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Cromnibus and the Swaps Pushout

White House insists things are good with Elizabeth Warren

President Obama apparently decided to support the omnibus budget bill late Thursday morning, December 11th. He supported the bill because Senate Majority Leader Harry Reid told him the threat of a government shutdown in the first quarter of 2015 was otherwise a real one, and the President should act quickly to get that off the table.

The next few hours appear to have been hectic ones, as alliances formed and shifted both for and against the bill, across party lines. The bill came to be called "cromnibus," apparently for "Continuing Resolution Omnibus." [Personally my first impression was that the "cr" stood from "cram." Alas not.]

At 9:37 Thursday evening, the bill passed the House, 219 to 206. Obama and House Speaker Boehner had both kept enough of their troops in line to get the result they both wanted.

The Senate passed it on Saturday night, with a vote of 56 to 40. The 40 who voted "no" included both Elizabeth Warren and Ted Cruz.

The cromnibus was indeed crammed: with various goodies for various important political lobbies and constituencies. Of these one of the most symbolically resonant is a repeal of a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that had prohibited banks (beneficiaries not only of the 208 bail-out but in general of depositor insurance arrangements going back to the 1930s) from trading interest-rate swaps.

Kevin Yoder, the nominal author of the repeal amendment, isn't talking about it.

For those who came in late: an interest rate swap is a bet that one referenced index rate will go up or down relative to another. And no, in case you're wondering, interest-rate swaps didn't have a lot to do with the crises of 2007-08. But frankly -- or even doddly, they don't have a lot of social utility either. They are essentially gambling. And I understand that the federal government, which [again I should mention, insures depositors], might not want to let the bankers take depositors' money to Vegas with them for a fun weekend.

Anyway, the Obama administration invested a lot of energy and political capital in securing passage of Dodd-Frank. And then in working to get the necessary implementing regs through various agencies. Now they have made themselves complicit in the gutting of part of that ill -- a part with more intuitive appeal than much of it.

I have to say I am unsurprised at Senator Warren's reaction.

I also think we're seeing one of the issues of the Democratic primary campaign of 2016 take shape. Yes, I know, everybody thinks Hillary is a steam-roller and there won't be any primary campaign. But Hillary has associated herself quite closely with this administration. Four years in the top cabinet approach made that inevitable. Even now that she is in a position where she could distance herself she isn't doing so.

This leaves her open to challenge. It might be Warren who does the challenging. It might be someone else. We'll have to see.


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