WASHINGTON, D.C. – Today, U.S. Sens. Sherrod Brown (D-OH) and David Vitter (R-LA) sent a letter to leaders in the U.S. House of Representatives and the U.S. Senate urging the removal of a provision in the year-end spending bill that would repeal a law prohibiting future bailouts.  On Wednesday, Brown released the following statement in reaction to the provisions inclusion in the package:

“This giveaway to Wall Street would open the door to future bailouts funded by American taxpayers,” Brown said. “It’s been just six years since risky financial practices put our economy on the brink of collapse and cost millions of Americans lost jobs, homes, and retirement savings. This provision, originally written by lobbyists, has no place in a must-pass spending bill.”

Following the financial crisis, Congress passed a provision in the Wall Street Reform Act that would end government insurance of risky Wall Street derivatives trading. Section 716 – entitled “Prohibition Against Federal Government Bailouts of Swaps Entities,” and also known as the Lincoln Amendment or the “swaps push-out” provision – prohibits Federal assistance to entities that engage in certain swaps and security-based swaps activities.  While this provision was scheduled to take effect on July 16, 2013, it has still not been implemented.

The year-end spending bill would repeal Section 716.

Brown and Vitter’s letter to House and Senate leadership is as follows.

December 11, 2014

Dear Speaker Boehner, House Minority Leader Pelosi, Senate Majority Leader Reid and Senate Minority Leader McConnell:

We are writing you about the broad bipartisan support for removing section 630 from H.R. 83.  This provision would repeal section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act.  We urge you to remove this provision from the year-end spending bill.

Section 716, also known as the Lincoln Amendment or the “swaps push-out” provision, prohibits Federal assistance to entities that engage in certain derivatives dealing and speculation.  The problem of “too big to fail” is clearly far from over.  Removing any taxpayer subsidy for risky derivative trades that are unnecessary for normal banking purposes is an important step.

The catastrophic events of the financial crisis demonstrated the risks posed by trading certain types of risky derivatives, and we are concerned that these activities continue to present a threat to financial stability.  Forceful implementation of section 716 is an important first step in ensuring that derivatives activities are conducted outside of the public safety net, where they can be properly supported by private capital instead of a taxpayer-provided backstop.

Yesterday, Federal Deposit Insurance Corporation (FDIC) Vice Chairman Thomas Hoeing pointed out that, “in 2008 we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks. Section 716 of Dodd-Frank is an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks.”

Former FDIC Chair Sheila Bair has also said that “this activity should be done outside of insured banks and only in non-FDIC insured affiliates. It should not be funded with FDIC insured deposits.”

We agree with them.

If Wall Street banks want to gamble, Congress should force them to pay for their losses, and not put the taxpayers on the hook for another bailout. Congress should not gamble on a possible government shutdown by attempting to tuck this controversial provision into a spending bill without having been considered by the committees of jurisdiction, where it can be subjected to a transparent and vigorous debate.

Thank you for considering our views on this important matter.

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