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House Votes To Audit The Fed… And Deregulate Wall Street

Posted by on September 17, 2014 in Government, Politics with 1 Comment

| Huffingtonpost

House Speaker John BoehnerWASHINGTON — The House of Representatives voted overwhelmingly to audit the Federal Reserve on Wednesday, a broadly bipartisan call for financial reform that accompanied two other bipartisan votes providing government perks to Wall Street on everything from higher mortgage fees to speculation in securities markets.

The votes underscore unique tensions among both Republicans and Democrats. All three bills garnered strong Republican majorities while essentially splitting Democrats down the middle.

“Today, the House passed the Federal Reserve Transparency Act,” Speaker John Boehner (R-Ohio) celebrated in a Vine video. “Finally, we're gonna audit the Fed.”

Of course, the Fed has been audited before. Reps. Alan Grayson (D-Fla.) and Ron Paul (R-Texas) secured an amendment to audit the central bank under the 2010 Dodd-Frank Wall Street reform law, and that audit revealed sweetheart deals for big financial firms.

But the provision remains unpopular at the Fed, big banks and many Capitol Hill offices. It is unclear if the Senate will take up the most recent audit bill, which passed the House by a vote of 333 to 92. Details about the Fed's lending activities are not generally made public without legislation requiring transparency.

Rep. John Campbell (R-Calif.) was the only Republican to vote against auditing the Fed, while Democrats voted 106 to 91 in favor, demonstrating the degree to which central bank transparency has become a mainstream issue.

Although the GOP is eager to expose the Fed's dealings with big banks, it is equally anxious to dole out favors to financial operators. Rep. Walter Jones (R-N.C.) was the only Republican to vote against the two deregulation bills Wednesday, with all other detractors coming from the Democratic Party. Jones, who also voted to audit the Fed, is the only consistent voice for bank reform among House Republicans.

One deregulation bill, H.R. 5405, would exempt a significant swath of the market for derivatives — the complex financial products at the heart of the 2008 meltdown — from Dodd-Frank's new trading rules.

Prior to the 2010 law, derivatives were traded in the dark without regulatory oversight or market scrutiny. Dodd-Frank required most derivatives to go through a central counterparty, which would pay up if either side of the trade failed to make good on its bet — a scenario designed to prevent another AIG fiasco. H.R. 5405 would exempt financial affiliates of big corporations from these clearing requirements, opening up avenues for speculative trading and systemic risk at major companies that aren't traditionally seen as banking powerhouses. Many large U.S. corporations are involved in banking, most notably General Electric, which received billions of dollars in government relief after its subprime bets blew up in 2008.

Americans for Financial Reform, the leading voice for Wall Street accountability on Capitol Hill, came out strong against H.R. 5405 and the other deregulation bill, H.R. 5461.

The latter legislation would give banks a way around the Volcker Rule, a ban on their speculating in the securities markets with taxpayer backing. It would weaken rules on bank ownership of collateralized loan obligations, a type of derivative that is dominated by big banks and that pools together many loans into one security. Weakening the rules would make it easier for banks to make big speculative bets with these derivatives and thereby get around the Volcker Rule.

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