Whistleblower Richard Bowen: Barclays Bank Gets Its Hands Slapped… and What Does That Change!!!??

By Richard Bowen
http://www.richardmbowen.com/barclays-bank-gets-its-hands-slapped-and-what-does-that-change/

Is getting its hands slapped a strong enough message? The latest in the bad bank sagas has the British bank, Barclays, red-faced. As it should.

CEO Jes Staley has been reprimanded for attempting to discover the identity of an internal company whistleblower. Mr. Staley stated that he was trying to protect a colleague from what he considered an unfair attack.

Mr. Staley took his inquiry so far he had Barclay employees reach out to postal inspectors in his attempt to discover who had anonymously mailed two letters to the Barclays board, which complained about the bank hiring a mid-level executive. 

The resulting fallout will see Mr. Staley facing a significant pay cut plus regulatory probes. The U.K. Financial Conduct Authority (FCA) has him under investigation which could result in a fine and a possible ban from the financial services industry if the FCA does not find him “fit and proper to lead the firm.”

The Department of Justice (DOJ) is also investigating whether any officials at Barclays or even the USPS may have violated civil Dodd-Frank Whistleblower protections; as well as criminal law in its attempts to uncover the whistleblower’s identity.

Mr. Staley has apologized to Barclays’ board and he states, “accepted its conclusion that my personal actions in this matter were errors on my part.”  However, he’d previously told the Barclays board “that he thought it was legal to unmask a whistleblower.” 

In the NY Post article, Jordan Thomas, Chair of the Whistleblower committee at Labaton Sucharow, the New York law firm responsible for the survey of 1200 plus U.S. and U.K. based financial services professionals on workplace ethics, principles, profits, leadership and confidence (re bank and bankers) asks, of the Barclays fiasco, “Under what circumstances do government agencies work for corporations?“

“Unfortunately” he points out, “you regularly see leaders within corporate America wanting to hunt down whistleblowers within their organization.” The survey’s findings pointed out a continued disregard for ethical engagement as well as alarming new tactics being attempted to silence potential whistleblowers.

In an earlier article, I’d posted New York Federal Reserve President William Dudley’s comment about ”an apparent lack of respect for law, regulation, and public trust that persists within some large financial institutions.”

Yes, absolutely there is cause for concern; the issues are ongoing. I continued that the article goes on to say that the Labaton Sucharow survey said “that one in four bankers said they knew co-workers who had run afoul of the law.” And nearly a third of those surveyed said bonus and compensation incentives encouraged malfeasance.

Profits continue to hold sway over principles no matter how many regulations or checks and balances large banks and their officials, employees and boards are accountable for. Accountable! Did I actually use that word as it regards the big banks?

As Marianne Jennings, professor emeritus of legal and ethical studies from the W.P. Carey School of Business at Arizona State says in her recent article about the Barclays situation, Barclays has been sending mixed messages for a long time.

She says, “Antony Jenkins was named Barclays’ CEO in December 2012 following the LIBOR rate-fixing problems at the bank, a serious misstep that cost the bank almost one-half billion in fines. Mr. Jenkins, by all accounts, worked diligently to change the Barclay’s culture.”

She points out, Mr. Jenkins did indeed try to change the culture, yet he was fired in July 2015 for not “doing enough shareholder-wise”. The message? Forget culture change, stick to earnings and profits! … “In the world of ethics and compliance, one of the keys to anonymous reporting is anonymity. However, Mr. Staley insists that he did not know such a request was wrong.” Yet he was told at the time he made the request that in fact “he could not unmask the identity of whistleblowers.”

He tried anyway, admitted such and now will reap the consequences.  Ironic, as she points out, that the media is lauding the board’s actions yet they fired the last CEO for trying to build a much-needed culture of accountability. Ms. Jennings says, and I agree, “This guy needs to go if the board expects to ever hear about any issue.”

We may not expect bankers to be girl and boy scouts any longer. But what’s it going to take to assure accountability? What is it about the makeup of big banks that has built a culture of profits at any cost even though this has resulted in such egregious malfeasance?

Is there any solution? If so, let me know.

Banks Manipulating Housing Prices

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Editor’s Note: Buyers Beware! The Banks are manipulating housing prices like the Arabs manipulate oil prices. When it suits them the prices go up and down depending upon whether they let the flow of empty houses flood the market or they hold back.

When we think about the tens of thousands of homes that were forced into foreclosure after so many of the homeowners requested a modification payment that they could meet, it isn’t hard to come to the conclusion that the banks are not interested in preserving housing prices, they are interested in foreclosures and making the housing prices bottom out far below market forces would allow. They have cornered the market on housing and they are using it the same way they cornered the market on money.

If you’re are thinking that this is all conspiracy theory answer this: “why were tens of thousands of homes bulldozed in Cleveland, Detroit, Indianapolis and other cities when many of the homeowners had submitted modifications proposals? The servicers and banks had a duty to “consider” those proposals which is to say they had a duty to accept the proposals if they made sense. They didn’t consider the proposals. They pretended to consider the proposals. So the pretender lenders are at it again.

They want the foreclosures because they want the foreclosure deed. That deed is evidence of the fact and carried a presumption of validity that the credit bid was valid, the beneficiary or mortgagee was properly identified and that the amount due was correctly stated. None of those things are true in most cases. Why law enforcement is not grasping this simple fact begs a political question in an election year.

Wall Street is now forming partnerships and other vehicles by which they are pooling their money and buying the homes at the rock bottom prices that they are creating.

They can do so with full confidence that the market will not go up until they want it to do so, based on their control of the housing supply (defined as houses for sale).

Why are we letting the banks take us for another ride? And while I am at it, why are we not holding candidates feet to the fire on the new Dodd-Frank Law and the regulations for the Federal Consumer Financial Protection Board?

The arguments against implementing proper regulations are completely discredited by the mortgage meltdown and the historical similarities with the great depression.

If you take the referees of the field, the players are going to make up the rules as they go around. The clearinghouses that were supposed to be transparent transactions and exchanges are now all but dead as the banks have created “innovative” ways to avoid them. The referees should step in and put some teeth behind the bite of Dodd-Frank.

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Everything Built on Myth Eventually Fails

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Editor’s Comment:

The good news is that the myth of Jamie Dimon’s infallaibility is at least called into question. Perhaps better news is that, as pointed out by Simon Johnson’s article below, the mega banks are not only Too Big to Fail, they are Too Big to Manage, which leads to the question, of why it has taken this long for Congress and the Obama administration to conclude that these Banks are Too Big to Regulate. So the answer, now introduced by Senator Brown, is to make the banks smaller and  put caps on them as to what they can and cannot do with their risk management.

But the real question that will come to fore is whether lawmakers in Dimon’s pocket will start feeling a bit squeamish about doing whatever Dimon asks. He is now becoming a political and financial liability. The $2.3 billion loss (and still counting) that has been reported seems to be traced to the improper trading in credit default swaps, an old enemy of ours from the mortgage battle that continues to rage throughout the land.  The problem is that the JPM people came to believe in their own myth which is sometimes referred to as sucking on your own exhaust. They obviously felt that their “risk management” was impregnable because in the end Jamie would save the day.

This time, Jamie can’t turn to investors to dump the loss on, thus drying up liquidity all over the world. This time he can’t go to government for a bailout, and this time the traction to bring the mega banks under control is getting larger. The last vote received only 33 votes from the Senate floor, indicating that Dimon and the wall Street lobby had control of 2/3 of the senate. So let ius bask in the possibility that this is the the beginning of the end for the mega banks, whose balance sheets, business practices and public announcements have all been based upon lies and half truths.

This time the regulators are being forced by public opinion to actually peak under the hood and see what is going on there. And what they will find is that the assets booked on the balance sheet of Dimon’s monolith are largely fictitious. This time the regulators must look at what assets were presented to the Federal Reserve window in exchange for interest free loans. The narrative is shifting from the “free house” myth to the reality of free money. And that will lead to the question of who is the creditor in each of the transactions in which a mortgage loan is said to exist.

Those mortgage loans are thought to exist because of a number of incorrect presumptions. One of them is that the obligation remains unpaid and is secured. Neither is true. Some loans might still have a balance due but even they have had their balances reduced by the receipt of insurance proceeds and the payoff from credit default swaps and other credit enhancements, not to speak of the taxpayer bailout.

This money was diverted from investor lenders who were entitled to that money because their contracts and the representations inducing them to purchase bogus mortgage bonds, stated that the investment was investment grade (Triple A) and because they thought they were insured several times over. It is true that the insurance was several layers thick and it is equally true that the insurance payoff covered most if not all the balances of all the mortgages that were funded between 1996 and the present. The investor lenders should have received at least enough of that money to make them whole — i.e., all principal and interest as promissed.

Instead the Banks did the unthinkable and that is what is about to come to light. They kept the money for themselves and then claimed the loss of investors on the toxic loans and tranches that were created in pools of money and mortgages — pools that in fact never came into existence, leaving the investors with a loose partnership with other investors, no manager, and no accounting. Every creditor is entitled to payment in full — ONCE, not multiple times unless they have separate contracts (bets) with parties other than the borrower. In this case, with the money received by the investment banks diverted from the investors, the creditors thought they had a loss when in fact they had a claim against deep pocket mega banks to receive their share of the proceeds of insurance, CDS payoffs and taxpayer bailouts.

What the banks were banking on was the stupidity of government regulators and the stupidity of the American public. But it wasn’t stupidity. it was ignorance of the intentional flipping of mortgage lending onto its head, resulting in loan portfolios whose main characteristic was that they would fail. And fail they did because the investment banks “declared” through the Master servicer that they had failed regardless of whether people were making payments on their mortgage loans or not. But the only parties with an actual receivable wherein they were expecting to be paid in real money were the investor lenders.

Had the investor lenders received the money that was taken by their agents, they would have been required to reduce the balances due from borrowers. Any other position would negate their claim to status as a REMIC. But the banks and servicers take the position that there exists an entitlement to get paid in full on the loan AND to take the house because the payment didn’t come from the borrower.

This reduction in the balance owed from borrowers would in and of itself have resulted in the equivalent of “principal reduction” which in many cases was to zero and quite possibly resulting in a claim against the participants in the securitization chain for all of the ill-gotten gains. remember that the Truth In Lending Law states unequivocally that the undisclosed profits and compensation of ANYONE involved in the origination of the loan must be paid, with interest to the borrower. Crazy you say? Is it any crazier than the banks getting $15 million for a $300,000 loan. Somebody needs to win here and I see no reason why it should be the megabanks who created, incited, encouraged and covered up outright fraud on investor lenders and homeowner borrowers.

Making Banks Small Enough And Simple Enough To Fail

By Simon Johnson

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press release materials).

His proposal, while not likely to immediately become law, is garnering support from across the political spectrum – and more support than essentially the same ideas received two years ago.  This week’s debacle at JP Morgan only strengthens the case for this kind of legislative action in the near future.

The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic. This idea had been gathering momentum since the fall of 2008 and, while the Brown-Kaufman amendment originated on the Democratic side, support was beginning to appear across the aisle. But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate. (For a compelling account of how the financial lobby works, both in general and in this instance, look for an upcoming book by Jeff Connaughton, former chief of staff to former Senator Ted Kaufman of Delaware.)

The issue has not gone away. And while the financial sector has pushed back with some success against various components of the Dodd-Frank reform legislation, the idea of breaking up very large banks has gained momentum.

In particular, informed sentiment has shifted against continuing to allow very large banks to operate in their current highly leveraged form, with a great deal of debt and very little equity.  There is increasing recognition of the massive and unfair costs that these structures impose on the rest of the economy.  The implicit subsidies provided to “too big to fail” companies allow them to boost compensation over the cycle by hundreds of millions of dollars.  But the costs imposed on the rest of us are in the trillions of dollars.  This is a monstrously unfair and inefficient system – and sensible public figures are increasingly pointing this out (including Jamie Dimon, however inadvertently).

American Banker, a leading trade publication, recently posted a slide show, “Who Wants to Break Up the Big Banks?” Its gallery included people from across the political spectrum, with a great deal of financial sector and public policy experience, along with quotations that appear to support either Senator Brown’s approach or a similar shift in philosophy with regard to big banks in the United States. (The slide show is available only to subscribers.)

According to American Banker, we now have in the “break up the banks” corner (in order of appearance in that feature): Richard Fisher, president of the Federal Reserve Bank of Dallas; Sheila Bair, former chairman of the Federal Deposit Insurance Corporation; Tom Hoenig, a board member of the Federal Deposit Insurance Corporation and former president of the Federal Reserve Bank of Kansas City; Jon Huntsman, former Republican presidential candidate and former governor of Utah; Senator Brown; Mervyn King, governor of the Bank of England; Senator Bernie Sanders of Vermont; and Camden Fine, president of the Independent Community Bankers of America. (I am also on the American Banker list).

Anat Admati of Stanford and her colleagues have led the push for much higher capital requirements – emphasizing the particular dangers around allowing our largest banks to operate in their current highly leveraged fashion. This position has also been gaining support in the policy and media mainstream, most recently in the form of a powerful Bloomberg View editorial.

(You can follow her work and related discussion on this Web site; on twitter she is @anatadmati.)

Senator Brown’s legislation reflects also the idea that banks should fund themselves more with equity and less with debt. Professor Admati and I submitted a letter of support, together with 11 colleagues whose expertise spans almost all dimensions of how the financial sector really operates.

We particularly stress the appeal of having a binding “leverage ratio” for the largest banks. This would require them to have at least 10 percent equity relative to their total assets, using a simple measure of assets not adjusted for any of the complicated “risk weights” that banks can game.

We also agree with the SAFE Banking Act that to limit the risk and potential cost to taxpayers, caps on the size of an individual bank’s liabilities relative to the economy can also serve a useful role (and the same kind of rule should apply to non-bank financial institutions).

Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.

No one is suggesting that making JPMorgan Chase, Bank of America, Citigroup and Wells Fargo smaller would be sufficient to ensure financial stability.

But this idea continues to gain traction, as a measure complementary to further strengthening and simplifying capital requirements and generally in support of other efforts to make it easier to handle the failure of financial institutions.

Watch for the SAFE Banking Act to gain further support over time.

TBTF Banks Bigger than Ever — How is that possible in a recession?

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Editor’s Comment: 

The pernicious effect of the banks and the difficulty of regulating them across transnational and state borders has led to a growing nightmare that history will repeat itself sooner than later.

This is to rocket science — it is recognition. We have median income still declining in what is still by most measures a recession that is about to get worse. Yet the largest banks are reporting record profits. What that means is that Wall Street is making more money “trading paper” than the rest of the country is making doing actual commerce — i.,e. the making and selling of goods of services.

This is another inversion of common sense. But it is explainable. 4 years ago I predicted that as the recession depressed the earnings of most companies the banks would nonetheless show increased profits. The reason was simply that using Bermuda, Bahamas, Cayman Islands the banks siphoned off most of the credit market liquidity through the tier 2 yield spread premium. The tier 2 YSP was really the money the banks made by selling crappy loans as good loans from aggregators to the investors — and then failed to document any part of the real transactions where money exchanged hands. In some case the YSP “trading profit” exceed the amount of the loan.

So now they are able to feed those “trading profits” back into their system a little at a time reporting ever increasing profits while the the real world goes to hell. So tell, me, what is it going to take to get you to to go to the streets, write the letters and demand that justice be done and allow, for the first time, investors and borrowers to get together and reach settlements in lieu of foreclosures? Don’t you see that whether you are rich or poor, renting or owning, that all of this is going to bring down your wealth and buying power. The Federal Reserve has already tripled the U.S. Currency money supply giving all the benefit to the TBTF banks. It seems to me that as group the American citizens are far more too big to fail than any industry or company.

Evil prospers when good people do nothing. 

Big Five Banks larger than before crisis, bailout

WASHINGTON —

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

Five banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It also is exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis and have thrived. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to swell, if less dramatically, thanks to internal growth and acquisitions from European banks shedding assets amid the euro crisis.

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

The Obama administration rejects the criticism, citing new safeguards to head off further turmoil in the banking system. Treasury Secretary Timothy Geithner says the U.S. “financial system is significantly stronger than it was before the crisis.” He credits a flurry of new regulations, including tougher capital and liquidity requirements that limit risk-taking by the biggest banks, authority to take over failing big institutions, and prohibitions on the largest banks acquiring competitors.

The government’s financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the tea-party movement. Banks and bailouts remain unpopular: By a margin of 52 to 39 percent, respondents in a February Pew Research Center poll called the bailouts “wrong” and 68 percent said banks have a mostly negative effect on the country.

The banks say they have increased their capital backstops in response to regulators’ demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, this month acknowledged public “hostility” toward bankers, boasts of a “fortress balance sheet.” Bank of America, which was about 50 percent larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.

“We’re a much stronger company than we were heading into the crisis,” said Jerry Dubrowski, a Bank of America spokesman. The bank, based in Charlotte, says it plans to shrink by year-end to $1.75 trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.

Still, the banking industry has become increasingly concentrated since the 1980s. Today’s 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.

“One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at-risk,” said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. “Some of the biggest banks got a lot bigger, and the market got more concentrated.”

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank’s research department, “Why We Must End Too Big to Fail — Now.”

A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”

The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or “living wills” detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.

The new protections represent an effort to avoid a repeat of the crisis and subsequent recession in which almost 9 million workers lost their jobs and the U.S. government committed $245 billion to save the financial system from collapse.

The goal of policy makers is to ensure that if one of the largest financial institutions fails in the next crisis, shareholders and creditors will pay the tab, not taxpayers.

“Two or three years from now, Goldman Sachs should be like MF Global,” said Dennis Kelleher, president of the nonprofit group Better Markets, who doubts the government would allow a company such as Goldman to repeat MF Global’s Oct. 31 collapse.

Dodd-Frank, the most comprehensive rewriting of financial regulation since the 1930s, subjected the largest banks to higher capital requirements and closer scrutiny. The law also barred federal officials from providing specific types of assistance that were used to prevent such firms from failing in 2008. Instead, the Fed will work with the FDIC to put major banks and other large institutions through the equivalent of bankruptcy.

“If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy,” Obama said before signing the act on July 21, 2010. “And there will be new rules to make clear that no firm is somehow protected because it is too big to fail.”

Officials at the Treasury Department, the Fed and other agencies have spent the past two years drafting detailed regulations to make that vision a reality.

Yet the big banks stayed big or, in some cases, grew larger. JPMorgan, which held $2 trillion in total assets when Dodd-Frank was signed, reached $2.3 trillion by the end of 2011, according to Federal Reserve data.

For Lacker, the banks’ living wills are the key to placing the financial system on sounder footing. Done right, they may require institutions to restructure to make their orderly resolution during a crisis easier to accomplish, he said.

Neil Barofsky, Treasury’s former special inspector general for the Troubled Asset Relief Program, calls the idea of winding down institutions with more than $2 trillion in assets “completely unrealistic.”

It’s likely that more than one bank would face potential failure during any crisis, he said, which would further complicate efforts to gracefully collapse a giant bank. “We’ve made almost no progress on ending too big to fail,” he said.

POLITICANS RUSH TO CASTRATE FINANCIAL REFORM

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The fact that Wall Street is so intent on doing this can only indicate one thing: they intend to do it again. Wake up America!

SEE VIDEO ELIZABETH WARREN ON GOALS FOR FINANCIAL CONSUMER PROTECTION

Note: One of the things that Warren brings out in the video is that the disclosure forms come much too late in the process. The obvious effect is that besides being confusing  on their face, there is very little time for consumer to study or get help understanding the disclosure statements. Early rendition and delivery of the disclosure statements would add to the barrier of committing consumer fraud. By requiring early delivery, the “lender” would not be able to argue later that the borrower was informed of the terms and signed anyway, even when the consumer never had any real opportunity to look at those forms. Now we have to argue that the delivery of the forms was under circumstances where the consumer was meant not to understand the transaction. Warren’s goal addresses that head-on.

EDITORIAL COMMENT: The only wrong with this editorial from the NY Times is that they seem to limit it to Republicans. I’ll agree that Republicans are leading the charge, but many Democrats are in the pack racing for ways to please Wall Street which is throwing money around like confetti. By making it a Republican vs. Democrat issue, the editorial diverts us from the point — that the Dodd-Frank bill is under attack and they intend to chip away at it in pieces by denying appropriations and otherwise tangling up the works so that it doesn’t work.

Who Will Rescue Financial Reform?

In what passes for self-restraint these days, House Republicans have been insisting that they do not intend to repeal last year’s Dodd-Frank financial reform law.

Not in one fell swoop, anyway.

A direct assault on Dodd-Frank would be so blatantly biased toward banks that it would be sure to provoke a public backlash. So the Republican plan is to delay and disrupt reform. The effort is partly ideological — an insistence that regulation is unnecessary, no matter the evidence to the contrary. It is also a campaign fund-raising ploy, because Wall Street will reward the opponents of reform. Of course, Democrats are themselves not indifferent to Wall Street campaign cash, which raises the question of how effectively they will counter the Republicans’ aims. Here are areas to watch.

DERIVATIVES Budget cuts could cripple the Securities and Exchange Commission and the Commodity Futures Trading Commission — which share the vital task of regulating the multitrillion-dollar derivatives market. The budget impasse in Washington has already frozen the agencies’ budgets, even as their rule-writing duties have exploded. Worse, prevailing Republican rhetoric, adopted in part by Democrats, portends more budget cuts, which would leave the agencies unable to enforce current rules, let alone new ones. Settling for less than President Obama’s requested amounts for the agencies would be acquiescing in the derailment of Dodd-Frank.

CONSUMER PROTECTION The Consumer Financial Protection Bureau, arguably the most innovative of the reforms, has been under constant attack by banks — and Republicans. Most recently, a House hearing on the bureau that was billed as an oversight session was instead a hazing of Elizabeth Warren, the Harvard law professor and consumer advocate chosen by Mr. Obama to set up the agency. Republican objections boiled down to charges that the agency — and Ms. Warren — have too much power. Ms. Warren’s rebuttals were clear and persuasive. Mr. Obama could define the debate further — and demonstrate his professed support for the bureau — by going on the offensive and nominating Ms. Warren as its official director. Senate Republicans have said that they would object, but it is their own credibility that would be at risk in opposing so qualified a candidate.

REPEAL BY ANOTHER NAME House Republicans have unveiled several bills to undo Dodd-Frank piece by piece. One would rewrite the law so that the C.F.P.B would be run by a five-member bipartisan board, rather than one director, a recipe for delay and division. Another would exempt an array of derivatives users from the new rules, perpetuating the deregulated market.

Yet another bill would repeal a requirement for private equity firms to register with the S.E.C, in effect ignoring the systemic risks in leveraged pools of private capital. And one would repeal a requirement that publicly traded companies disclose the ratio of a chief executive’s pay to that of a typical employee, a move that would deprive analysts of data to detect bubbles that correlate to skewed pay. The list goes on.

Dodd-Frank is no cure-all, but properly implemented and enforced, it would close dangerous regulatory gaps. That won’t happen if Republicans get their way — and they will, unless the fight is engaged in no uncertain terms. Democrats in Congress need to unite behind the law and Obama officials should denounce the antireform effort for what it is: an attempt to weaken Dodd-Frank on behalf of those who brought us the financial crisis.

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