues to defeat the funding bill because of the “stealth attack” on his namesake legislative achievement.

House Minority Leader Nancy Pelosi (D-Calif.) said Democrats are “deeply troubled” by several provisions included in the roughly 1,600-page bill posted Tuesday evening and highlighted language stepping back tougher rules on financial derivatives.

“This provision, allowing big banks to gamble with money insured by the FDIC [Federal Deposit Insurance Corp.], opens the door to another taxpayer-funded bailout of big banks — forcing middle class families to bear the burden of Wall Street’s mistakes,” she said in a statement.

Several top-ranking House Democrats immediately identified the financial reform law tweaks as a major concern, after the group huddled Wednesday morning.

While Pelosi stopped short of saying she would vote against the measure without changes, Rep. James Clyburn (D-S.C.), the third-ranking House Democrat, said he would oppose the bill as is, and Rep. Steny Hoyer (D-Md.), Pelosi’s top lieutenant, singled out the Dodd-Frank portion as “very dangerous” to taxpayers.

Democratic support will be crucial to passage of the bill in the House, as dozens of conservative Republicans are expected to oppose the measure over concerns that it doesn't go far enough to counter President Obama's recent executive action on deportations.

The GOP defections mean Speaker John Boehner (R-Ohio) will need Democratic support to pass the bill and send it on the Senate.

Along with Warren, Sen. Sherrod Brown (D-Ohio), who could be the top Democrat on the Senate Banking Committee in the next Congress, blasted the Dodd-Frank provision as a “giveaway to Wall Street.”

Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee, said the party was prepared to fight against that particular provision.

“Democrats are now alerted, and they’re paying attention, and I think we can put up a good fight,” she said.

While unified Democratic opposition could pose trouble for the spending package, time is running short for changes, with the government set to shut down without a new funding measure at the end of the day Thursday.

The fight centers on legislation included in the bill sponsored by House Republicans — but with some Democratic support — that would allow banks to engage in some derivatives trading activity that was previously barred under Dodd-Frank.

The so-called “push out” requirement of Dodd-Frank requires banks to shift derivatives activity to separate entities that are not guaranteed by the FDIC, which provides a backstop for traditional banking activities and accounts.

The thinking behind the measure is that risky derivatives trading, which played a central role in financial collapse, should not occur in banks where the government is ultimately in a position to provide a rescue.

But the financial industry has pushed for some relief from that requirement for some trading activity, arguing it overcomplicates their services and renders them more costly.

The provision included in the spending measure was previously passed by the House with bipartisan support. Seventy Democrats joined nearly all Republicans in approving the legislation in October 2013, but the bill went nowhere in the Democratic-led Senate.

At the time, the White House issued a statement on the bill that stopped short of a veto threat but argued it was potentially “harmful” to tinker with Dodd-Frank while regulators were still implementing it. The White House did not commit Wednesday to signing the measure if Congress passed it but praised the bipartisan effort behind it.

Backers of the provision argue that removing that part of Dodd-Frank and allowing banks to engage in some derivatives activity is not overly risky.

“There’s huge misunderstandings about what this thing says,” said Rep. Jim Himes (D-Conn.), who was an early sponsor of the original House bill.

Himes argued that the most dangerous derivatives would still be kept away from government-backed banks, and banks would only be allowed to trade “plain vanilla” interest rate swaps.

— Mike Lillis and Ramsey Cox contributed.

http://thehill.com/regulation/finance/226638-democrats-balking-at-dodd-frank-changes-in-cromnibus