Washington, DC –(ENEWSPF)–January 29, 2015. Today, Senator Elizabeth Warren, Ranking Member of the Subcommittee on Economic Policy, and Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, sent letters to Bank of America, JPMorgan Chase, Citibank, and Goldman Sachs requesting information about how they will alter their swaps trading practices after a law passed in December gutted a key section of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Section 630 of the 2015 Consolidated and Further Continuing Appropriations Act, which was signed by the President on December 16, 2014, removed restrictions that had been enacted in Section 716 of Dodd-Frank to limit risky trades. As a result, taxpayers are again vulnerable to the same type of credit meltdown that led to the 2008 financial crisis. As Senator Warren stated in opposing the omnibus bill, Section 630 allows “derivatives traders on Wall Street [to] gamble with taxpayer money-and, when it all blows up, require the government to bail them out.”
In their letters, the Members cite experts stating that the new law gutting Section 716 of Dodd-Frank “neuters the swaps push-out rule, since it effectively lets in nearly all swaps activities,” and they cite economist Paul Krugman, who argues that these changes are a “significant” blow to financial reform and amount to “letting Wall Street play games with government-guaranteed funds.”
Today, the Members requested that Bank of America, JPMorgan Chase, Citibank, and Goldman Sachs – which account for 93% of swap activities – provide (1) information about how they will determine which swaps trades can now be made; (2) the total value of derivatives contracts they hold; (3) copies of applications to the OCC or the Federal Reserve to delay implementing Section 716; and (4) information on the total value of swaps they would have “pushed out” under Section 716 absent the changes in the omnibus bill. The Members also requested a briefing from each of the banks.