THE BLOG
12/11/2014 08:27 am ET Updated Feb 10, 2015

Stop Congress From Eliminating Dodd-Frank Provision That Prevents Bail Outs of Too-Big-To-Fail Banks

Bill Clark via Getty Images

The audacity is breathtaking. It is just six years after their orgy of speculation in so called "credit default swaps" caused the collapse of the World economy and precipitated the Great Recession.

Undaunted, the big banks have told Republican leaders to include a provision in the "must pass" bill to fund the government that eliminates provisions of the Dodd-Frank law that prevent them from doing exactly the same thing all over again.

The personal economies of many ordinary Americans still have not recovered from the Great Recession that resulted from Wall Street's speculative frenzy. It cost 8 million Americans their jobs, destroyed the 401K plans of millions of retirees, sunk our home values, and cut our wages.

On the other hand, the CEO class and Wall Street bankers bounced right back. Today the share of national income going to wages is at record lows, but the stock market and corporate profits are at record highs. No wonder that for the "masters of the universe", the lure of making billions of short -term profit by speculating in exotic securities far outweighs the risk of another financial collapse.

The provision Wall Street is attempting to excise is called "Prohibition Against Federal Government Bailouts of Swaps Entities". As the name implies it was put in place to prevent future bailouts of too-big-too fail banks. It prevents banks from engaging directly in the kind of extraordinarily risky transactions that set off the world-wide financial melt down -- requiring them to set up special segregated subsidiaries if they want to gamble in these instruments. That protects the parent institution -- government regulated, depositor financed banks -- from collapse if their bets go bad the way they did in 2008.

But the big banks think that limits their ability to make zillions in huge speculative plays. In their view nothing should stand in the way of their ability to make money - certainly not something as trivial as the well being of the World economy. So they want Congress to eliminate these "onerous" restrictions.

This is the kind of measure that could never pass on its own in the light of day. After all, what Member of Congress wants to explain to the voters why they supported a law that opens the door to another Great Recession or taxpayer bank bail out?

This is the kind of deal that has to be done quickly in the dark of night, because once it is out there for everyone to see, its supporters begin to scatter like the cockroaches in your kitchen when you turn on the lights. And like a dead fish, the longer its sits on the dock, the more is smells.

So Wall Street lobbyists dressed it up as a "technical" provision in the larger bill to fund the government, hoping no one would notice -- or that if they did they wouldn't want to vote no and risk a government shutdown.

But now the secret is out. House Democratic Leader Nancy Pelosi is organizing Democrats to demand removal of this horrible provision as the price for the Democratic votes that will be necessary to advance the spending bill to final passage.

Republicans in the House would have enough votes to pass the spending bill without any Democrats. Their problem is that about 40 of their number -- the Tea Party wing of the Party -- thinks the bill doesn't go far enough to stop President Obama's immigration executive action. So they will vote no.

And the Wall Street bail out provision won't make the bill anymore attractive to those Tea Party types, since the bank bailout was anathema to many of their hard-core supporters.

In the late 1990s Wall Street convinced many Members of Congress -- including some Democrats -- to support a bill they euphemistically called the "Financial Modernization Act". That bill repealed the Glass-Steagall law that prevented big banks from speculating in high-risk securities. The law was one of the chief reasons that there had not been a major American financial disaster since the Great Depression in the 1930's.

The "Financial Modernization Act" unleashed the explosion of speculation that -- in just over a decade -- lead to the Great Recession.

My wife, Congresswoman Jan Schakowsky, considers her vote against the repeal of Glass-Steagall one of the proudest votes of her Congressional career. She ranks it right up there with here vote against the Iraq War.

This is another Glass-Steagall moment.

Members of Congress need to ask themselves how they will feel a decade from now when they find that their vote on this measure has once again led directly to a catastrophic collapse of the American economy.

And while they're at it, they might consider how their voters will feel in the very next election when they hear that their Member of Congress voted to allow another taxpayer bailout of the big Wall Street Banks. That TV ad writes itself.

If Democrats stand tall and support Leader Pelosi, they can stop this provision dead in its tracks. But you can't wait to act. The decision will be made today. Call your Members of Congress the moment you finish reading this article. Tell them to vote against the so called "Cromnibus" funding bill until the provision that allows for the bail out of big Wall Street banks is excised and sent to the shredder where it belongs.

Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on Amazon.com. He is a partner in Democracy Partners and a Senior Strategist for Americans United for Change. Follow him on Twitter @rbcreamer.