OR-Sen: Jeff Merkley (D) Fights For Dodd-Frank While House GOP Keeps Trying To Weaken It

DailyKos:

House Republicans continue to find ways to weaken and gut Wall Street reform, this time through an agriculture budgeting bill: http://www.huffingtonpost.com/...

Republicans in Congress have been pressuring regulators for years to exempt derivatives that U.S. companies sell overseas from the new rules set by the 2010 Dodd-Frank financial reform law. For much of 2013, the deregulatory drive enjoyed bipartisan support in the House, with lawmakers casting their efforts as an attempt to harmonize U.S. law with international regulations. But financial reform advocates have attacked the initiative for padding Wall Street profits at the expense of important public protections, and Democratic support has eroded. In June, the House passed a bill that would completely exempt from U.S. oversight derivatives sold through the nine most popular foreign derivatives jurisdictions. The legislation is occasionally derided as the "London Whale Loophole Act" on Capitol Hill -- a reference to the overseas trades that cost JPMorgan Chase more than $6 billion in 2012. London was the epicenter of much of the derivatives trading by U.S. financial firms leading up the 2008 crash, including AIG's infamous Financial Products division. If banks can simply route trades through loosely regulated overseas affiliates, financial reform advocates warn, the most critical aspects of Dodd-Frank will be effectively nullified. The "London Whale Loophole Act" faces opposition from Senate Democrats and President Barack Obama, so it's unlikely to be signed into law. But June's House Agriculture Committee funding bill has much stronger prospects for passage, since it's tied to approximately $19 billion in other spending. That bill would require the Commodities Futures Trading Commission -- the agency with responsibility for more than 90 percent of the derivatives market -- to negotiate its regulations with the Securities and Exchange Commission, which oversees the remainder of the derivatives business. Big banks have railed against the CFTC guidelines for taking a broad view of what constitutes an American firm. The SEC's proposed rule, by contrast, would bar American regulators from overseeing many offshore partnerships run by U.S. firms, and many trades between U.S. firms and overseas companies. Forcing the CFTC to negotiate with the SEC would almost certainly introduce loopholes into the CFTC's rules, and may shut down the rulemaking process altogether. "The House bill is nothing more than a backdoor way of killing derivatives reform," said Dennis Kelleher, president and CEO of the financial reform advocacy group Better Markets. "It's Christmas in July for Wall Street." - Huffington Post, 7/8/13

But Senator Jeff Merkley (D. OR) has been leading his colleagues in stoping the House GOP:

Eight Democratic senators, organized by Sens. Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.), on Wednesday signed a letter to CFTC Chairman Gary Gensler and SEC Chairman Mary Jo White stating that both the CFTC and the SEC have failed to deal with shadowy financial entities “sponsored” by U.S. banks without any explicit legal guarantee for their obligations. - Huffington Post, 7/8/13 Here's Merkley and Levin's letter:

Along with Merkley and Levin, the other Senators to sign this letter are Elizabeth Warren (D.MA), Tom Harkin (D. IA), Jeanne Shaheen (D, NH), Barbara Boxer (D. CA), Richard Blumenthal (D. CT) and Dianne Feinstein (D. CA). Despite being on opposite ends of the filibuster reform argument, Merkley and Levin have had a strong relationship fighting to make sure Dodd-Frank is not only enacted but also strengthened.  Especially when it comes to Gary Gensler and the Commodity Futures Trading Commission: http://dealbook.nytimes.com/...

Some lawmakers are urging the agency to tighten its rules. On Wednesday, a group of Democratic senators, including Carl Levin of Michigan and Jeff Merkley of Oregon, are expected to raise concerns about loopholes. Wall Street, in contrast, is bracing for July 12, when an order exempting overseas trading from federal scrutiny expires. If the agency fails to produce new guidelines but declines to extend the deadline, some banks fear widespread confusion will ensue. “We find it very problematic that, this close to a critical date, there is complete uncertainty as to how the agency will proceed,” said Annette L. Nazareth, a partner at the law firm Davis Polk. History would suggest that a deal will materialize. Of 56 Dodd-Frank rules approved at the agency, two-thirds won support from all five commissioners. But this deal is different. For one, it is likely to be the last policy to come from the current configuration of the trading commission. Ms. Sommers recently said her last day would be Monday. And Mr. Gensler, whose term expires in December, has turned down the White House’s offer to return to the agency. With time running low, Mr. Gensler has refused to extend the July 12 deadline. By his reckoning, the deadline comes three years after the passage of Dodd-Frank and a year after a draft version of the guidance. “Congress and President Obama asked us to do this thing three years ago,” said Bart Chilton, a Democratic commissioner at the agency who supports Mr. Gensler’s effort. “Come on already.” - New York Times, 7/2/13

Merkley & Levin have also worked together on the report about the affects from the London Whale scandal: http://financialreform.wolterskluwerlb.com/...

A report by the Senate Permanent Subcommittee on Investigations into JPMorgan Chase's “London Whale” losses of 2012 concludes that the bank's activities provide “another warning signal” about the ongoing need to tighten oversight of banks' derivatives trading, including better valuation techniques, more effective hedging documentation, stronger enforcement of risk limits, more accurate risk models and improved regulatory oversight. “Whale trades provide a startling and instructive case history of how synthetic credit derivatives have become a multi-billion dollar source of risk within the U.S. banking system,” the report notes. The losses also demonstrate “how inadequate derivative valuation practices enabled traders to hide substantial losses for months at a time,” according to the report. - Wolters Kluwer, 3/15/13 And it was Levin's grilling that was able to get the JP Morgan guys to show their true colors: http://www.huffingtonpost.com/...

Like some kind of tireless, question-asking robot, Sen. Carl Levin (D-Mich.) grilled JPMorgan Chase executives relentlessly for close to four hours on Friday about the bank's disastrous "London Whale" trades. Though the executives mostly held their ground and kept embarrassing soundbites to a minimum, Levin created plenty of uncomfortable moments for them during a hearing before the Senate Permanent Subcommittee on Investigations about the London Whale. Along with testimony from bank regulators at the Office of the Comptroller for the Currency, the entire hearing lasted more than five hours. Most of the time Levin was the only senator in the room. The executive that had the hardest time was Chief Financial Officer Douglas Braunstein. Levin quizzed him for several minutes about statements Braunstein made to investors during an April 13, 2012, conference call. At the time, the media was full of stories about massive positions in credit derivatives held by a trader at the bank's Chief Investment Office known as the London Whale. Ultimately, JPMorgan would acknowledge that the trades went horribly wrong, costing the bank more than $6 billion. At the time, though, CEO Jamie Dimon assured investors that the London Whale story was a "tempest in a teapot." And on the same call, Braunstein claimed that the CIO's positions were vetted by the bank's risk managers and routinely reported to regulators. After several minutes of rapid-fire questioning from Levin, Braunstein painted a more nuanced picture of what was true about the CIO's positions on that day: They actually had not been vetted by risk managers and their positions were not, in fact, routinely reported to regulators. - Huffington Post, 3/16/13

Merkley of course praised Levin's grilling: http://www.merkley.senate.gov/...

“I applaud Senator Levin for his work uncovering the astounding level of unacceptable behavior surrounding the ‘London Whale’ trades and sending his findings along to the DOJ and SEC.  The DOJ and SEC should quickly review the evidence compiled by Senator Levin’s investigations subcommittee and proceed aggressively to bring justice in this matter. The history of slapping big financial institutions on the wrist only reinforces Wall Street’s excessive risk-taking, and ordinary Americans pay the price. No financial institution should be above the law.” Now Levin is retiring next year but Merkley is running for re-election and Lord knows we need him to stay in the Senate to help continue to protect consumers from Wall Street.  If you would like to donate to Merkley's 2014 campaign, you can do so here:

http://www.jeffmerkley.com/

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