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March 20, 2013

Public Citizen Condemns House Agriculture Committee’s Reckless Disregard of Financial Calamity in Approving Wall Street Deregulation

WASHINGTON, D.C. – Approval today by the House agriculture committee of six bills to gut or stall important Wall Street reforms demonstrates reckless disregard of the financial crash of 2008 and the Senate’s just-released dissection of JPMorgan’s so-called London Whale gambling loss of $6.2 billion.

Last week, Republicans, led by U.S. Sen. John McCain (Ariz.), joined with Democrats on the Senate’s Permanent Subcommittee on Investigations to issue a scathing rebuke of trading activity by JPMorgan, the world’s largest bank. The report reveals mismanagement, deception, book-cooking and regulatory neglect. The London Whale lost more than $6 billion of depositor funds through JPMorgan’s London office on a bet about the direction of bond prices.

This week, Republicans on a House committee unanimously approved half a dozen bills to reduce Wall Street prudential obligations and oversight authority of Washington regulators of the derivatives market.

“We have to hope these House members just didn’t read the Senate report,” said Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division. “Otherwise, they wouldn’t have been so irresponsible.”

Seventeen House Democrats opposed one measure that would prevent U.S. regulatory oversight of American operations in London. Ranking Democrat Colin Peterson (D-Minn.) argued against deregulating London Whale-type trades, but Rep. David Scott (D-Ga.) joined with Republicans to approve the Wall Street-lobbied measure.

The committee also approved a misguided measure to force additional analysis of all rules (in addition to many other requirements). “This will further enable Wall Street to use the courts to delay and even block regulatory oversight,” said Amit Narang, regulator policy counsel for Public Citizen’s Congress Watch division.

In 2011, in response to a lawsuit, a U.S. court rejected a rule from the Securities and Exchange Commission, and the fear of more litigation like it has helped to slow implementation of the 2010 Wall Street Reform Act. Agencies have issued only a third of the rules required by Dodd-Frank. Additional analysis requirements are not needed.

The committee also approved a bill repealing the Wall Street reform that prevented derivatives trading within a financial firm’s federally insured bank. The 2010 reform, dubbed the “Lincoln amendment” for former Sen. Blanche Lincoln (D-Ark.), required that this activity be conducted in separately capitalized subsidiaries and that losses could not be covered by funds from the firms’ bank affiliate.

“Last year, this measure was dubbed the ‘Swaps Bailout Prevention Act.’ At least the bill’s authors have dropped this disingenuous title for a measure that actually authorizes such bailouts,” Naylor said. “The full House should consider the evidence from the Senate and recall the $12 trillion in damage from the financial crash of 2008 as they vote on these dangerous measures.”


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