The House Financial Services Committee advanced a package of bills Tuesday that would weaken major regulations included in the 2010 Dodd-Frank Wall Street Reform Act, doing so over the objections of the Obama Administration with bipartisan support.

The legislative package, which has been criticized by both current Treasury Secretary Jack Lew and his predecessor, consisted of six bills that would weaken the regulation of derivatives. Derivatives are the the financial instruments that were at the “center of the storm” that caused the financial crisis, according to the Financial Crisis Inquiry Commission. Nevertheless, those regulations have emerged as a key target for opponents of reform and the financial industry.

One of the most significant rules the package would weaken is the so-called “push-out” provision that would limit derivatives trading at banks and financial institutions that are insured by the federal government. But rather than weaken the push-out rules, Congress should be making them even stronger, former Federal Deposit Insurance Commission chair Sheila Bair told Bloomberg:

“If Congress wants to re-open Dodd-Frank on this question, if anything, they should push all derivatives activities (other than the banks’ own hedges) into affiliates outside of the insured bank,” Bair said in an e-mail. “This would force market funding of derivatives thus providing substantially greater market discipline than permitting them to be funded with insured deposits.”

Like the Volcker Rule, which would limit forms of risky trading at federally-insured banks, the push-out rule is meant to make the large institutions that were at the center of the financial crisis safer. But the Financial Services Committee, chaired by noted Dodd-Frank opponent Rep. Jeb Hensarling (R-TX), has repeatedly passed legislation weakening derivatives reforms since the law passed. At one point in 2012, there were nine separate pieces of legislation aimed at the regulation of derivatives pending in Congress. “These proposals threaten to create large oversight-free zones that could allow risky behaviors to flourish,” advocacy group Public Citizen wrote of such legislation in 2012.

The package of legislation isn’t expected to move forward in the Senate, according to Rep. Jim Himes (D-CT), one of the sponsors. But Congress isn’t just taking aim at the rules: in recent years, it has gutted the budget for the Commodity Futures Trading Commission, the agency tasked with enforcing the new derivatives rules.

Yesterday, Sen, Richard Shelby (R-AL) introduced new legislation to gum up implementation of the Dodd-Frank financial reform law, in the latest Republican effort to prevent bank regulations from going into effect. A bipartisan group of lawmakers today decided to get into the act, introducing a bill that would weaken rules meant to prevent banks from engaging in risky trading of derivatives with federally backed dollars:

U.S. House and Senate lawmakers introduced legislation that would allow more swaps trading to be conducted at banks that have federal insurance by repealing part of the Dodd-Frank Act.

The bipartisan measures call for altering the 2010 law’s requirement that banks with access to deposit insurance and the Federal Reserve’s discount window move some derivatives trades to separate affiliates that have their own capital.

Banks have already received a reprieve from these rules courtesy of regulators who have delayed its implementation, giving these lawmakers time to water it down. But as Marcus Stanley, policy director for Americans for Financial Reform, said, “the swaps-pushout provision is a really important part and something that absolutely should be a central part of the regulatory framework.” Economists Jane D’Arista and Gerald Epstein added, “the intent is to remove risky activities from the core banking functions that are essential to the economy and to ensure that those risky activities will not trigger the need for a bail out to prevent systemic collapse in the future as they did in the 2008 crisis.”

As financial expert Jennifer Taub noted, “Swaps have been at the heart of major financial crises since the bankruptcy of Orange County. The Long-Term Capital Management meltdown, the failure of AIG and the Greek debt crisis, share this common component.” Banks are already looking for creative ways to circumvent Dodd-Frank’s various limitations on risky trading (even as Wall Street profits skyrocket back to their pre-financial crisis highs). In this environment, the last thing that the financial system really needs is lawmakers aiding and abetting the ability of banks to gamble with taxpayer funds.

House Ways and Means Committee Chairman Dave Camp (R-MI) is gearing up to release a corporate tax overhaul. Much like the last few versions he’s proposed, the plan is expected to include some favorite Republicans provisions that would make it easier for corporations to avoid taxes and offshore jobs.

But according to the Huffington Post’s Ryan Grim and Zach Carter, the plan may include one interesting facet: a new tax treatment for derivatives, the credit instruments that were at the epicenter of the 2008 financial crisis. And Camp may be proposing the idea out of spite at CEOs who supported new revenue during negotiations over the so-called “fiscal cliff”:

One Republican operative told HuffPost that Camp’s bill is political payback for the CEOs collaborating with the Fix the Debt coalition, which worked with corporate chiefs who had pressured Republicans to accept tax increases as part of a deal to avert the so-called fiscal cliff at the close of 2012. [...]

Camp’s bill would establish a new tax regime for derivatives, requiring banks to declare the fair market value of the products at the end of each year. Any increase in value would be considered corporate income, subject to taxation. It’s a more aggressive tax treatment than Wall Street enjoys for either derivatives or for trading in more traditional securities.

Under Camp’s plan, banks would have to pay taxes on the increase in value of their derivatives, treating the increase as income; it’s a more efficient way of taxing profits than the current, convoluted system. “It’s a pretty bold step and I think this idea is sensible,” said Steve Rosenthal of the Tax Policy Center. The current system has “no basis in the reality of economics,” said tax lawyer David Miller. “As a result, sophisticated taxpayers are free to choose a tax treatment that minimizes their taxes.”

Members of the financial services industry are, predictably, freaking out about the proposal: “It doesn’t make any sense,” said one trader. The derivatives market, which is still largely unregulated, totals about $639 trillion.

Camp’s bill also preserves an important provision that prevents homeowners from having to pay a huge tax bill when they receive a mortgage modification. The provision was temporarily extended recently, and would be made permanent under Camp’s plan.

JP Morgan’s $2 billion derivatives trading debacle has forced House Republicans to, at least temporarily, delay their efforts to repeal the Dodd-Frank financial reform law. Republicans on the House Agriculture Committee yesterday pushed back votes on a series of bills that would weaken the derivatives portion of Dodd-Frank.

Those bills had already been cleared by the House Financial Services Committee, which has been making a concerted effort to chip away at Dodd-Frank. And overall, according to a report from Public Citizen, nine bills are pending in Congress that would weaken Dodd-Frank’s title on derivatives:

Since the passage of Dodd-Frank, industry has engaged in a concerted effort to weaken it. At least nine bills are pending in Congress that would water down its derivatives reforms. Three additional bills would saddle federal agencies with additional burdens to fulfill requirements to issue concerning financial services, including those involving derivatives.

Among other things, these bills would eliminate a requirement for federally insured banks to spin off their derivatives operations; reduce disclosure requirements for certain derivatives trades; provide a broad exemption from Dodd-Frank’s provisions for swaps involving foreign affiliates of U.S. companies; and exempt purportedly small players, even those with up to $200 billion in the notional value of their derivatives exposure.

These proposals threaten to create large oversight-free zones that could allow risky behaviors to flourish.

All but one of those nine bills is sponsored by a Republican, with Rep. Jim Himes (D-CT) the lone Democrat.

In addition to attempting to gut derivatives regulation, House Republicans have also refused to give the Commodity Futures Trading Commission, which is charged with enforcing those regulations, the funds needed to do its job. As CFTC Commissioner Bart Chilton wrote this week, the CFTC “is shy over $100 million of what is needed and what was requested in the President’s budget. And, the CFTC is a front-line regulator charged with overseeing the exact type of trading that caused the economic collapse and dealt the body blow to JPM.”

During the debate over the Dodd-Frank financial reform law — which President Obama signed one year ago today — Republicans warned that the law would have a debilitating effect on the economy and undermine the “safety and soundness” of banks (code for cutting too deeply into their profits). But as the Los Angeles Times noted this week, banks “have been reporting billions of dollars in profits — including a record quarter for Wells Fargo & Co. — with nary a word about how the so-called Dodd-Frank financial reform law was hindering them”:

On Tuesday, Wells Fargo, the nation’s third-largest bank, posted record earnings of $3.9 billion for the second quarter. JPMorgan Chase & Co. reported last week that its revenue and profit were higher in the first half of this year than in the first six months last year, before Dodd-Frank was passed. Nor did the law seem to deter Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc.

As Mother Jones’ Kevin Drum put it, “Dodd-Frank hasn’t taken full effect yet — nor have new capital requirements — but this is an ominous sign anyway. In the long run, if banks end up as profitable as they were before the law was passed, it almost certainly means that dangerous behavior really hasn’t been reined in significantly.” Indeed, several key regulations — including the Volcker rule, aimed at cutting down on risky trading — aren’t on the books yet, but there’s little reason to believe that the new rules will have any of the doomsday effects of which the banks were warning.

Even so, Republicans are doing everything they can do to undermine the law (while acknowledging that repeal is not in the cards with President Obama in the White House). Here are some of the main thrusts of their attack:

– Weaken the Consumer Protection Bureau: The House plans to vote today on a bill that would significantly weaken the Bureau (which Obama has vowed to veto). Senate Republicans have said they won’t confirm any bureau director until the structure of the bureau is changed to be more bank-friendly. The bureau officially opened for business today.

– Water down derivatives reform: House Agricultural Committee Chairman Frank Lucas (R-OK) plans to introduce legislation weakening the derivatives title of the laws, providing more exemptions from the law’s requirements that derivatives deals be transparent and cleared by regulators.

– Let banks keep passing on risk: One important provision of the bill requires lenders to hold onto a portion of loans that they make, so that they can’t divorce themselves entirely from loans with low standards. Republicans have tried to weaken this provision.

All in all, Dodd-Frank is still a work in progress, and Republicans are doing their best to slow that progress down as much as posible.

The Commodity Futures Trading Commission — which oversees the nation’s commodities markets — announced yesterday that it is going to allow for an additional month of comments on the rules governing derivatives that it is implementing under the Dodd-Frank financial reform law. According to Dodd-Frank, the CFTC is supposed to have finished implementing a new regulation regime for derivatives by July, but CFTC Chairman Gary Gensler has already said that the deadline will be missed.

House Republicans been pushing for the CFTC to delay derivatives reform for months, claiming that the rules were being implemented without enough input from businesses and the financial sector. So has this delay assuaged their concern? As the Wall Street Journal noted, it certainly hasn’t:

Republican Rep. Frank Lucas of Oklahoma, chairman of the House Agriculture Committee, which oversees the CFTC, said the agency’s decision to extend the comment period wasn’t enough to address his concerns.

“To expect that market participants can comment on dozens of complex regulations and their cumulative impact on the marketplace meaningfully in 30 days is consistent with the process we’ve seen at the CFTC, a bare minimum and check-the-box approach. We owe more diligence to the economy,” he said in a statement.

Derivatives, remember, were the financial instruments that brought down, among others, the insurance giant AIG (necessitating a government rescue). The Financial Crisis Inquiry Commission reported that derivatives were “at the center of the storm” during the financial crisis.

Despite the role these instruments (and the huge financial firms that used them) played in bringing the economy to the brink, Republicans have been attempting to slow-walk derivatives reform for months, both legislatively and by denying the CFTC funding to implement Dodd-Frank. House Republicans earlier this month introduced a bill to delay derivatives reform for 18 months.

But as CFTC Commissioner Bart Chilton said yesterday, “dangers” still exist in the derivatives market. “There are dangers out there in the OTC world that we need to get a handle on. There are some that want to run out the clock. Many of these people are people who opposed [Dodd-Frank] to begin with want to run out the clock until the next election. Maybe consumers won’t be as hot on reform then,” Chilton said.

The House Financial Services Committee today held a hearing on the derivatives title of the Dodd-Frank financial reform law. The new derivatives regulations in Dodd-Frank are key to bringing regulation and oversight to this huge ($600 trillion) and largely unregulated market.

Republicans fought the new derivatives regulations, and Dodd-Frank more generally, tooth and nail, falsely claiming that regulating derivatives would have a detrimental effect on everything from energy prices to the makers of Snickers bars.

Today, Republicans broke out a new piece of evidence meant to dissuade the Commodity Futures Trading Commission — which has been charged with implementing the derivatives title of Dodd-Frank — from actually following through with the law’s requirements. They cited “a recently released report, backed by pro-business groups, that claims a hypothetical three percent margin requirement [for derivatives trades] could cost 130,000 jobs.” Here’s Financial Services Committee Chairman Spencer Bachus (R-AL):

One study, released just yesterday, concludes that upwards of 130,000 jobs could be lost if U.S. regulators impose new restrictions on derivatives transactions too broadly. Others may not see a loss of jobs, but will see increased costs because of these regulations — costs that will be passed along to consumers.

For one thing, Republicans are trying to convince regulators to exempt non-financial companies from derivatives requirements when such exemptions already exist. But for another, they are relying on a thoroughly discredited study circulated by, among others, the U.S. Chamber of Commerce and the Business Roundtable, two of the banking industry’s chief apologists.

The study, conducted by Keybridge Research on behalf of the Coalition for Derivatives End Users, which is an umbrella group that includes the Business Roundtable and the Chamber of Commerce, claims that derivatives regulation will cause 130,000 jobs to be lost. As MIT professor John Parsons wrote, the calculation left out a key step:

A regulation that requires using cash instead of credit costs the company on one side, but loosens its constraints on the other. The net effect on the company’s free cash flow is zero. Keybridge’s oversight here is a first order mistake. One could argue that the cash requirement is costlier than credit, but then you would have to figure out by how much. That would be an extra, very difficult step in the calculation, and any reasonable estimate for the differential would drive the headline number down enormously, possibly to zero.

“This is not any kind of research. This is people who want to overleverage and risk the system — because, once again, they will get the upside and taxpayers/all citizens get the downside,” added MIT’s Simon Johnson.

In fact, the firm that the Chamber and Roundtable relied upon has been touting its affiliation with various scholars — including Nobel Prize winner Joseph Stiglitz — without those scholars knowing it. As the New York Times’ Andrew Ross Sorkin noted, “As I made calls about the relationship between Keybridge and the academics, names mysteriously disappeared from the group’s site.” Stiglitz himself said of Keybridge’s study: “The argument they make is particularly foolish…Companies are sitting on $2 trillion of cash. It’s just an embarrassment that they’d use that argument in the current context.”

Today, the Financial Crisis Inquiry Commission — which was charged with examining the causes of the 2008 financial meltdown — released its final report. The Commission laid out all the excruciatingly painful details of a financial system marred by poor incentives and excessive risk, while explaining all the ignored warnings, regulators asleep at the wheel, and predatory loans which fed into a pipeline of shadowy investments that imploded the balance sheets of the country’s biggest banks. The ultimate message of the report is “this financial crisis was avoidable.”

Of the many things that contributed to the crisis, the Commission noted that derivatives — the financial instruments that brought down, among others, American International Group — “were at the center of the storm“:

The enactment of legislation in 2000 to ban the regulation by both the federal and state governments of over-the-counter (OTC) derivatives was a key turning point in the march toward the financial crisis…One type of derivative — credit default swaps (CDS) — fueled the mortgage securitization pipeline. [...]

Second, CDS were essential to the creation of synthetic CDOs. These synthetic CDOs were merely bets on the performance of real mortgage-related securities. They amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread them throughout the financial system. Goldman Sachs alone packaged and sold $73 billion in synthetic CDOs from July 1, 2004 to May 31, 207.

“The existence of millions of derivatives contracts of all types between systemically important financial institutions — unseen and unknown in this unregulated market — added to uncertainty and escalated panic, helping to precipitate government assistance to those institutions,” the Commission found.

Fortunately, the Dodd-Frank financial regulatory reform law passed last year included a significant upgrade in the regulation of derivatives. In fact, the derivatives title is one of the strongest parts of the law.

However, House Republicans have taken it upon themselves to undermine derivatives reform by both refusing to fund the agency charged with implementing the new rules, the Commodity Futures Trading Commission, and trying to publicly shame the CFTC into slowing down its efforts. Bloomberg reported today that House Agricultural Committee Chairman Frank Lucas (R-OK) and Rep. Michael Conway (R-TX) are accusing the CFTC of “‘prioritizing speed’ and creating an ‘irrational sequence’ of rules” as it attempts to rein in the derivatives market.

The derivatives market was essentially the Wild West of the financial world before the financial crisis: unregulated, unrestrained, and ultimately unsustainable. But with the effects of the financial meltdown and the Great Recession that followed still being felt by families across the country, the GOP is throwing up roadblocks to prevent new rules from coming online.

Incoming House Financial Services Chairman Spencer Bachus (R-AL) told the Birmingham News this week that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.” And Bachus plans to provide that service by trying to slow down a whole host of measures being implemented under the Dodd-Frank financial reform law.

One of the targets that Bachus has in his sights is derivatives reform, the title of the Dodd-Frank law that aims to bring some prudent regulation to the currently unregulated derivatives market, which played a significant role in the 2008 financial meltdown. During the debate over Dodd-Frank, Bachus had an utterly incoherent position on derivatives reform, but that hasn’t stopped him from saying that derivatives reform is “one of the job-killing provisions of Dodd-Frank that needs to be addressed.”

And Bachus is getting some help from his fellow Republicans, who are threatening to bog down rule-writing by the Commodity Futures Trading Commission, which is charged with implementing derivatives reform. First, comes Rep. Scott Garrett (R-NJ), who will be chairing the subcommittee on capital markets next year:

“The rule-making bodies, especially the CFTC, seem to be eager to move along at this faster than anyone can keep up with,” said Mr. Garrett, who will try to slow the process with heightened congressional oversight.

And then Reps. Jerry Moran (R-KS) and Frank Lucas (R-OK):

Republicans on the panel said CFTC should move more slowly. Frank Lucas, who will become Agriculture Committee chairman in January, said he was “willing to consider an easing of statutory deadlines.” Jerry Moran, who will become a senator in January, said CFTC was rushing to issue a rule before it has adequate information on market size or appropriate limits.

Michael Greenberger, a former CFTC division director and University of Maryland law professor, called these complaints “a red herring offered by Wall Street to delay implementation.” But it’s not only Congressional Republicans who are trying to slow-walk reform. Republican appointees to the CFTC itself are doing the same thing, according to the Wall Street Journal:

The CFTC’s two Republican commissioners say the agency is moving too fast. Commissioner Jill Sommers said she supports giving the agency another year to write the rules.

The derivatives title is one of the strongest in the Dodd-Frank law, and getting it into place will bring much-needed light to a market that is several times the size of the entire U.S. economy. But Republicans, who did nothing to contribute to the financial reform debate, are trying to throw as many wrenches into the gears as they can, while Wall Street reaps its second-highest amount of revenue ever.

Rep. Spencer Bachus (R-AL), who will likely be the next chairman of the House Financial Services Committee due to the Republican victory last night, has signaled his intent to weaken a series of provisions in the Dodd-Frank financial reform law, including the Volcker rule and the resolution authority for dismantling failed banks. And he told the Wall Street Journal this morning that he also “plans to rewrite the derivatives provisions” in the law:

“That’s one of the job-killing provisions of Dodd-Frank that needs to be addressed,” the Alabama Republican said in an interview Wednesday morning, calling the provisions “overly expansive.” Mr. Bachus said the new derivatives rules, which will require most routine swaps to be traded on exchanges and routed through clearing houses, will redirect as much as $1 trillion from the U.S. economy, draining capital from the financial system that could be used for loans or job creation.

During the debate over Dodd-Frank, Bachus had an utterly incoherent position on derivatives reform, calling for transparent derivatives markets while opposing all reforms that would increase market transparency. Now, it seems, he’s ready to carry Wall Street’s water by dialing back the requirements designed to bring currently unregulated derivatives trading out of the dark.

This is troubling, as the derivatives title is one of the strongest parts of the Dodd-Frank bill, bringing much needed regulation to a portion of the financial system that suffered from a severe lack of oversight. Remember, it was AIG’s issuing of billion in credit default swaps that it couldn’t honor that led to its downfall; Lehman Brothers was also sunk by exposure to derivatives. The derivatives title of Dodd-Frank — authored by outgoing Sen. Blanche Lincoln (D-AR) — sets up exchanges so that derivatives must be traded publicly (like stocks) and employs clearinghouses to ensure that both parties in a derivatives trade have adequate collateral backing it up.

What House Republicans will likely aim to do — if their rhetoric during the financial reform debate is any indication — is try to grant wide exemptions to the exchange and clearing requirements, letting all sorts of activity that is purely speculative continue unabated.

But Commodity Futures Trading Commission Chairman Gary Gensler, who has been one of the staunchest supporters of strong derivatives reform, is pushing back, saying the election yesterday won’t interrupt the CFTC’s rule-writing effort. “Any regulatory agency is obliged to follow the statute and what Congress wrote, and that’s what we’ll do,” Gensler said.