Lew Won’t Adopt Geithner’s Stand Against Wall Street Deregulation Bills

Jochen Zick/Action Press/ZUMAPress

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


 

This post has been updated.

Last year, then-Treasury Secretary Tim Geithner slammed a series of bills that would have deregulated Wall Street banks. But this year, as a slate of nearly identical bills is being considered by the House Financial Services Committee, newly minted Treasury Secretary Jack Lew has declined to oppose them.

The bills are presented as technical fixes to the 2010 Dodd-Frank Financial Reform Act, which was aimed at preventing another 2008-style financial crisis. Most of them aren’t. One bill would allow certain derivatives that are traded among a corporation’s various affiliates to be exempt from almost all new Dodd-Frank regulations. Another measure would expand the types of trading risks that banks can take on. Yet a third bill would allow big multinational US banks to escape US regulations by operating through international arms. Etc. Etc.

The main problem with these bills, financial reform advocates say, is that it’s too early to tweak Dodd-Frank. Although the massive financial-reform law passed more than two years ago, all of its provisions must go to regulatory agencies to be crafted into rules before they take effect in the real world. Because of heavy industry lobbying to weaken or kill the regulations, two-thirds of the 400-odd rules are still not finalized. “You take the least controversial [bill], and it’s still pulling a thread out of a jacket,” says Jeff Connaughton, an investment banker-turned-financial reform advocate who worked with former Sen. Ted Kaufman (D-Del.) on financial reform legislation in 2009 and 2010. He says altering these sections of the law could make the whole thing fall apart. “Can we please get the rulemaking done first before we start pulling thread out of the sleeve?”

When many of the same bills were introduced in the last Congress, Geithner sent a letter to the House Financial Services Committee warning against the measures. The Dodd-Frank Act “provides essential financial reforms that should not be weakened or repealed,” he wrote:

The bills present issues that the regulators are still actively considering in their rulemakings. If enacted, the proposed legislative changes would undermine the integrity of the rulemaking process, further complicate the work of the regulators, and increase uncertainty for firms. Accordingly, Treasury believes that the proposed bills are at best premature and that the regulators should be permitted to continue their work through the rulemaking process.

When asked about Lew’s position on the bills and whether he would take a stand against them, Lew’s office had no comment. However, his spokesperson did point to recent testimony by a Treasury official who said, “Efforts to repeal the Dodd-Frank Act in whole or piecemeal…will…be corrosive to the strength and stability of our financial system.” But a Treasury official saying that a partial Dodd-Frank repeal would be bad does not carry the same weight as a letter from the Secretary of the Treasury that takes a stand against specific bills.

Financial reform advocates have said the administration has not done enough to defend Dodd-Frank. “This is a three-front war by Wall Street,” Connaughton says. “The administration needs to be standing up strongly on all three fronts and they’re not. They haven’t been supporting the agencies the way they should. They haven’t been giving the judicial battles the legal importance it deserves. They haven’t loudly stated Geithner’s position from April 2012, so they’re not fighting Congress.”

The seven bills sailed out of the House Agriculture committee in late March and are now being considered by the House Financial Services Committee. Last year, the similar bills cleared all the committees, but some never received a vote on the House floor, and they all failed to reach the Senate by the time the 112th Congress ended. As Bart Naylor of Public Citizen noted in April, the bills got an early start this time around, so the pressure on the Senate to take them up if they pass the House will be higher.

Update: After this story, the Treasury Department got in touch with Mother Jones to clarify its stance on Dodd-Frank. After that story, the Department got in touch with Mother Jones again to further reiterate its support for financial reform.

 

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate