Elizabeth Warren's Warnings About Financial Reform Are Already Coming True

[n2doc]

By Danny Vinik

hen Congress passed legislation in December to fund most of the government through the remainder of the fiscal year, Senator Elizabeth Warren and liberal Democrats nearly killed the bill over a policy rider that rolled back a piece of the Dodd-Frank financial regulatory bill. It was a sign, they warned, of what’s to come.

Just a few days into the 114th Congress, those warnings are proving prescient. On Thursday afternoon, the Senate overwhelmingly passed legislation to renew the Terrorism Risk Insurance Act (TRIA), which expired at the end of 2014 and allows the federal government to backstop commercial insurance companies up to $200 million in the case of a terrorist attack. But the bill, which the House passed on Wednesday, also eliminates another provision in the financial regulatory bill. Wall Street’s strategy to dismantle Dodd-Frank is only picking up speed.

The regulation that TRIA rolls back is not pivotal to Dodd-Frank. It gives the Securities and Exchange Commission (SEC) and Commodities Future Trading Commission (CFTC) oversight over collateral and margin requirements for certain financial trades—known as derivatives—with commercial end users. It’s not as important to Dodd-Frank as Section 716, which prevented banks from using taxpayer-backed money to trade in certain high risk financial products and was eliminated in the year-end funding bill known as the CROmnibus. But it still weakens the law. “The oversight of margin and collateral for derivatives transactions is a basic regulatory safeguard,” Americans for Financial Reform wrote in an open letter opposing the provision. “Even though regulators have not proposed to require any margin of commercial end users at this time, it is inappropriate to completely eliminate the ability of central derivatives market regulators to take action in this important area.”

The regulation has nothing to do with terrorism risk insurance; it was slipped into the bill so that it would pass without much fanfare. New York Senator Chuck Schumer, who has been one of the leading advocates for TRIA, called the provision “a pound of flesh in a must-pass piece of legislation.” In other words, it’s not a good change but it’s the price liberals must pay to pass TRIA.

more

http://www.newrepublic.com/article/120733/democrats-pass-terrorism-risk-insurance-bill-weakens-dodd-frank

[RiverLover]

1. Kick! Huge Thank you n2doc!! Also see~

...Falling oil prices will place a huge stress on the world's junk bond market as energy companies now account for 15 percent of the outstanding issuance in the non-investment grade bond market. The plunge in the prices of crude could trigger a "volatility shock large enough to trigger the next wave of defaults," according to Deutsche Bank.

This explains why the Obama administration - with complicity of both congressional Democrats and Republicans - managed in the wee hours of the morning to slip a loophole into the supposedly "must-pass" cliff-hanger omnibus budget bill. This toxic Trojan horse, passed in December 2014, now includes a minor footnote provision that might cause taxpayers to pick up the tab on more than a trillion dollars (yes, trillion) if the energy market bubble implodes, which it must if oil stays at half the price it fetched just six months ago.

After last minute, heavy lobbying on the budget bill by Jamie Dimon of JPMorgan Chase and an army of 3,000 Wall Street lobbyists, it appears that once again sufficient insecurity and fear had been spread among the political class regarding destabilization of the financial markets (or withdrawal of campaign financing). They allowed a last minute amendment that killed Dodd-Frank protections, and allowed US taxpayers to be shaken down to cover Wall Street's shale gambling debacle.

...Wall Street is now flooded with fracking industry derivatives contracts that protect the profits of oil producers from dramatic swings in the marketplace. Derivatives are essentially insurance policies taken out by the oil industry to guard against fluctuations in the cost of fossil fuel supplies. Dramatic swings rarely happen, but when they do they can be absolutely crippling.

Derivatives taken out to ensure prices don't go down are now creating billions in losses for those who sold such bets on the market; someone is going to have to absorb massive losses created by the sudden drop in oil on the other end of those insurance contracts. In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing colossal losses....

http://www.truth-out.org/news/item/28406-russia-blamed-us-taxpayers-on-the-hook-as-fracking-boom-collapses

[NYC_SKP]

2. Sure is in the news alot lately, isn't she?

:p