Shaving a few billion off the deficit more important than preventing a deeper recession (and probably deeper deficit)--the Senate GOP stands on ideology even if it means sinking the ship and everybody on it.S enate GOP Again Kills Jobless Bill, New York Times, June 30, 2010.
These are those same Senate GOP members who mostly are avid supporters of cutting revenues (and increasing deficits) by giving the ultra wealthy beneficiaries of mega estates a cut in the tax that ordinarily would be taken out of the estate upon transfer, killed the bill to provide unemployment assistance to those millions who have been out of work for 26 weeks and would provide funding for states that otherwise will be laying off thousands of teachers. The naysaying GOP senators say they are sympathetic with all those ordinary Americans who are losing their jobs or losing their sole means of making it, but they just can't pass a bill like that because it will cost too much money. It would add $33 billion to the deficit. The GOP dream of estate tax repeal would cost between $20 and $30 billion; just lowering the amount of tax collected from estates that do-nothing heirs inherit as a windfall would cost about $15 billion.
The House on June 30th passed the financial reform bill conference agreement, with 19 Democrats joining all but 3 Republicans in voting against the bill. See Financial Overhaul Wins Final Approval in House, New York Times (DealBook), June 30, 2010. The Senate vote will be delayed until after the July 4 recess.
The overall scheme of the bill is a start on financial regulation, though it leaves much too much out altogether as a result of the long negotiation sessions too influenced by bank lobbyists demanding that they be allowed to continue business as usual. It also leaves too much discretion to regulators rather than enacting strict limitations on leverage, banning particular risky derivatives outright (like naked credit default swaps, for which there is no justification other than gamblin). While it requires registration and hedge and private equity funds and some disclosure, it hardly scratches the surface of what should be done with the shadow banking system, which is to acknowledge that these entities exist to get around the rules governing conservative banking and represent a major weak point of the financial system because of their excessive leverage, interconnectedness and size. Shadow banking entities should be regulated as banks, and banks should be regulated in a way that ends overly leveraged speculation.
Here's the Times' key paragraphs describing the bill:
The bill gives government regulators the authority to liquidate failing financial companies by breaking them apart, selling assets and forcing creditors and shareholders to take losses so that taxpayers do not pay the bill.
The legislation also vastly expands the regulatory powers of the Federal Reserve and establishes a systemic risk council of high-ranking officials, led by the Treasury secretary, to detect potential threats to the overall financial system. It creates a powerful new consumer financial protection bureau and widens the purview of the Securities and Exchange Commission to broaden regulation of hedge funds and credit rating agencies.
The measure restricts the ability of banks to invest and trade for their own accounts — a provision known as the Volcker Rule, for its proponent, the former Fed chairman, Paul A. Volcker — and creates a new regulatory framework for derivatives, the complex financial instruments that were at the heart of the 2008 crisis.
Of course, derivative regulation is markedly insufficient, since only some types cannot be dealt in by banks subject to federal bailout power. Lincoln's plan to force swaps trading desks out of banks failed because of resistance from the GOP corporatist majority and various Dems worried about Wall Street's profits. That group misses the point about the crisis--the real economy suffers from financial innovation through derivatives and securitizations that permitted the banks and shadow banks to "manufacture" money by lending and relending based on the same underlying.
Links for additional documents on both items:
Extenders/unemployment insurance bill:
CBO estimate of revenue and spending under S. Amdt 4402 to HR 5297 (House-passed small business legislation).
CBO (with JCT) estimate of budgetary effects of S. Amdt. 4425 to HR 4213 (tax extenders/ unemployment insurance bill)
Text of S. Amdt. 4425 to HR 4213 (tax extenders/unemployment insurance bill) Download 4213. S. Amdt 4425. text.
Financial Reform Bill:
Conference Report (this is unofficial copy, from a political website named Liberty Center--I'm writing this Wednesday night, so will substitute official copy as soon as available).