Weakening Dodd-Frank — John Carney Edition

According to this Saturday’s NJ, John Carney is lending some bi-partisan credibility to one of (there’s a package of bills out there trying to weaken an already weak legislation) the bills meant to loosen restrictions on banks who are trading in derivatives from their foreign operations:

Under Dodd-Frank, U.S. and foreign firms must comply with new rules affecting derivatives known as “swaps” in their dealings with U.S. customers.

Guidance from the Commodity Futures Trading Commission, scheduled to take effect in July, would require that foreign branches and subsidiaries of U.S. financial firms also submit information to U.S. regulators on any foreign swaps transactions.

The commission would defer to a host country’s rules in some instances, on a case-by-case basis.

The financial industry is fighting the swaps rule, saying it could force them to comply with redundant sets of foreign and domestic regulations and would deter foreign firms from dealing with U.S.-based firms.

“They’re concerned they could get pulled into U.S. regulations and they’re inclined not to trade with those U.S.-registered firms,” said Kenneth Bentsen, head of the Securities Industry and Financial Markets Association. “The U.S. firms are concerned that they could be at a distinct disadvantage.”

Notice anything here?  It is the US regulations that might be redundant and the problem.  Not the multiple foreign sets of trading rules that already exist that these firms are living with.  Dodd-Frank already provides for living with foreign rules that are truly comparable to the US ones:

The proposed Dodd-Frank rule on international swaps already says that countries with truly comparable regulations are exempt from US regs. This bill weakens that by presuming that international rules are comparable and making it hard for the SEC and CFTC to decide otherwise.

The NJ makes that point too. But Carney says in the Press Release sent out by Rep. Scott Garrett (R-NJ) back in March (couldn’t find a press release from Carney on his site about this, though):

“For the last two years, I’ve been working with my colleagues to make the financial system stronger and help our economy recover and grow,” said Carney. “As we work to implement the provisions of Dodd-Frank, Congress and regulators must ensure that we’re protecting American consumers, ending future bailouts, and maintaining American competitiveness in an increasingly global economy. This legislation will give U.S. companies the certainty they need to compete overseas, while maintaining important provisions from Dodd-Frank that will increase transparency in the U.S. derivatives market.”

Somehow this weakening is supposed to be good for everybody and is one of the more insulting examples of regulatory talking points. If this bill passes, banks do not have to live with the strongest of the derivative regulations — the ones in Dodd-Frank — if they are doing business overseas. Weakening this provision makes it easier for these banks to misbehave in other markets, meaning that taxpayers are at greater risk from TBTF — not less.

Dodd-Frank is already much too imperfect a solution to trying to avoid another crash. And John Carney coming down on the side of the banks instead of taxpayers is all to a familiar scene. What’s especially tough about this is that Carney can be for cuts in Social Security while he is placing Social Security at further risk with letting banks get away with more foolishness. If you’re willing to let the banks play Russian Roulette with taxpayer funds, Rep. Carney, why not support getting at least Social Security funds out of harms way? At least *that* would represent genuinely centrist policy — not the craven calculation here that responding to the needs of banks is more important than the needs of the people you represent.

So far, President Obama, the Treasury Department and Elizabeth Warren are opposed to the complete set of these bills that are meant to weaken Dodd-Frank. Unfortunately, since these are bank bills and the banks have bought a very great many legislators, these will likely show up in the Senate at some point.