Washington – Legislation championed for years by Connecticut Rep. Jim Himes, D-4th District, threatened to become a “poison pill” Wednesday in a massive budget bill that would avoid a government shutdown. Himes’ spokesman, however, insisted the congressman didn’t know how the legislation was placed in the budget bill.
The controversy centers on a provision that would amend the Dodd-Frank Act by lifting its prohibition on derivatives trading by bank units insured by the federal government. Some derivatives, which are complex financial securities, were one of the culprits in the 2008 financial collapse and a target of the Dodd-Frank reform bill.
Sen. Elizabeth Warren, D-Mass, urged House Democrats to vote against the spending bill. Because many conservative Republicans won’t vote for the bill, House Speaker John Boehner needs Democratic votes to pass it.
“We all need to stand and fight this giveaway to the most powerful banks in the country,” Warren said.
Maxine Waters of California, the senior Democrat on the House Financial Services Committee, said she was “disgusted that in a back-room deal, some members and lobbyists for the largest banks are trying to undo a seminal component” of the Dodd-Frank financial reform bill. There has been a flurry of action by bank lobbyists seeking to use the must-pass budget bill to undo provisions of Dodd-Frank.
Himes, who is also a member of the Financial Services Committee, introduced legislation with Rep. Randy Hultgren, D-Ill, last year that would “allow banks to keep commodity and equity derivatives in federally insured units.”
Himes spokesman Greg Vadala said the language in the budget bill is identical to Himes’ legislation. But he does not know how the provision was included in the budget bill.
“We found out about it when we saw the draft (of the bill) last night,” Vadala said.
He also said there was broad bipartisan support for Himes’ derivatives bill last year.
The House approved the derivatives bill with substantial Democratic support last year, But the bill died in the Senate, where lawmakers were reluctant to roll back Dodd-Frank. The Obama administration also opposed the bill, the U.S. Treasury Department warned it could leave the nation vulnerable again to excessive financial risk-taking.
Vadala also said Himes was not seeking to weaken Dodd-Frank with his derivatives legislation.
“Not only has Himes helped write the Dodd-Frank Wall Street reform law, he’s consistently defended it.
Himes, who once worked for Goldman Sachs, was criticized by Republican opponent Dan Debicella last summer for his support of the derivatives bill.
When Himes was a possible candidate to head the Democratic Congressional Campaign Committee last month, a liberal group opposed his appointment to head the Democratic organization, saying he was too close to Wall Street. Himes did not get the job.
The House Rules Committee is considering the $1.1 trillion budget bill that would keep the government running past Thursday at midnight, when current legislation funding the federal government expires. The committee is not expected to strip out the derivatives legislation.
Vadala said Himes hasn’t decided whether to support the budget bill, which funds the Department of Homeland Security only until February so the new Republican-controlled Congress can have a showdown with the Obama administration over President Obama’s decision to use to legalize the status of millions of immigrants.