Top House Democrats attempted to halt momentum Wednesday for a bill to delay by 18 months the derivatives provisions of the Dodd-Frank Act, arguing the legislation would chip away at the regulatory reform law.
A day before a House Financial Services Committee vote on derivatives legislation, Rep. Barney Frank and other Democrats said Republicans were only seeking a delay in the hopes they could strangle the new rules if they win in the 2012 elections.
"This is not about slowing it down," Frank said. "This is about killing it in tranches. First they want to put it off until December 2012, at which point they are hoping to be in power to kill the whole thing. So this is a bill to kill the thing — not to get more time."
The derivatives bill, by Rep. Frank Lucas, R-Okla., had been gathering steam in the House. It passed the House Agriculture Committee by voice vote on May 4. The House Financial Services Committee is scheduled to vote Thursday on the bill and on measures to restructure the Consumer Financial Protection Bureau (CFPB).
The derivatives legislation has traction in part because of an inspector general report that criticized the Commodity Futures Trading Commission's (CFTC) haste in implementing the derivatives requirements. The inspector general said the agency had not properly considered the rules' costs and benefits. Dodd-Frank requires the derivatives rules to be offered within a year of the reform bill's enactment, which is July 21.
Frank said the derivatives provisions, which require most swaps to be traded on an exchange, would make the system safer.
"We are not trying to ban derivatives," he said. "We don't see how requiring trades to go on exchanges is somehow anti-market. … They want to prevent any substantive regulation of the derivatives market, which contributed so much to the financial crisis. … The legislation the Republicans proposed is a re-deregulation of derivatives. It goes back to the good old days of 2010, when you could not have any limitation on derivatives activities."
Rep. Collin Peterson, the lead Democrat on the House Agriculture Committee, said delaying the derivatives rules will confuse the markets.
"They are claiming this bill somehow or another is going to give them more time and more certainty," he said. "I think what it does is gives them more uncertainty, because now you are just having an arbitrary delay on all parts of the bill, and I can't see any other reason for this other than they want to get by the election. They are hoping that they either have a Republican Senate or Republican president so they can undo this law. That's the only thing I can see they are trying to accomplish with this legislation."
Peterson and Frank said they believe the bill faces an uphill climb in the Senate.
"Their view is they will get this through the House," Frank said. "It won't pass the Senate. They are trying to intimidate the CFTC and the [Securities and Exchange Commission]. We are going to make clear this doesn't work. … We are going to make clear to them they are on the wrong side of this issue and we will encourage the agencies to go ahead with this important set of protections both for consumers and the economy as a whole."
Rep. Maxine Waters, D-Calif., said the bill is a part of the Republicans' broader attacks on Dodd-Frank.
"Since Republicans know they cannot repeal Dodd-Frank, and despite its overwhelming popularity among the American people, they continue to seek every opportunity to defund, delay, de-emphasize the law," Waters said. "HR 1573 is basically another gift from the GOP to Wall Street."
Democrats noted that Republicans were also trying to pass bills that would replace the CFPB's director with a commission, put the agency through the appropriations process, and allow bank regulators more veto power over the consumer bureau's actions.
Though the House is expected to pass all three bills, 44 Senate Republicans have said they will hold up a CFPB nomination until their chamber takes similar action and the bills are signed by the president.
"Stop acting like thugs," Frank told the senators. "You have seen the greatest abuse of the confirmation process. … What you have on the part of the Republicans — like Sen. [Richard] Shelby, who seems to be engaging in extortion throughout — to try to use the confirmation to try to substitute what they can't do in the legislative process."
Frank agreed with speculation that the Republican senators' actions will likely force President Obama to make a recess CFPB appointment.
"I assume they will now make a recess appointment," Frank said. "I assume the president will behave appropriately and ignore them. Once somebody is in there … the public sees what the benefits are and it's going to be hard for them to undo it. That's why they are so desperate."