WASHINGTON -- The recent Wall Street deregulation push in Congress has been fueled by a significant disparity in campaign donations from big banks: Members of Congress who voted to expand taxpayer support for big banks in late March have received nearly eight times as much money from Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup as the members who voted against the legislation, according to an analysis by MapLight, a government transparency nonprofit.
Last month, the House Agriculture Committee approved six new bills to deregulate complex financial transactions called derivatives. The bills will next be considered by the full House. Derivatives tied to the housing market were at the heart of the 2008 financial meltdown. All but one of the bills passed by a unanimous voice vote, meaning that members of Congress were not required to have their names recorded in a formal tally.
But the most controversial bill was forced to an actual vote, and passed with broad bipartisan support by a 31-to-14 margin. The bill would roll back a provision in the 2010 Dodd-Frank Wall Street reform bill that currently requires banks to move some derivatives operations outside of units that receive taxpayer-backed deposit insurance. Moving derivatives outside these units prevents them from creating losses for taxpayers caused by risky derivatives trading. Banks receive higher credit ratings for derivatives sold with taxpayer support, making them more profitable.
For the 31 representatives who voted in favor of deregulation, the average total campaign contributions from political action committees for Goldman, JPMorgan, BofA and Citi since Jan. 1, 2009, was $9,209.68, according to MapLight. That average is more than 7.8 times as much as the average haul for the 14 congressmen who voted against the bill, which amounted to $1,178.57. Only four of the 'no' votes received any money from the four banks, while 11 of the votes to deregulate did not receive any contributions; absence of a contribution was factored into the averages.
Goldman, JPMorgan, BofA and Citi account for 93 percent of the total derivatives exposure in the banking industry, according to the Office of the Comptroller of the Currency.
The Financial Services Roundtable, which represents big banks, declined to comment for this article.
Top recipients of big bank money on the committee were Reps. Randy Neugebauer (R-Texas) and David Scott (D-Ga.), who brought in $52,000 and $41,500, respectively. Neugebauer and Scott are among a handful of House members who serve on both the Agriculture and the Financial Services Committees. Through an accident of history, the Agriculture Committee has oversight over many matters concerning derivatives, since the instruments were initially designed as insurance products to help farmers manage risk.
Both Neugebauer and Scott declined to comment for this article, but Scott spoke in favor of several bills to deregulate derivatives before the vote in March.
"[This] was never given proper consideration in the House during the initial development of Dodd-Frank and ... it could have substantial unintended consequences," Scott said, referring to the requirement that banks move derivatives trading outside their taxpayer-backed units. "It could lead to less and lower quality capital in the affiliate, thereby actually increasing risk."
At the same hearing, Rep. Collin Peterson of Minnesota, the ranking Democrat on the panel, warned against deregulating derivatives. Peterson, who voted against the bill, has received $5,500 in campaign contributions from Goldman, JPMorgan, BofA and Citi since 2009.
"Two of the worst votes I ever made in this place was the Commodity [Futures] Modernization Act of 2000 that exempted all of these swaps from any regulation or any margins," Peterson said. "I didn't know any better. The other vote I made that was really bad is eliminating Glass-Steagall. We should have never done that, and I bought into that. You know, if we had Glass-Steagall back, this wouldn't be an issue here ... At the time we did the Modernization Act, there were $80 billion in swaps, in derivatives. We gave 'em legal certainty, we eliminated the regulation requirements, and it went to $700 trillion and it blew up on us. So just be careful: You can vote any way you want, but this could come back and haunt you."
Dodd-Frank passed with the weakest Republican support possible: three Republican Senators joined Democrats voting in favor of the bill, just enough to clear a filibuster. No House Republican voted in favor of the bill. In the years since its passage, however, Congress has returned to its more traditional bipartisan support for bank deregulation. The major deregulatory bills of the Clinton-era -- Gramm-Leach Bliley and the Commodity Futures Modernization Act of 2000 -- both received backing from Republicans and Democrats alike.
President Barack Obama is unlikely to support partial repeals of his Wall Street reform legislation, but the deregulation bills approved in March could find their way into broader legislation that may prove more difficult for the White House to reject.
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