WASHINGTON Oct 30 The U.S. House of
Representatives voted on Wednesday to scale back a much-debated
provision of the Dodd-Frank Wall Street reform law, handing bank
lobbyists a token victory in their fight against the tougher
Big banks and their allies in Congress have been pushing to
undo part of the law that calls for walling off risky
derivatives trading by investment banks from government
backstops such as deposit insurance. They say the rule is
unnecessary and would be expensive for banks.
A total of 70 Democrats joined Republican lawmakers in a
vote to scrap the so-called push-out provision for most types of
derivative trades, defying the will of the White House, which
had called for the rule to remain in place.
"This bill does not expose the taxpayer to any additional
risk," said Representative Carolyn Maloney, a New York Democrat
who voted to scale back the rule.
Govtrack.us, a website which assigns the likelihood of a
bill passing, saw only a 19 percent chance of the bill being
enacted before the vote. It is unlikely to make it through the
Senate, which is held by Democrats.
Still, the high number of Democrats voting in favor of the
bill in the House could make it a bargaining chip toward the end
of the congressional session, when last-minute deals are often
hammered out between the two parties.
Enacting the bill would be the first major change to
Dodd-Frank, as the White House and Senate Democratic leadership
have resisted any changes, in part out of concern that would
open the door for Republicans to weaken the law.
The push-out provision has been one of the most widely
criticized parts of the Dodd-Frank law, having been slipped in
by a senator who has since left Congress.
Former Rep. Barney Frank, for whom the law was named, later
said he never thought it was necessary, and Federal Reserve
Chairman Ben Bernanke has also said it is not clear that setting
up separate swaps entities would make banks safer.
And while Obama on Monday did call for the push-out rule to
remain in place, he stopped short of threatening to veto the
legislation, as he has with other bills.
Still, backers of the pushout idea say it would keep banks
from making wild trades while counting on federal support, such
as the Fed's discount window, if their trades go wrong.
"This bill would allow Wall Street's too big to fail banks
to use insured deposits for their derivatives trading and
gambling. That is indefensible," said Dennis Kelleher at Better
Markets, a financial reform lobby group.
Following the law's directions, regulators wrote a rule
forcing banks to either split swaps trading off into separate
arms or else forgo federal support.
But they gave large investment banks such as JPMorgan Chase
, Citigroup and Bank of America two extra
years to comply with the rule.
(Editing by Bob Burgdorfer)