TAIBBI: Wall Street Rolling Back Another Key Piece of Financial Reform To Screw Cities & Towns

[kpete]

This bill passed last night with the support of both parties and Barney Frank. Are you proud to be an American yet?

To deal with this problem, the Dodd-Frank Act among other things included a simple reform. It required the financial advisors of municipalities to do two things: register with the SEC, and accept a fiduciary duty to respect the best interests of the taxpayers they are advising.

Sounds simple, right? But Wall Street couldn’t have that. After all, if companies are required to have a fiduciary responsibility to cities and towns, how in the world can they screw cities and towns? The idea was a veritable axe-blow to the banks’ municipal advisory businesses.

So what did Wall Street lobbyists and trade groups like SIFMA (the Securities Industry and Financial Markets Association) do? Well, they did what they’ve been doing to Dodd-Frank generally: they Swiss-cheesed the law with a string of exemptions. The industry proposal that ended up being HR 2827 created several new loopholes for purveyors of swaps and other such financial products to cities and towns. Here’s how the pro-reform group Americans for Financial Reform described the loopholes (emphasis mine):

For example, any advice provided by a broker, dealer, bank, or accountant that is any way “related to or connected with” a municipal underwriting would be exempted from the fiduciary requirement. A similar exemption would be created for all advice provided by banks or swap dealers that is in any way “related to or connected with” the sale to municipalities of financial derivatives, loan participation agreements, deposit products, foreign exchange, or a variety of other financial products.

So basically, if you’re underwriting a municipal bond for a city or a town, and you happen also to give the city or town advice about some deadly swap deal that will put the city into bankruptcy for the next thousand years, you don’t have a fiduciary responsibility to that city or town. The banks’ view is that being asked to perform the merely-technical function of underwriting a bond is very different from advising someone to take on an exotic swap deal – so if a bank is mainly an underwriter and happens to offhandedly recommend this or that swap deal, it just isn’t fair to drop this onerous financial responsibility, this weighty designation of municipal financial advisor, on its shoulders.

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Read more: http://www.rollingstone.com/politics/blogs/taibblog/wall-street-rolling-back-another-key-piece-of-financial-reform-20120920#ixzz271balYxe

[phantom power]

1. recommend

[hedda_foil]

2. And this piece 'o crap bill passed with bipartisan support including ...

Barney Franks!!????,

[xchrom]

3. Du rec. Nt