Moral Low Ground

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Citigroup Lobbyists Wrote Wall Street Deregulation Bill

Wall Street lobbyistsLobbyists for one of Wall Street’s biggest financial firms helped draft legislation exempting banks from new regulations and allowing them to engage in riskier trades.

The New York Times reports that Citigroup lobbyists wrote most of a House bill that would allow banks such as itself to make risky trades supported by a taxpayer-funded bailout.

Mother Jones reports that the bill, the Swaps Regulatory Improvement Act, was approved by the House Financial Services Committee earlier this month and will soon head for a vote on the House floor. It essentially defangs a section of the 2010 Dodd-Frank financial reform act called the ‘push-out rule’ which would bar banks from trading certain derivatives.

The ‘push-out rule,’ which is scheduled to take effect in July, would require banks to conduct certain risky derivative trades through independent non-bank affiliates not insured by the Federal Deposit Insurance Corporation (FDIC). These affiliates are less likely to benefit from taxpayer-funded bailouts. The new bill would circumvent the ‘push-out rule’ by permitting banks to use FDIC-insured funds to engage in bets on more risky derivatives.

According to the Times, “Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill.”

“Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word-for-word,” the Times reports.

The Times also reports that Wall Street has recently doubled its already significant political contributions, giving twice as much money to lawmakers who backed bank-friendly bills as it did to those who opposed them. Wall Street firms also recently hosted fundraisers for lawmakers who co-sponsored bills pushed by big banks. Last week, lobbyists and corporate executives paid up to $2,500 to attend a fundraising dinner for Rep. Sean Patrick Maloney, a New York Democrat who co-sponsored the bill largely written by Citigroup.

Financial industry watchdogs claim the ‘push-out rule’ that firms such as Citigroup are trying to kill is an extremely important regulation, as Wall Street banks continue to shift derivatives trading from non-FDIC insured investment banking divisions into taxpayer-backed entities.

“The rule is needed more than ever,” Mike Konczal of the Roosevelt Institute told Mother Jones.

“The big banks support [the bill] because it means they’ll get to keep the public subsidy to their derivatives-dealing business,” Marcus Stanley, policy director at Americans for Financial Reform, added.

Wall Street lobbyists acknowledged their role in drafting bank-friendly legislation, but claimed this is common practice in Washington, DC.

“We will provide input if we see a bill and it is something we have an interest in,” Kenneth E. Bentsen Jr, a former US congressman-turned Wall Street lobbyist, told the Times.

Critics point to the symbiotic relationship between Wall Street, K Street and Capitol Hill– the so-called ‘revolving door’ of big money special interest politics– as an indication of how the nation’s democratic process has been perverted from one “of the people, by the people, for the people” to one “of the corporations, by the corporations, for the corporations.” The influence of special interest money in politics accelerated significantly in the wake of the US Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling, which affirmed that corporations are people, money is protected free speech, and therefore corporations could spend as much as they please to influence the outcome of US elections.

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