The narrow passage of a budget in the US House of Representatives to keep the government open came at a price for liberal Democrats but concessions to Republicans may be the shape of things to come as the GOP takes control of Congress.
Massachusetts Senator Elizabeth Warren, the consumer champion and scourge of Wall Street, beseeched fellow Democrats this week to reject the $1.1 trillion (€887 billion) spending Bill that would avert a second government shutdown in just over a year.
Central to the dispute over the Bill was a key provision of the 2010 Dodd-Frank reforms introduced in the wake of the worst financial crisis since the Great Depression to regulate Wall Street excesses. Warren opposed a change in the Bill that rolled back Dodd-Frank to allow big banks trade in high-risk financial instruments such as swaps and derivatives under the cover of the Federal Deposit Insurance Corporation – aka the taxpayer – with funds guaranteed by the public.
Stock market gambles
The country’s biggest banks, including
Citibank
and JP Morgan, along with trade associations representing US banks, had lobbied US lawmakers to unwind part of Dodd-Frank that forced banks to shift their riskiest operations into new entities so that federally protected deposits would not be exposed to these stock market gambles.
For Warren, a favourite of grassroots Democratic voters, this was too much. She warned that the provision in the Bill exposed the American taxpayer to another financial crisis and another hefty bill. From the Senate floor, she called the spending Bill "the worst of government for the rich and powerful," as it not only rolled back limits on Wall Street speculation but increased the amount that national political parties could raise from individuals.
Facing another damaging closure of government, the White House recognised that the Bill was the lesser of two evils and frantically lobbied House Democrats on Thursday evening to pass the measure.
That the administration was willing to sacrifice parts of a signature piece of legislation for the White House, a key domestic achievement of the president’s first term, reflects the shift in the balance of power and the kind of compromises Democrats may have to make to ascendant Republicans, who from the New Year will control both the House and Senate.
Another opportunity
The Bill continues to fund most parts of the government until September 2015. Notably, the budget excludes funding for the Department of Homeland Security for that period; the Bill only covers a budget for the department until February which gives Republicans another opportunity to torpedo Obama’s executive orders to shield up to five million illegal immigrants from deportation in the spring.
On Thursday night the White House and Republican leaders in the House formed an unusual alliance – and liberal Democrats and conservative Republicans an unlikely opposition – as internecine fighting was sufficiently overcome to get the Bill across the line.
Some Democrats were shocked that the White House would cave so much. In a rare revolt against the White House, key Obama ally Nancy Pelosi, the Democratic minority leader in the House, launched a stinging attack on the Bill, saying that she was "enormously disappointed" with the president for supporting a Bill that relaxes post-financial crisis rules on America's big banks.
Taxpayer coverage
“This is ransom, this is blackmail. You don’t get a Bill unless Wall Street gets its taxpayer coverage. It’s really so sad,” she said. The White House explained away the lost ground, noting how other amendments that would have trimmed back Dodd-Frank were removed and there were increases in funds for Wall Street regulators.
Republicans were unhappy that the Bill – known as “Cromnibus” (a “continuing resolution” of short-term funding mixed with an “omnibus” of measures) – didn’t go further to scuttle Obama’s immigration actions. In the end, 67 Republicans revolted and the Bill required 57 Democratic votes for the measure to pass 219 votes to 206, late on Thursday night, just hours before the government was to shut down.
Mr Obama conceded there were “a couple provisions in this Bill that I really do not like” but that it also contained provisions that would allow the US to build on economic progress and national security.
“This by definition was a compromise Bill,” he told reporters. “This is what’s produced when we have the divided government that the American people voted for.”
