Thursday, March 15, 2018

Glass-Steagall repeal part 2? Senate to remove Dodd-Frank protections and allow banks to take Wall Street casino speculation to even higher levels

Despite tens of trillions of dollar printed out of thin air to recapitalize the banking system following the 2008 financial crisis, it appears to not be enough as the U.S. Senate just passed a measure which would remove many safeguards put in place under the Dodd-Frank Banking Reform Act and allow Wall Street banks to take speculation even above their current all-time levels for asset prices.

Glass-Steagall repeal part 2?

A bipartisan bill which would relax restrictions placed on the financial industry during the credit-crisis has cleared the Senate with a vote of 67-31, on the 10-year anniversary of the collapse of Bear Stearns - but not before several changes to the original legislation were made, which would benefit big banks. 
"A bill that began as a well-intentioned effort to satisfy some perhaps legitimate community bank grievances has instead mushroomed, sparking fears that Washington is paving the way for the next financial meltdown," writes David Dayen of The Intercept
Key Provisions 
  • Relaxes a host of reporting requirements for small - medium banks, and to a smaller extent, large banks
  • Eliminates a reporting requirement introduced by Dodd-Frank designed to avoid discriminatory lending
  • Relaxes stress testing requirements intended to show how banks would survive another financial crisis
  • Raises the threshold for banks which are not subject to enhanced liquidity requirements, stress tests, and enhanced risk management, from $50 billion to $250 billion - exempting several institutions which could pose systemic risks down the road.
  • Allows megabanks such as Citi to count municipal bonds as "highly liquid assets" that could be used towards the "liquidity coverage ratio," - assets which can be quickly liquidated during a crisis. 
  • Calls for a report on the risks and benefits of algorithmic trading within 18 months
Introduced by Idaho Republican Mike Crapo and co-authored by North Dakota Democrat Heidi Heitkamp and several other Democrats, S.2155 was originally intended to relax regulations on community banks, credit unions, and so-called custodial banks - institutions which do not primarily make loans, but instead keep assets safe. In addition to relaxed reporting and disclosure requirements, the bill reduced the supplementary leverage ratio (SLR) - or how much equity they must have on hand compared to total assets (such as loans). As it was first written, the SLR modification would have benefitted just two U.S. banks; State Street and Bank of New York Mellon.  
After a vociferous protest by Citigroup CFO John Gerspach, among others, the language in the bill was vastly changed - along with the definition of a custodial bank so as to include virtually any large financial institution, such as Citigroup.  
Citi is making a very aggressive effort,” according to one bank lobbyist who asked The Intercept not to be named because he’s working on the bill. “It’s a game changer and that’s why they’re pushing hard.” 
Aside from the gifts to Citigroup and other big banks, the bill undermines fair lending rules that work to counter racial discrimination and rolls back regulation and oversight on large regional banks that aren’t big enough to be global names, but have enough cash to get a stadium named after themselves. In the name of mild relief for community banks, these institutions — which have been christened “stadium banks” by congressional staff opposing the legislation — are punching a gaping hole through Wall Street reform. Twenty-five of the 38 biggest domestic banks in the country, and globally significant foreign banks that have engaged in rampant misconduct, would get freed from enhanced supervision. -The Intercept 
Relaxed reporting, relaxed leverage ratios, relaxed disclosures 
One of the biggest giveaways is relaxed reporting requirements. Currently, banks with over $50 billion are subject to enhanced regulatory standards introduced by Dodd-Frank - which include additional capital and liquidity requirements, stress tests, and enhanced risk management. The new bill raises that threshold to $100 billion immediately, and to $250 billion in another 18 months.  
This would primarily benefit so-called "stadium banks," as explained by a Senate aide: "If you can get naming rights to a stadium, you're not a community banks."  
The relaxed rules would benefit 25 of the 38 largest banks in the United States, including Citizens Bank (Philadelphia Phillies), Comerica (Detroit Tigers), M&T Bank (Baltimore Ravens), SunTrust (Atlanta Braves), KeyBank (Buffalo Sabres), BB&T (Wake Forest University), Regions Bank (AA baseball’s Birmingham Barons), and Zions Bank (Salt Lake City’s Real Monarchs of Major League Soccer). 
While smaller banks don't pose much systemic risk in the event of another banking crisis - banks in the $250 billion range may be a different story. - Zerohedge

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