Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Friday, May 29, 2015

Why Obama Is Wrong and Warren Is Right on Trade Bill Quarrel

In her quarrel with President Barack Obama over trade legislation, Elizabeth Warren has got the law on her side.

The Massachusetts senator has warned fellow Democrats that a fast-track trade bill now in Congress could undo U.S. laws such as the Dodd-Frank banking regulations later. A number of constitutional scholars and other legal experts say she’s right.

The reason: An arcane trade-bill provision that would make it easier for a future president and Congress to undercut existing statutes, even ones with little to do with trade.

The risk to Dodd-Frank is “real and meaningful and worth worrying about,” said Michael Barr, Obama’s former assistant Treasury secretary for financial institutions and an architect of the financial law. Barr said a hostile president might weaken the law through other means, such as a legislative assault or regulatory maneuvers.

The fight pits two of the most popular Democrats in the country against one another. Obama’s support of fast-track trade authority and regional free-trade deals under negotiation with Pacific Rim and European nations places him sharply at odds with most of his party.
Simple Majority

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.

“In the next few weeks, Congress will decide whether to give the president fast-track authority,” she said in a May 5 speech to the Institute for New Economic Thinking in Washington. “If fast-track passes, a Republican president could easily use a future trade deal to override our domestic financial rules.”

Obama called Warren’s contention “absolutely wrong” in an interview with Yahoo News, and said he’d “have to be pretty stupid” to agree to a trade deal that would undermine the Dodd-Frank law he signed himself. The law, intended to rein in banks viewed as responsible for the 2008 financial crisis, is deeply popular with Democrats, and Warren’s contention that a trade deal might undermine it could help rally Democratic opposition.

“Our priority has and continues to be defending against any attempts to undermine these critical protections,” Whitney Smith, a Treasury Department spokeswoman, said in an e-mail. “Our trade agreements would not weaken our ability to implement the law now or in the future.”
Tribe’s View

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.

The bill to grant the president fast-track authority for six years is expected to pass the Senate next week. It faces resistance from House Democrats.

Obama’s supporters argue that a back-door rewrite of Dodd-Frank through trade legislation would be unwieldy, and therefore Warren’s concern is unlikely to be realized.

Two people close to the administration who insisted on anonymity to discuss a hypothetical situation said rolling back Dodd-Frank through a trade deal would complicate ratification not only by the U.S. Congress but by parliaments in other countries involved.
Avoiding Filibuster

It would be easier for a Republican president to use other tactics, they said. Republicans could use special Senate procedures for budget-related legislation to avoid a filibuster, or attach a rollback of Dodd-Frank rules to must-pass legislation such as a bill to avoid a government shutdown. A future president could also simply issue new regulations weakening the law.

The odds are “pretty low” of a weakening of financial regulations through a trade deal, said Gary Hufbauer, a fellow at the Peterson Institute for International Economics. U.S. financial regulators would resist addressing the issue in a trade agreement, he said.

It would “stir up a hornet’s nest, and I don’t think policy makers are that irresponsible,” said William Krist, a trade official in President Ronald Reagan’s administration and now a senior scholar at the Wilson Center, a congressionally chartered research institute in Washington.
European Efforts

Yet Barr said European Union officials are already pressing the U.S. to lower capital requirements for banks in a trade deal now under negotiation -- the same capital requirements Dodd-Frank had raised.

Obama has refused, but a future president and Congress might think differently.

White House Press Secretary Josh Earnest said Wednesday that no trade agreement concluded under the fast-track authority would change any U.S. laws.

“I will show you the specific text that’s included in the legislation that specifically, word for word, bars the agreement from being used to change U.S. law,” Earnest said. “That’s written into the bill. That is a concern that people do not have to have.”

The so-called “sovereignty” provision Earnest cited exists, preventing the trade agreement itself from overriding U.S. laws. The fast-track authority, however, doesn’t just govern the trade deal; it would speed consideration of legislation Congress must pass to implement the pact. That legislation could change U.S. laws.

“It is possible it could undermine Dodd-Frank,” Krist said.
Derivatives Issue

European officials and financial industry executives are itching to loosen key requirements the Dodd-Frank law established to reduce the threat of another financial collapse, Barr said. Their targets include regulations on derivatives trading by bank affiliates outside the U.S.; a ban on proprietary trading, named after former Federal Reserve Chairman Paul Volcker; and the rules on capital requirements, he said.

The Europeans also want banks to be able to count as acceptable capital higher-yielding assets that carry more risk, Hufbauer said.

“All the big-ticket items that make a huge difference in terms of the safety and soundness of the financial system are things that some in Europe have opposed,” said Barr, now a law professor at the University of Michigan.

U.S. financial industry groups have written letters to trade officials urging that the Asia-Pacific and European negotiations address some of those issues. They also want to limit financial regulation through negotiations under the auspices of the World Trade Organization.
‘Procedural Loophole’

Republicans already won passage of legislation weakening one provision of the Dodd-Frank law, over Warren’s opposition, by attaching the measure to a spending bill that avoided a government shutdown last year.

“Legal experts agree that fast track creates a procedural loophole that could be used to push major legislative changes to Dodd Frank through Congress as part of that upcoming deal,” Warren said in an e-mailed statement. “This president supports financial reform, but he has still not explained how he -- or anyone else -- can stop the next president from caving to the big banks in the next trade deal.”

Original Article
Source: bloomberg.com/
Author:  Mike Dorning 

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