It’s not easy defending Wall Street these days. And it’s particularly tough sticking up for derivatives.
On Tuesday, Congressman Gary Ackerman expressed to the Huffington Post his concerns about Senator Blanche Lincoln’s derivatives provision in the Senate bill, and the fact that it might drive big banks out of New York.
“Those of us in New York represent not only Main Street, but Wall Street as well, and understand very much that Main Street is affected by Wall Street,” said Ackerman, who wrote a letter to the leaders of conference committee that argues for the softer touch in the House bill.
Ackerman—who is circulating the letter with Congressman Michael McMahon—said he expects near unanimity within the state’s Congressional delegation. (With the exception of the three New York members of the conference committee, and one other. “We’re missing the tickling guy, so we’re down to 26 [members] instead of 27,” he told HuffPo.)
Yesterday, the Progressive Change Campaign Committee warned lawmakers against that. PCCC emailed its supporters in New York to sign an online petition urging the delegation not to sign on to Mr. Ackerman’s letter. “This is just common sense — banks shouldn’t be able to gamble for their own profit with our money and then demand taxpayers bail them out when they lose,” said the pitch.
The group currently claims more than 3,500 signatures on the petition, and says more than 270 people called their representatives.
Whether New York electeds will be willing to publicly sign on to Ackerman’s letter—given the obvious political liability—remains to be seen. In April, Senator Gillibrand filed an amendment to the Senate bill that—instead of banning derivatives—would have empowered a commission to study them first. This was interpreted by some as watering down the bill, which forced the senator’s representatives to urgently renew her commitment to comprehensive reform (and to clarify that introducing the amendment was a way to preserve that option during the bill’s mark-up).
Ackerman isn’t backing off.
“If our objective is to protect consumers and increase transparency, it is essential that we keep banks here so that we can regulate them,” the congressman wrote in a statement to The Observer. “Driving banks out of New York does not fix the problem. If they leave, we have no reach, no way to regulate them and no way to protect people on Main Street. This is about ensuring the best protections for consumers while keeping a multi-trillion dollar industry in New York. Not choosing Wall Street over Main Street.”
Here’s the letter:
Dear Speaker Pelosi, Leader Boehner, Chairman Frank, and Ranking Member Bachus:
As you begin to work to reconcile the recently-passed Senate amendments to the House-passed Wall Street Reform and Consumer Protection Act with the bill as originally passed by the House of Representatives, we write to express our deep concerns about the potential implications of the provisions contained in the Senate bill regarding derivatives trading.
The Senate amendments to H.R. 4173 includes a provision that would bar banks involved in derivatives trading from access to several important federal banking institutions, including the Fed window and the Federal Deposit Insurance Corporation. While we strongly believe that more transparency and accountability is needed in our derivatives markets, we believe the House-passed language, requiring the use of exchanges or clearinghouses for derivatives trades, is far more pragmatic than the Senate’s approach and more sensibly addresses one of the major regulatory deficiencies that led to the near-collapse of our financial system in 2008. The effect of the Senate provision would be to force America’s largest banks to spin off their derivatives trading activities.
We are deeply concerned by the very real possibility that, as a result of the Senate derivatives provision, America’s largest financial institutions will move their $600 trillion derivatives businesses overseas, at the expense of both New York’s and the United States’ economy. Aside from the immediate and long-lasting economic impact of the Senate’s language, we are further concerned by the implications of such a large industry moving abroad, where many other sensible mandates and protections contained in the Wall Street Reform and Consumer Protection Act may not apply. The Senate derivatives language may inadvertently undermine the very intent of the legislation.
In the interest of the continued recovery of America’s financial industry – and the United States’ economy – and as supporters of comprehensive but sensible financial regulatory reform, we ask that you strongly advocate for the House-passed derivatives language during the conference with the Senate on H.R. 4173.