Over at the Wonk Room, Pat Garofalo takes a moment this morning to discuss the sweetheart deal that Senator Scott Brown (R-Mass.) carved out of the financial regulatory reform negotiations to benefit banks in his home state:
As the conference committee reconciling the House and Senate versions of financial regulatory reform went through its marathon 20 hour negotiating session on Thursday night, an exception to the Volcker rule -- which prevents banks from trading for their own benefit with federally insured dollars -- was added at the behest of Sen. Scott Brown (R-MA). The exception, which was pushed by large Massachusetts-based financial firms State Street Corp. and Mass Mutual, allows banks to invest up to three percent of their capital in risky hedge funds and private equity firms and to continue managing those funds.
These exemptions could undermine the effectiveness of the rule, as State Street is a great example of a financial firm that specialized in relatively benign financial practices, but then became systemically important by building up a huge amount of credit risk and engaging in risky trading. Ultimately, it needed to be rescued by federal intervention.
Garofalo has more about how this "strikes at the very heart of the Volcker rule, so get thee hence to learn more. What I'd like to know is why we don't yet have a snappy, headline-ready nickname for this little bit of chicanery, like "Cornhusker Kickback" or "Louisiana Purchase." If you have any suggestions, feel free to leave it in the comments.
UPDATE: As it turns out, I slept on our own Ryan Grim, who already nicknamed this the "Bay State Buyoff" in the Thursday edition of HuffPost Hill. Headline writers, take note!
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Scott Brown Receives Special Deal In Financial Reform Bill, But Still May Vote Against It [Wonk Room]
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