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From Banking and Finance Law Daily, December 15, 2014

Spending bill passes Senate; amends Dodd-Frank swaps push-out provision

By J. Preston Carter, J.D., LL.M.

The Senate passed the $1.1 trillion government funding bill Saturday night, including the hotly debated swaps push-out amendment, clearing the way for President Obama’s signature. The House had passed the measure late Thursday night by a vote of 219-206. The Senate vote was 56 to 40.

The Consolidated and Further Continuing Appropriations Act, H.R. 83, a $1.1 trillion spending package that funds most of the government through September 2015, amends the swaps push-out provisions of the Dodd-Frank Act to allow some financial institutions enjoying the umbrella of federal deposit insurance to keep some derivatives trading in house (see Banking and Finance Law DailyDec. 12, 2014). H.R. 83 also would require an OMB report on the costs to the federal government of the Dodd-Frank Act.

Warren and Vitter amendment. Senators Elizabeth Warren (D-Mass) and David Vitter (R-La) continued their opposition to the funding bill (see Banking and Finance Law DailyDec. 11, 2014) by filing a short, one-page, bipartisan amendment on Friday night, which was not voted on, to remove the swaps push-out amendment. "Ever since the new financial regulations went into place, Wall Street has been working behind the scenes to open another loophole so they could gamble with taxpayer money and get bailed out when their risky bets threaten to blow up our financial system," said Warren.

"Before Congress starts handing out Christmas presents to the megabanks and Wall Street—we should vote on this bipartisan amendment," Vitter said. "We need to remove these risky derivatives that aren't even necessary for normal banking purposes and would only make future taxpayer funded bailouts more likely."

Levin, Merkley, and Reed opposition.

Senators Carl Levin (D-Mich), Jeff Merkley (D-Ore) and Jack Reed (D-RI) voted against the funding bill. In a Senate floor statement, Levin said that, by repealing the swaps push-out provision, “we would ignore the lessons of the last financial crisis and weaken Dodd-Frank’s protections against the next crisis.”

Merkley said he voted no because of his “deep opposition to a provision that puts the Wall Street Casino back in business. This provision allows big Wall Street banks to get back in the business of making risky and exotic bets with government backing.”

Referring to a number of “last minute additions” to the appropriations bill, including the “provisions to weaken Wall Street reforms,” which are a “bad deal for the middle-class and the American people deserve better,” Reed stated that he opposed final passage.

Industry response. The Systemic Risk Council released a statement expressing its “strong opposition to including in the omnibus spending bill a repeal of the so-called ‘swaps push-out’ provision of the Dodd-Frank financial reform law…To increase market discipline and protect taxpayers, we should be shrinking the safety net, not expanding it.”

The U.S. Chamber of Commerce commended Congress for ensuring funding for the federal budget for FY 2015. Executive Vice President for Government Affairs Bruce Josten said, “This package strikes a good balance on funding and policy initiatives and will implement important improvements.”

Companies: Systemic Risk Council; U.S. Chamber of Commerce

MainStory: TopStory SecuritiesDerivatives

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