The repeal of part of the Dodd-Frank financial reforms has left big U.S. banks holding ten trillion dollars of “risky” derivatives trades on their books, the Financial Times reported yesterday. Senator Elizabeth Warren said that the repeal, which sparked a firestorm when it was slipped into a budget bill in December 2014, had left federally insured banks exposed to dangerous swaps trades. The rollback of the relevant rule, which followed almost no congressional debate, sparked stinging criticism of Wall Street and cemented perceptions of the pernicious influence of bank lobbyists on Capitol Hill. The rule would have required banks to “push out” swaps trades to entities that are not insured with taxpayer funds. On Tuesday, Sen. Warren cited figures from bank regulators indicating that about $10tn of those contracts remained on banks’ books, the first such estimates. Sheila Bair, former chair of the Federal Deposit Insurance Corp. and now president of Washington College in Maryland has stated that the swaps repeal was a “classic backroom deal.” “There’s no way this would have passed muster if people had openly debated it, so [the banks] had to sneak it on to a must-pass funding bill,” Bair said. “For an industry that purports to want to regain public trust, it was an extraordinary thing to do.”
