by Simon Johnson (MIT Sloane School of Management; formerly chief Economist - IMF)
"In a blistering speech on Tuesday, December 9th, Senator Warren emphasized how much power large Wall Street banks have in Washington. The pushback from those banks’ supporters was, not surprisingly, to deny any special rights and privileges.
On Wednesday, a provision — drafted by Citigroup — to repeal part of the Dodd-Frank financial reforms (Section 716) was added by House Republicans to their spending bill. On Thursday, Citigroup led the charge to persuade enough Democrats to vote for that bill.
The repeal of Section 716 stayed in the spending bill only because Wall Street brought so much pressure and influence to bear. Everything that transpired on Wednesday and Thursday exactly fit the pattern that Senator Warren had described on Tuesday. Those seeking to disparage Senate Warren now attempt to paint her as some sort of extremist – the tea party of the left.
But such a description is completely at odds with the reality of this week. In arguing against the repeal of Section 716, Senator Warren was supporting arguments put forward by Thomas Hoenig (a Republican appointee at the Federal Deposit Insurance Corporation), Sheila Bair (Republican and former chair of the FDIC), and Senator David Vitter (R., Louisiana). On Friday, the Systemic Risk Council – chaired by Sheila Bair – put out a statement against the repeal of Section 716. (I am a member of the SRC; the council includes people from the left, center, and right of the political spectrum.)"
This is not a left vs. right issue. It is a fundamental systemic risk issue, on which people across the political spectrum who want to lower those risks can agree – Section 716 should not be repealed. In fact, some of the sharpest voices on this issue come from the right.
In a statement on Tuesday, Thomas Hoenig, appointed by the Republicans to be Vice Chair of the FDIC, said:
“In 2008 we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks. Section 716 of Dodd-Frank is an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks. It is illogical to repeal the 716 push out requirement.”'via Blog this'