Mr. President, I’m back on the floor to talk about a dangerous provision that was slipped into a must-pass spending bill at the last minute, solely to benefit Wall Street. This provision would repeal a rule called, and I’m going to quote the title of the rule: “Prohibition against federal government bailouts of swaps entities.”
The “president” was the presiding officer of the Senate, where, as the clock ran out on the 113th Congress, Senator Elizabeth Warren delivered a speech that electrified progressive Democrats and seized the attention of Wall Street.
The Massachusetts senator covered a lot of ground in nine minutes.
Warren: “Let’s pass something—anything—that would help break up these giant banks.”
While mentioning neither president by name, Warren excoriated Bill Clinton and Barack Obama for appointing Wall Street executives to positions of power and for turning their administrations into farm teams for investment banks.
And most important, aware that Republicans in the 114th Congress intend to dismantle the Dodd-Frank finance-reform law passed in 2009, Warren warned Democratic collaborators that they will pay a price.
Warren focused on Citigroup, an obvious target (read the full transcript here).
A Citigroup lobbyist had written the amendment to the end-of-session spending bill, which now allows banks insured by the Federal Deposit Insurance Corporation to return to derivative trading. Dodd-Frank prohibited federally insured banks from trading derivatives, a direct cause of the financial collapse that led to the 2008 bank bailout and an unprecedented recession.
There’s a Clinton backstory. Citi and other investment banks were given license to drag the global economy into The Great Recession, because 10 years earlier Bill Clinton and his Treasury Secretary Robert Rubin worked to pass the 1999 Gramm-Leach-Bliley financial-reform bill, which allowed, among other things, FDIC-insured derivative trading.
Gramm-Leach-Bliley was passed months after Citi obtained temporary approval from Treasury to merge with Travelers, a marriage that couldn’t be sanctioned until the bill was signed into law by Bill Clinton. Robert Rubin subsequently took his talents to Citigroup, where was paid $126 million as the bank slid into insolvency.
Warren ignored the Republican Party’s incestuous relationship with big finance and focused on the transgressions of her own party.
“Consider just a few examples,” she said.
“Three of the last four Treasury Secretaries under Democratic presidents have had close Citigroup ties. The fourth was offered the CEO position at Citigroup, but turned it down. The Vice Chair of the Federal Reserve system is a Citigroup alum.”
On she went, leaving insiders to fill in the blanks in a speech that read like an indictment with names redacted. But all those indicted were Democrats, members of the party that once represented Main Street and has given itself over to Wall Street.
The derivatives-trading provision that Warren unsuccessfully tried to block, after all, would not be law today if Democrats negotiating the Senate version of the bill had not signed off on the provision.
Without naming a single individual, Warren identified nine Citigroup executives whom Presidents Clinton and Obama appointed to manage the economy and financial institutions.
The first-term Massachusetts Senator reminded her Democratic colleagues that they were elected to work for families “who lost their homes or their jobs or their retirement savings the last time Citi bet big on derivatives and lost.”
“If this Congress is going open up Dodd-Frank in the months ahead,” she said, “let’s open it up to get tougher, not to create more bailout opportunities. If we’re going to open up Dodd-Frank, let’s open it up so that once and for all we end too-big-to-fail.
“Let’s pass the bipartisan twenty-first century Glass-Steagall Act, a bill I proposed with John McCain, with Angus King and Maria Cantwell. Let’s pass something—anything—that would help break up these giant banks.”
As a senator, Warren is the creation of the Senate Republicans, who six years ago informed Obama that they would block her confirmation to chair the Consumer Financial Protection Bureau, which she envisioned and proposed while she was teaching at Harvard. So she ran for the office she now holds.
Whether she runs for president or not, Warren has redirected the public conversation at a moment when the belief in opportunity that is central to the American dream is an illusion to working-class Americans and when Washington Post polling finds 71 percent of Democrats and Republicans in agreement that our economic system favors the wealthy.
As Republicans in Congress begin to roll back Dodd-Frank’s financial regulations, Democratic senators who might consider joining them might want to think again.
Lou Dubose is the editor of The Washington Spectator