Financial regulation is having a walk-on role in the raging trade debate between Obama and progressive legislators.
Sen. Elizabeth Warren (D-Mass.) is claiming that the Fast Track trade legislation could be used to undermine the Dodd-Frank Wall Street reforms. Her erstwhile partner in passing that bill – President Obama – virulently disagrees:
She is absolutely wrong… Think about the logic of that, right? The notion that I had this massive fight with Wall Street to make sure that we don’t repeat what happened in 2007, 2008 [the recession], and then I sign a [trade] provision what would unravel it? … I’d have to be pretty stupid.
The claim continues to be litigated in the secondary opinion market, with Bloomberg’s Mike Dornan backing up Warren…
Warren says she’s concerned that Republicans could include provisions in a future trade deal undercutting Dodd-Frank. They could then pass it with a simple majority in the U.S. Senate because the fast-track bill would prevent Democrats from blocking the legislation through a filibuster. Normally, it takes 60 votes to break a filibuster… On Warren’s side: One of the nation’s preeminent constitutional law scholars, Laurence Tribe of Harvard University, who counts Obama as a former student. “Any act of Congress or duly ratified treaty overrides any contrary prior federal legislation,” he said in an e-mail.
… and Matt Yglesias at Vox casting doubt on her claims…
Warren is right about this, but it’s also irrelevant. A Republican president looking to gut Dodd-Frank isn’t going to need anything as labyrinthine as a trade pact with Europe to wreck Obama’s signature financial regulation initiative.
For one thing, House Republicans keep passing bills to repeal parts of Dodd-Frank. They don’t pass because the Obama administration opposes them. But with the Cruz administration’s support, huge swaths of the bill would simply be repealed the old-fashioned way.
Beyond that, there is a lot of regulatory discretion in Dodd-Frank. The new president will appoint new personnel to run the SEC, CFTC, and CFPB and the Treasury Department. Later, the new president will appoint a new Fed chair and colleagues on the board. If these people want to go easier on the banks than Obama, that is exactly what is going to happen. Unlike in the case of environmental or civil rights regulations, there are no private causes of action that a regular citizen can take if she feels bank supervision is excessively lax.
Long story short, while it is easy to image a scenario in which a Republican president undermines bank regulation in 2017 it is difficult to imagine a scenario in which possession of Trade Promotion Authority is the linchpin of the scheme.
As someone who spent nearly a decade researching Fast Track and financial services trade issues, I am excited to see these issues break into the mainstream debate. Too often, reporters and politicians simplify the trade debate into a tariff reduction story. But tariffs are low, and most of modern trade deals are about behind-the-border regulation of the kind Warren is talking about.
But some of these interventions are conflating various issues, and confusing the debate as a result.