"Gotcha" Legislation and Congressional Failures
A 60 Minutes episode that aired several months ago focused on the Commodities Futures Modernization Act of 2000 (the "Act") and the substantial role it played in our current economic crisis. The Act allowed financial institutions to engage in high-risk derivative transactions and credit default swaps without any regulatory oversight by the SEC or the CFTC. And they did so to the tune of an estimated $50 to $80 trillion dollars -- until many of these institutions became "too big to fail" and were rewarded with substantial infusions of government largess. Not only did the Act prohibit the SEC and CFTC from regulating these transactions, it also prohibited states from enforcing existing gambling and bucket shop laws against Wall Street, which, as 60 Minutes pointed out, appears to be Congressional recognition that these financial instruments were nothing more than high-stakes gambling for the upper class and illegal or at least prosecutable.
As Congress holds hearing after hearing in which our Congressional Representatives and Senators self-righteously deride the greed and avarice of corporate CEOs and the negligence and incompetence of the SEC and other government agencies, the public needs to ask how in the hell did Congress enact this legislation, particularly when the Long Term Capital Management hedge fund so clearly demonstrated the risk of derivatives, leverage and lack of transparency only two years earlier.
As prior postings on this website have described, the Act was slipped in at the last minute by Senator Phil Gramm and other sponsors on December 14, 2000, by being incorporated by reference into a massive Omnibus bill without first being vetted by Committees or debated by the full House and the Senate. The Omnibus bill was approved by the House and Senate the following day on December 15, 2000 and signed into law by former President Clinton on December 21. This procedural masterstroke was nothing short of "gotcha" legislation by legislators who received significant financial support from the financial services industry and it raises many important questions, including the following.
Do the Congressional Rules and Procedures really permit major pieces of legislation to be slipped in for vote without the opportunity for members to review and debate the substance and effect of the legislation? In addition to the Act, Congress also permitted eight other bills to be incorporated by reference into the Omnibus bill even though they were not introduced until December 14 or 15. This suggests that slipping in last minute legislation without proper vetting is an accepted practice. In other words, the rules and procedures observed by Congress when purportedly protecting the people's business apparently are not nearly as stringent as those adopted by the average charity or homeowner association.
Were the other members of Congress duped in the wake of the chaos that followed the 2000 election and US Supreme Court intervention and their desire to wrap things up so they could leave for the holidays? On the floor on December 14, Senator Gramm described the Act "as the finished product of years of work involving half a dozen committees in both Houses of Congress, and as many agencies of the Federal government." Earlier versions of the Act had been considered by the House and the Senate during 2000. The House had passed an earlier version but the legislation then stalled and the full Senate neither debated nor voted on its version. The Act as slipped in by Gramm on December 14, however, differed significantly from the earlier versions and eliminated regulatory federal oversight, but Gramm did not point out the differences in his remarks on the floor. But if Congress was duped, why didn't they take remedial action when they realized what had happened? And certainly, why did all of Congress ignore experts who identified the risk of permitting derivatives and credit default swaps to be traded free of any regulatory oversight and why didn't they take action when the danger of the subprime loans and the high volume of high risks derivatives first became apparent (and when there was still time to prevent much of the damage we are now suffering).
While Congress should hold hearings and question CEOs and federal regulators to determine how this debacle happened and what actions can be taken to prevent future economic collapse, at the same time Congress needs to look into its own internal workings, assess its own role in the crisis, and implement procedures to prevent "gotcha" legislation and insure they do everything they can in the future to protect the public interest. So far, there appears to be little to give us assurance that they are doing so.
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Members of Congress seem to have forgotten they are OUR lobbyists.
not really true any more - most of their actual income is probably from the lobbyists, not the salary we pay them. But of course they've legislated away the need for us to know about that, so it would appear.
@Marilyn great article! I've tried to tell people about this for over a year now and you've said it better than I could!
OK, everyone else, your are all right and something must be done!
But only venting here gets you nothing. Are you doing like I do and forward the URL and a copy of your response to your Congress critters?
If you are not then your wasting your time and keystrokes, because you can bet no member of Congress will admit they've read this.
Make your voice heard, tell Congress what you think!
The comments so far are missing the bigger question: is it really permitted to insert unexamined bills for vote without debate? The past 8 years have seen a lot of use of this maneuver by the Bush WH: the PATRIOT act is a prime example, with many unexamined and unintended consequences, the worst of which is its failure to include any oversight, monitoring, or corrective measures.
Why is there never any debate about "Drunk Driving" legislation? Why does MADD get to supercede the Constitution?
Why does America let MADD take us back into Prohibition, trampling several Constitutional amendments on the way?
Why does no one ever cross-check their exclusive claim that 40% of motor vehicle accidents are caused by "drunk drivers"? WHO is making the most money from all this new "Drunk Driving" legislation?
Can I get an honest answer this time as opposed to "My [so and so] was killed by a drunk driver!" rhetoric?
(I'll be very surprised if this is posted)
you wanna read legislation? try Congressional Record or on-line access via Library of Congress Thomas system.
you wanna know what legislators are doing? watch CSPAN.
you think there would have been oversight of derivatives of Gramm bill hadn't been passed? well, SEC was generally asleep (think Madoff) so its unlikely there and CFTC didn't have resources. Remember that no one asked for such oversight, this was merely to preclude it. no reason to believe it would have happened in any event.
in fact, legislators make up the rules as they go, particularly in the Senate where "unanimous consent" is the norm, so any Senator who found the Gramm proposal totally offensive could have slowed or stopped it. Might have resulted in government closure, but Congress, like the rest of us, is constantly groping for the least worst solution.
fact is there was a lot discussion of this issue at the time and major controversy about whether derivatives were positive or negative on balance. majority believed they were positive and that attempting regulation would yield negative results. in hindsight, that majority view was clearly wrong, but has little do Congressional procedures.
I think Americans need to know what's going on in their government.
The US Congress has the primary responsibilitly of funding the government every fiscal year, from Oct. 1 through Sept. 30.
http://app
It must pass 13 appropriations bills to do this.
Lately, the Congress has failed in its responsiblities of passing the 13 appropriations bills, and thus must pass continuing resolutions or Omnibus Appropriations Bills, lumping all unpassed bills into one.
http://boo
The Congress' failure to pass the annual appropriations bills gave rise to the Ominibus bills, which created a must pass vehicle to which Gramms attached his atrocious bills.
http://en.
In the Senate, their is the German rule. And also the rule of not legislating on the Approriations bills.
Gramms' amendments should have been defeated as ungerman to the bill.
"...Gramms
In a rethug Congress? Better luck wishing for a perpetual motion machine.
Don't forget the name of the president that signed off on the bill
Gee, how would it be if Congress did the job it is paid to do and that they spent a bunch of money getting elected to do. Something on the order of knowing what they're voting for? But then what is ignored in this piece is just exactly who "owned" Congress at the time. There is a "No" button that can be pushed and electoral consequences for not doing so.
That last assumes some information on the part of the electorate and campaigns and...oh well.
Finally, Marilyn said what I have personally been striving to get the mainstream media to say. The Futures Modernization Act (FMA) and the Community Re-investment Act (CRA) are the two legislative vehicles contributing the most to oiur current financial demise. Congress knowingly provided the thieves (Wall Street and our financial institutions) with the tools and assistance needed to become the best thieves in history. The thieves utilized those tolls with proficiency while Congress looked the other way. WHY! What were they thinking? I believe we all know the answers to those questions. Allow Congress the opportunity to investigate themselves? You've got to be kidding! Years and millions of dollars later Congress will have convinced the electorate that it was all somehow our faults. Sadly, most people will believe them. No! Not this time. Never again. Main Street must have the opportunity to appoint it's own investigative panel of bi-partisan accountants, lawyers, and seasoned investigators with a mandate to identify the culprits from both sides of the aisle. Let the chips fall where they may. Now...that is change I can live with.
See Marilyn Barrett's Profile
I absolutely agree that Main Street needs to find some way to monitor and oversee the actions taken by Congress (and we should add federal agencies since it is clear that Congress has not done a "heck of a job" monitoring them either. Otherwise, we remain subject to official obfuscation and lack of transparency. I also think it is essential that contributors to the economic collapse be identified and sanctioned as appropriate. Congress (and especially the Democratic leadership) continually fail to do so on the premise that "it is more important that we heal the problems than investigate the wrongdoers
"...Finall
Which only proves you have no idea what you're talking about.
Mortgages to low-income families were being written for years before CRA. Problem was, they were only written for low-income whites. CRA was to end the practice of "red-lining" minority applicants.
The first two options that come to mind would be for our President-elect to appoint an independent commission, or for a team of investigative reporters to spend the next several months piecing this crime together. I will volunteer for either.
See Marilyn Barrett's Profile
Either option would be very helpful. We have in the past relied upon investigative reporters to scrutinize Congressional actions. However, their ability to do so has apparently been diminished through budget cuts and other corporate actions. Voters need some body to oversee Congressional actions and raise the red flag when Congress fails to fulfill its duties to the public.
The poblem with investigative reporters is that most of them are employed by the mainstream media. The very same media that has become polarized and divided, mirroring our Congress. It is difficult nowdays to distinguish between facts and rhetoric when monitoring a news story. I believe Main Street must become a united cohesive force demnading integrity and honesty in our government. A good place to start would be with Main Street providing the resources to investigate Congress.
As a father, grandfather, and an American who loves this country, I will also volunteer to serve on any bi-partisan investigative panel with a mandate to identify the culprits. I will do so at my own expense for ever as long as it takes. This country needs anew direction. It is time Main Street takes the lead.
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