The House-Senate Finance Reform Bill: Brought to You by Wall Street

June 26, 2010 (LPAC)—After negotiating into the wee hours of Friday morning, the House-Senate conference committee run by Bailout Barney Frank and Sen. Chris Dudd agreed on a Financial Reform bill which left Wall Street breathing a sigh of relief at having "dodged a bullet," as Bloomberg put it.

Despite the wave of popular hatred for Wall Street that forced Congress to even take up the issue in the first place, financial interests and White House hitmen were able to terrorize and buy off enough Congressmen to get a final bill which:

* Modified the Blanche Lincoln ban on derivatives trading by banks, to allow them to trade interest rate and foreign exchange swaps, and to hedge their own risks. That's a "loophole" big enough to drive a freight train through.

* Softened the already useless Volcker Rule to limit "proprietary trading"—i.e., speculating on their own behalf—by allowing banks to own hedge funds and private equity funds for up to 3% of their capital. That allows room for a second freight train.

* Created a new oversight council, with the Treasury Secretary playing the key role, and granted major new powers to the Federal Reserve—subjecting them to an audit only two years after they make emergency loans.

Those same Wall Street and Obama forces had earlier killed the Cantwell-McCain amendment to restore Glass-Steagall, which was the one "bullet" the City of London and Wall Street truly feared.

A smiling Financial Times reported: "Bankers said the 3% rule was a positive sign for the industry, as it would allow financial institutions to keep ownership of their internal hedge funds and private equity funds, albeit with less proprietary investment. 'It is a victory for us'...said a senior Wall Street executive."

Predictably, bank stocks rose today in response to the news, including a 3% jump for Goldman Sachs. Equally predictably, President Obama praised the bill, saying it is 90% of what he had proposed.

The bill must now be passed by both houses of Congress before becoming law, a step which can be prevented if Congress becomes sufficiently fearful of the mass strike ferment welling up in the population.