Traders banking on Sen. Kirsten Gillibrand to shield them from financial reform

Daily News
By Michael McAuliff
April 22, 2010

Sen. Blanche Lincoln’s Wall Street reform bill that passed the Agriculture Committee yesterday contained a provision that would bar banks from dealing in swaps and derivatives if they want access to the FDIC and Federal Reserve — a move affecting trillions and trillions of dollars of business handled by New York firms.

Yet, of the interested New York Democratic members of Congress, only one had a sensible, cogent argument to make: Queens Rep. Gary Ackerman.

Sen. Kirsten Gillibrand had crafted an amendment that would have required a study before such a move could happen, but she never offered it for debate, and declined to explain why, or explain what the problem with barring the swaps business might be.

Sen. Chuck Schumer’s overworked spokesman would only say the senator favors melding the Ag bill with the Senate Banking Committee bill. “I question the wisdom of the Senate Agriculture Committee, which (Wednesday) passed a bill that would in effect spin off an entire, almost $500 trillion, mostly New York-based industry without so much as a hearing,” said Ackerman. “While there is no question that unregulated, unchecked swaps were close to the heart of the near-meltdown of our economy, the bill the Senate Agriculture Committee passed could take out the legs of financial institutions just as they’re starting to recover from the financial crisis.”

Really, we don’t know what the Ag bill would do to New York business. (Couldn’t they just spin off the derivatives trade, and keep making billions?) But shouldn’t New Yorkers want to take a close look before jumping on something like that?

We also reached out to the delegation’s Democratic members on the House Financial Services Committee, which has its own bill. We got back bland responses favoring reform generally but

Rep. Pete King has no problem ripping the idea. “The misguided action by the Senate Agriculture Committee on derivatives will seriously damage New York banks and I am totally opposed to it!” he declared.

And he’s just as opposed to any sort of new taxes on the banks. “Any bank tax will cost our financial institutions billions of dollars. This cost will no doubt be passed down to the Main Street consumer,” King wrote with a number of other GOP members in a letter to the Senate Banking Committee honchos recently.

The whole letter is after the jump.

Dear Chairman Dodd and Ranking Member Shelby:

We are writing today to express strong opposition to the inclusion of a bank tax in the Senate’s financial regulatory reform bill that is expected to come to the Senate floor this month for a vote. A tax on our nation’s largest financial institutions is not the solution to our nation’s economic crisis.

Any bank tax will cost our financial institutions billions of dollars. This cost will no doubt be passed down to the Main Street consumer. In today’s economy, now is not the time to ask Americans to bear another tax burden.

Our biggest priority should be job creation and economic recovery. History has shown us that our small businesses play a major role in job growth. Your bank tax will restrict access to capital for small businesses and other job creators.

Finally, it is important that America’s financial institutions remain competitive in the global economy. By imposing this bank tax on our largest firms, we run the risk of driving capital overseas, where there are less obstacles and fees. A lack of competition will simply stifle economic growth.

This bank tax will stunt economic growth and job creation, impose a huge burden on consumers, and hurt American competitiveness. It is for these reasons that we urge you not to include any bank tax in the Senate’s financial regulatory reform bill. Thank you for your consideration.