By Jim Acosta, CNN Senior White House Correspondent
Updated 4:17 PM EST, Tue December 16, 2014
Washington
(CNN) -- The mystery congressman
responsible for the inclusion of language in the $1.1 trillion
dollar spending bill that caused a progressive outcry is
coming forward to defend the provision. The measure weakens banking regulations
designed to prevent another financial crisis.
Critics of the language, such as
Democratic Sen. Elizabeth Warren, claim the provision could invite another
fiscal meltdown and was essentially written by the U.S. banking giant,
Citigroup.
In a statement to CNN, Rep. Kevin
Yoder, R-Kansas, insisted the provision included in the spending bill would not
lead to a collapse on Wall Street, followed by a bailout from taxpayers.
"The amendment does not address
the riskier derivatives associated with the mortgage crisis," Yoder said
in the statement. "Other backstops exist in Dodd-Frank to prevent a
bailout based on those instruments."
As the spending bill, dubbed the
CRomnibus by Capitol Hill insiders, was debated in Congress last week, Warren
blasted the banking provision as a "loophole" that would allow Wall
Street to gamble with taxpayer money.
"This giveaway that was drafted
by Citigroup lobbyists has no place in a critical government funding
bill," Warren said in a speech on the Senate floor that once again stirred
speculation the Massachusetts Democrat may run for the presidency.
A spokesman for Yoder acknowledged
the wording of the amendment essentially came from a stand-alone bill that
passed the House last year.
"We got the language from HR
992," a Yoder aide told CNN.
That legislation, HR 992, was
partially written by lobbyists for Citigroup, according to emails obtained by
The New York Times. The bill, which was never voted on in the Senate, sought to
loosen Dodd-Frank Act regulations aimed at limiting banking and investment
industry practices that led to the 2008 financial crisis.
Asked about the provision, White
House Press Secretary Josh Earnest said President Barack Obama plans to sign
the spending legislation to prevent a government shutdown. But Earnest said the
President remains opposed to Yoder's language.
"The White House, regardless of
who wrote the provision, strongly opposes it and doesn't think it's a good
idea, because it does water down one element of Wall Street reform,"
Earnest told reporters Tuesday.
Earnest said the White House was
"in the loop" in the drafting of the spending bill but could not
account for every provision in the legislation.
"This is a bill that was
written by Congress, and whether one element of that bill was plagiarized by a
member of Congress from a Citibank lobbyist is something that you'd have to ask
a member of Congress," Earnest said.
In his statement, Yoder touted his
provision as needed protection for smaller financial institutions, rather than
a boon to Wall Street.
"Without this fix, smaller
regional banks would be in danger of not being able to meet the lending needs
of their customers. Ultimately, farmers, manufacturers and other Main Street
businesses would be harmed the most," Yoder added.
Yoder is perhaps best-known for
skinny dipping in the Sea of Galilee during a trip with other congressional
leaders to Israel in 2011. The Kansas Republican later apologized for the
incident.
Source:http://www.cnn.com/2014/12/16/politics/kevin-yoder-citigroup-elizabeth-warren-wall-street/
Summary: H.R.992 — 113th Congress (2013-2014)
Passed
House without amendment (10/30/2013)
(This measure has not been amended since it
was introduced. The summary of that version is repeated here.)
Swaps Regulatory Improvement Act - Amends
the Dodd-Frank Wall Street Reform and Consumer Protection Act with respect to
the prohibition against certain federal assistance to swaps entities, namely
the use of any advances from specified Federal Reserve credit facilities or
discount windows, or Federal Deposit Insurance Corporation (FDIC) insurance or
guarantees, for the purpose of: (1) making any loan to, or purchasing any
stock, equity interest, or debt obligation of, any swaps entity; (2) purchasing
the assets of any swaps entity; (3) guaranteeing any loan or debt issuance of
any swaps entity; or (4) entering into any assistance arrangement (including
tax breaks), loss sharing, or profit sharing with any swaps entity.
Extends to any major swap participant or
major security-based swap participant that is an uninsured U.S. branch or
agency of a foreign bank the exemption from the prohibition against federal
assistance to swaps entities which is currently limited to any major swap
participant or major security-based swap participant that is an FDIC-insured
bank or savings association.
Designates both uninsured U.S. branches or
agencies of a foreign bank and insured depository institutions as "covered
depository institutions."
Requires any covered depository institution
exempted from the prohibition to limit its swap and security-based swap
activities to hedging and similar risk mitigating activities (as under current
law), non-structured finance swap activities, or certain structured finance
swap activities. (Defines "structured finance swap" as a swap or security-based
swap based on an asset-backed security [or group or index primarily composed of
asset-backed securities].)
Qualifies a structured finance swap
activity for the exemption if: (1) it is undertaken for hedging or risk
management purposes, or (2) each asset-backed security underlying the
structured finance swap is of a credit quality and of a type or category with
respect to which the prudential regulators have jointly adopted rules
authorizing such a swap or security-based swap activity by covered depository institutions.
Repeals the exemption from the prohibition
for any insured depository institution that limits its swap and security-based
swap activities to acting as a swaps entity for: (1) swaps or security-based
swaps involving rates or reference assets that are permissible for investment
by a national bank; or (2) credit default swaps, including those referencing
the credit risk of asset-backed securities unless they are cleared by a
derivatives clearing organization or a clearing agency registered, or exempt
from registration, under the Commodity Exchange Act or the Securities Exchange
Act.
DEFINITION of 'Credit Default Swap - CDS'
A swap designed to transfer the credit exposure of fixed income
products between parties. A credit default swap is also referred to as a credit
derivative contract, where the purchaser of the swap makes payments up until
the maturity date of a contract. Payments are made to the seller of the swap.
In return, the seller agrees to pay off a third party debt if this party
defaults on the loan. A CDS is considered insurance against non-payment. A
buyer of a CDS might be speculating on the possibility that the third party
will indeed default.
INVESTOPEDIA EXPLAINS 'Credit Default Swap - CDS'
The buyer of a credit default swap receives credit protection,
whereas the seller of the swap guarantees the credit worthiness of the debt
security. In doing so, the risk of default is transferred from the holder of
the fixed income security to the seller of the swap. For example, the buyer of
a credit default swap will be entitled to the par value of the contract by the
seller of the swap, should the third party default on payments. By purchasing a
swap, the buyer is transferring the risk that a debt security will default. - go
deeper in your quest for knowledge on CDS and read Credit Default Swaps: An Introduction
From Wikipedia, the free
encyclopedia
In finance, a derivative is a contract that derives its value
from the performance of an underlying entity. This underlying entity can be an
asset, index, or interest rate, and is often called the "underlying".[1][2] Derivatives can be used for a number of purposes -
including insuring against price movements (hedging), increasing exposure to
price movements for speculation or getting access to otherwise hard to trade
assets or markets.[3]Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as collateralized debt obligations, credit default swaps, and mortgage backed securities. Most derivatives are traded over-the-counter (off-exchange) or on an exchange such as the Chicago Mercantile Exchange, while most insurance contracts have developed into a separate industry. Derivatives are one of the three main categories of financial instruments, the other two being equities (i.e. stocks or shares) and debt (i.e. bonds and mortgages).
Comments
If you enjoyed reading the definitions as
much as I did, you should be anxious to hear the debate on this unrelated
amendment. I would like to see a simulation of a court argument over this. May
it please the court, let the TV lawyer pundits enter the debate. Then we can
move to who should decide how much money the Fed is allowed to print. We have
bet on high TV ratings for this one.
Norb Leahy, Dunwoody GA Tea Party Leader
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