Sen. Pat Toomey (R-PA) was one of the financial industry’s biggest apologists during November’s campaign, opposing the Dodd-Frank financial reform law while claiming that derivative deals were “non-risky,” even as they cost schools and cities all across the country (including many in Pennsylvania) millions of dollars. And Toomey has been totally unrepentant about his personal role in deregulating the financial industry.
In 2000, former Sen. Phil “mental recession” Gramm (R-TX) attached the Commodity Futures Modernization Act to an unrelated, 11,000 appropriations bill. The CFMA ensured that the growing market in over-the-counter derivatives, including credit default swaps, stayed entirely unregulated. Toomey — then a member of the House of Representatives — voted for that bill, and said that he would do it again, inaccurately claiming that the legislation “did absolutely nothing to cause the financial crisis.”
So, naturally, Republicans have seen fit to name Toomey to the Senate Banking Committee, which has oversight of the nation’s financial regulatory laws. The committee was instrumental in crafting Dodd-Frank.
Here’s what the Financial Crisis Inquiry Commission — which released its final report yesterday — had to say about the bill Toomey claims did nothing to bring about the financial crisis:
The CFMA effectively shielded OTC derivatives from virtually all regulation or oversight. Subsequently, other laws enabled the expansion of the market…The OTC derivatives market boomed. At year-end 2000, when the CFMA was passed, the notional amount of OTC derivatives outstanding globally was $95.2 trillion, and the gross market value was $3.2 trillion. In the seven and a half years from then until June 2008, when the market peaked, outstanding OTC derivatives increased more than sevenfold to a notional amount of $672.6 trillion; their gross market value was $20.3 trillion.
Ultimately, the FCIC concluded, derivatives “were at the center of the storm.” And yet, Republicans put someone on the Banking Committee who has said that he would go back and deregulate those instruments all over again if he could.