Moving on from the important issue of privatizing asteroids, the House on Wednesday voted to conduct an audit of the Fed and passed two bills to deregulate Wall Street banks, allowing them to return to practices which caused the financial collapse that led to the Great Recession.
All three bills passed with bipartisan support, with nearly all Republicans voting for them and the Democrats split roughly down the middle.
“Today, the House passed the Federal Reserve Transparency Act,” Speaker John Boehner (R-OH) said. “Finally, we’re gonna audit the Fed.”
Of course that was a typically misleading statement. The Fed has faced an audit before. In 2010 Representatives Alan Grayson (D-FL) and Ron Paul (R-TX) successfully added an amendment to the Dodd-Frank Wall Street reform law requiring an audit of the Fed.
That audit found evidence of many sweetheart deals for big financial institutions which allowed them to owe the Fed many times the companies’ capital value. Every major bank in the country would have failed had it not been for support from the government.
The audit bill passed on a 333 to 92 vote, but there is no sign that the Senate will take action on the bill in the few days remaining in the current session.
The other two bills, HR 5405 and HR 5461, would remove some restrictions on the way that Wall Street banks do business. HR 5405 would allow big banks to avoid having to get trades involving the highly speculative and risky derivatives market, requiring that it be made through a central counterparty which would be responsible for paying in the event that either of the parties involved failed to deliver on its promise.
Derivatives are an instrument with a value tied to someone’s debt. If the debtor cannot or will not pay, the derivative is worth nothing, yet the House would allow banks to trade in them.
Under Hr 5405, the banks would be allowed to get around the clearing process by using an affiliate which is not subject to the rule to make the actual trade.
HR 5461 would allow banks to charge higher upfront fees when issuing a mortgage while still getting special treatment under the rules as a “qualified mortgage.” The bill eliminates the cost of items such as mortgage title insurance from the total of upfront costs allowing the banks to charge more in other fees while still maintaining their protection from claims of predatory lending.
h/t: Huffington Post