US Politics: Furor Over Move to Aid Big Banks in Funding Bill - by Jonathan Weisman

In a 1,600-page, $1.1 trillion spending bill, a provision to roll back an obscure financial regulation became a focal point of uproar as Congress struggled to keep the government funded.

The “push-out” regulation — a measure to ensure that banks trade their riskiest financial instruments without the protection of the Federal Deposit Insurance Corporation or the Federal Reserve’s backup — was controversial from the start. Hundreds of billions of taxpayer dollars were shoveled into Wall Street banks after instruments like credit default swaps became worthless in the financial crisis, but even some crucial Democrats were unsure if Congress went too far when it voted to include push-out in the landmark Dodd-Frank law to regulate Wall Street in 2010.

But with regulators pressing to put rules into effect to carry out the law, a provision in the enormous spending bill to remove the push-out regulation drew bipartisan outrage. Representative Nancy Pelosi of California, the House minority leader, said she was “heartbroken” by the “taint” visited upon the spending bill, which would finance virtually all of the government through September.

The fierce Democratic opposition over the Dodd-Frank rollback provision created the odd spectacle of President Obama and Vice President Joseph R. Biden Jr. calling Democrats to muster support for the spending bill over the opposition of Ms. Pelosi.

“I love the American political system, I really do, but the ability to sneak in substantive policy measures and make it take it or leave it, I think it’s appalling,” said Simon Johnson of the Massachusetts Institute of Technology’s Sloan School of Management and a former chief economist at the International Monetary Fund, who is a prominent critic of the nation’s big banks.

The push-out legislation assumed outsize importance, not only because of what it does but because the biggest Wall Street companies have fought it since it was proposed.

The language in the spending bill was inserted by Representative Kevin Yoder, Republican of Kansas, but he did not write it. Citigroup did. In 2013, the bank and its allies were able to corral a bipartisan vote to pass the rollback out of the House Financial Services Committee. In an analysis by The New York Times of Citigroup 

The banking industry strongly supports the rollback measure. James C. Ballentine, an executive vice president at the American Bankers Association, said financial instruments like credit deferred swaps are used to mitigate risk, not bolster it. To force their trading into units unprotected by federal taxpayers would be onerous, he argues.

“The push-out requirement to move some swaps into separate affiliates makes one-stop shopping impossible for businesses ranging from family farms to energy companies that want to hedge against commodity price changes,” Mr. Ballentine said.

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