By Rachel Goldfarb, originally published on Next New Deal
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Democrats Revolt Against 'Wall Street Giveaway' In Deal To Prevent Government Shutdown (HuffPo)
Zach Carter and Sabrina Siddiqui quote Roosevelt Institute Chief Economist Joseph Stiglitz on why a provision that will bring risky derivative trades under FDIC protection is a disaster.
The focus of the uproar is a provision that would allow Wall Street banks to trade risky financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. -- potentially putting taxpayers on the hook for losses. Big banks traded derivatives from these FDIC-backed units in the years leading up to the 2008 crash, but the 2010 Dodd-Frank financial reform law required them to move many of the transactions to other subsidiaries that are not insured by taxpayers. Banks receive higher credit ratings for derivatives they sell from taxpayer-backed units, which in turn makes the derivatives more profitable.
“If Congress repeals this regulation of dangerous over-the-counter derivatives and swaps, the U.S. economy will be vulnerable to the same kind of financial risks that triggered the Great Recession," warned Joseph E. Stiglitz, chief economist at the Roosevelt Institute and a Nobel Laureate, in a press release.
Follow below the fold for more.
Warren Leads Liberal Democrats’ Rebellion Over Provisions in $1 Trillion Spending Bill (WaPo)
Senator Warren is calling on House Democrats to withhold support of the spending bill unless this derivatives provision is removed, report Lori Montgomery and Sean Sullivan.
Congress' Backroom Pension-Cutting Deal is Even Worse Than Expected (LA Times)
Michael Hiltzik details the pension-cutting measure attached to the omnibus spending bill, which he says has far fewer protections for older retirees than originally implied.
The Wall Street Takeover of Charity (ProPublica)
Donor-advised charitable funds, which are run by financial firms, aren't increasing charitable giving as much as they're making money for the firms, writes Jesse Eisinger.
Walmart Illegally Punished Workers, Judge Rules (NYT)
Steven Greenhouse reports on a National Labor Relations Board decision in California, which found that Walmart managers had illegally intimidated workers for supporting unionizing efforts.
The Economic Threat to Cities Isn't Gentrification; It's the Opposite (Vox)
With gentrification comes a higher concentration of poverty, writes Danielle Kurtzleben, and increased economic segregation comes with less economic mobility.
New on Next New Deal
The Financial Regulation Congress Is Quietly Trying to Destroy in the Budget
Roosevelt Institute Fellow Mike Konczal explains why Section 716 of Dodd-Frank was implemented in the first place, and why weakening it today would put the economy and taxpayers at risk.