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Pro-Wall Street clause frays support for US spending bill

Thursday, December 11, 2014 - 07:12
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A US financial deregulation measure buried in a 1,603-page federal spending bill triggered a Democratic revolt Wednesday, throwing viability of the must-pass legislation into doubt ahead of a government shutdown deadline.

[WASHINGTON]A US financial deregulation measure buried in a 1,603-page federal spending bill triggered a Democratic revolt Wednesday, throwing viability of the must-pass legislation into doubt ahead of a government shutdown deadline.

Progressives led by Senate Democrat Elizabeth Warren blasted Republican efforts to repeal part of the so-called Dodd-Frank reforms requiring that taxpayer-insured funds not be used by banks when they conduct risky derivatives trading.

Top House Democrat Nancy Pelosi argued that the change opens the door to another big-bank bailout and could lead to a repeat of conditions that fueled the financial crisis of 2007-2008.

"I urge my Democratic colleagues in the House to withhold support for (the spending bill) until this risky giveaway is removed," Warren said on the Senate floor.

Congress must fund federal operations before Friday or face a government shutdown.

After weeks of negotiations, Republicans and Democrats late Tuesday finalized a US$1.1 trillion (S$1.44 trillion) bill covering nearly all federal expenditures through September 30.

Such mega-laws, greased by backroom negotiating and often introduced at the last minute, present countless opportunities for give and take, and hordes of lobbyists struggle to get certain favorable measures inserted.

To expedite the process, lawmakers vote not on each amendment but on the final text. The take-it-or-leave-it approach is a double-edged sword: approval can be swift, but rejection can trigger a government shutdown.

With the deadline approaching, Congress likely will approve an short extension allowing room for debate and final votes on the spending bill, although the calendar is not set.

The Dodd-Frank element has angered far-left Democrats to the point they may seek to sink the entire bill if Republicans do not remove it.

With dozens of Republicans expected to vote no on the bill, Ms Pelosi's Democrats will be vital to its passage.

The measure would repeal a key part of financial legislation passed in 2010 as President Barack Obama's chief reform accomplishment, after his sweeping health care initiatives.

Financial institutions today are required to separate some of their transactions on derivatives - including "credit default swaps" - away from the Federal Deposit Insurance Corporation, the fund which covers commercial banks.

The Republican measure weakens that provision of the law.

"The House is about to vote on a budget deal, a deal negotiated behind closed doors, that slips in a provision that would let derivatives traders on Wall Street gamble with taxpayer money and get bailed out by the government when their risky bets threaten to blow up our financial system," Ms Warren warned.

The New York Times reported that the clause was co-written by Citigroup lobbyists.

"This is a democracy, and the American people didn't elect us to stand up for Citigroup," Warren said.

Citigroup declined to respond to an AFP request for comment.

AFP

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