During his nearly three years in the U.S. Senate, Scott Brown (R-MA) frequently came to the aid of the financial sector — watering down the Dodd-Frank bill and working to weaken it after its passage — and accepted hundreds of thousands of dollars in campaign cash from the industry. Now, the man Forbes Magazine called one of “Wall Street’s Favorite Congressmen” will use those connections as counsel for Nixon Peabody, an international law and lobbying firm.

The Boston Globe noted Monday that while Brown himself will not be a lobbyist — Senators may not lobby their former colleagues for the first two years after leaving office, under the Honest Leadership and Open Government Act of 2007 — “he will be leaning heavily on his Washington contacts to drum up business for the firm.” The position will also allow him “to begin cashing in on his contacts with the financial services industry, which he helped oversee in the Senate.”

Among the lobbying clients represented by Nixon Peabody is Goldman Sachs, the Wall Street behemoth that reportedly skirted the Dodd-Frank rules . Brown received $10,000 in PAC contributions from Goldman and more than $100,000 in contributions from its employees.

Brown was also the deciding vote against the DISCLOSE Act, which would have allowed voters to see which moneyed interests were funding secret political ads. The U.S. Chamber of Commerce, which reportedly received millions from Goldman Sachs, led the opposition to the bill.

Last month, Brown joined Fox News Channel as a contributor. In his first appearance in that capacity, he lamented that Congress is “dysfunctional and extremely partisan,” and promised to “stay involved” by being “part of the election process back home and other elections throughout the country.”

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.

Republicans have spent the past two years trying to delay and water down regulations included in the Dodd-Frank Wall Street Reform Act, the landmark regulatory law passed in the wake of the financial crisis that sparked the Great Recession. Alabama Sen. Richard Shelby (R), who served as the ranking member on the Senate Banking Committee in the previous Congress, is now renewing that fight, as he plans to introduce legislation that would require regulators to perform a cost-benefit analysis on all new financial regulations before they are finalized.

Under Shelby’s legislation, any new rule for which costs outweigh benefits would be prohibited from final implementation, The Hill reports:

“If a regulation’s costs outweigh its benefits, it should be thrown out,” Shelby said. “By providing a clear, rigorous and consistent process for regulators in making that determination, this legislation will eliminate unnecessary burdens on our economy.”

Shelby’s past efforts to ensure that cost-benefit analyses are performed on new regulations has drawn harsh rebukes from regulators and the Obama administration. “[W]e are seeing a determined effort to slow and weaken reforms that are critical to our ability to protect Americans from another crisis,” former Treasury Secretary Tim Geithner said of such a change in 2011.

Such a proposal may seem benign, but “quantifying costs and benefits objectively is notoriously difficult,” Reuters’ John Kemp wrote in 2012, and “the result tends to depend on who is doing the measuring.” Those analyses would likely throw out many regulations that could protect the nation from future financial crises or from incidences like the rate-rigging scandal that embroiled the financial industry last year. Independent studies have shown that the financial crisis cost the U.S. $22 trillion, including nearly $13 trillion in lost economic output.

And while they have support from the Chamber of Commerce and other financial industry interest groups who have challenged new regulations in court, the analyses are meant not to ensure smart regulations but to slow down or block the regulatory process. “The standard they seek to enforce,” Kemp observed, “would be impossible to meet.”

The Volcker Rule — a part of the Dodd-Frank financial reform law that is meant to rein in risky bank trading — is on the verge of being delayed, again, as regulators squabble over its exact parameters. Wall Street banks and congressional Republicans, after successfully watering down the Volcker Rule when Dodd-Frank was being debated, have been trying to get rid of what little bits are left ever since.

But Occupy the SEC, an offshoot of the Occupy Wall Street movement that focuses on matters before government regulatory agencies, is suing the federal government in an attempt to speed up the process and get the Volcker Rule in place. The two plaintiffs in the case claim that their deposits are at risk, so long as banks are allowed to engage in risky gambling with federally backed funds:

Plaintiffs suffer the risk of irreparable injury to their deposits by reason of [the government's] non-action. The Plaintiffs’ bank accounts are subject to potential dissipation or liquidation resulting from bank losses occasioned by excessively risky trading activities by those banks. The Volcker Rule would institute structural safeguards insulating depository accounts from banks’ proprietary trading activities, thereby protecting Plaintiffs’ bank accounts. Defendants’ unjustified delay in finalizing the Volcker Rule puts Plaintiffs’ bank accounts at continued risk of financial loss.

This is the first lawsuit challenging regulators to implement, rather than delay, the Volcker Rule. As Public Citizen’s Bart Naylor wrote, the suit is “making the straightforward case that banks shouldn’t gamble with savings because real people may be harmed.”

Currently, less than half of the rules in Dodd-Frank have been finalized. Wall Street, meanwhile, had its second most profitable year ever last year.

According to the Federal Deposit Insurance Corp., banks in 2012 had their most profitable year since 2006 and their second most profitable year ever. Banks made nearly $35 billion in the fourth quarter of last year, bringing their yearly total to more than $141 billion:

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $34.7 billion in the fourth quarter of 2012, a $9.3 billion (36.9 percent) improvement from the $25.3 billion in profits the industry reported in the fourth quarter of 2011. This is the 14th quarter in a row that earnings have registered a year-over-year increase. Increased noninterest income and lower provisions for loan losses continued to account for most of the year-over-year improvement in earnings. For the full year, industry earnings totaled $141.3 billion — a 19.3 percent improvement over 2011 and the second-highest ever reported by the industry after the $145.2 billion earned in 2006.

Wall Street bonuses, while not attaining the same heights to which they rose in 2006, also increased last year. Despite their high profitability, banks are still trying to circumvent or water down the Dodd-Frank financial reform law, claiming that it will undermine their ability to do business. Overall, the financial sector sucks $635 billion out of the economy every year that could be spent on more productive uses.

Congressional Republicans have taken every opportunity to gum up the implementation of the Dodd-Frank financial reform law. They have denied regulators the funds needed to finalize the law’s rules, leading to huge delays.

And the GOP is about to receive a hand from the so-called “sequester,” budge cuts scheduled to take effect at the end of the week. As The Hill reported, both the Securities and Exchange Commission and the Commodity Futures Trading Commission, regulators charged with large responsibilities under the law, will see hefty reductions in funding:

The Securities and Exchange Commission’s (SEC) $1.3 billion budget would fall by $108 million, while the CFTC would take a $17 million haircut to its $205 million budget.

The OMB’s report also states that the new Consumer Financial Protection Bureau (CFPB) — despite not having its budget set by Congress like the SEC and CFTC — would also face cuts totaling $34 million from its $448 million budget.

During a House Financial Services Committee hearing today, both ranking member Rep. Maxine Waters (D-CA) and Rep. Keith Ellison (D-MN) raised concerns about the ability of those agencies to do their jobs should the sequester go into effect. Watch it:

Allowing the sequester to go ahead would have a huge impact on many important programs. Meanwhile, Wall Street will continue to avoid the scrutiny it deserves.

Wells Fargo is the latest bank to ramp up new forms of risky trading in advance of the Volcker Rule, a regulation included in the 2010 Dodd-Frank Wall Street Reform Act meant to make banks safer by prohibiting certain types of trades that helped trigger the global financial crisis in 2009. The rule bans proprietary trading, in which banks bet their own money for the sole purpose of turning large profits, at financial institutions that have the backing of taxpayers.

While some banks have done away with such trading, Wells Fargo is increasing it by relying solely on its own funds to invest in private equity markets, a practice known as “merchant banking” that will likely be allowed by the finalized Volcker Rule. That sort of banking, however, may turn out to be even more dangerous than the prop trading the Volcker Rule prohibits, Reuters reports:

Their decisions may run counter to rulemakers’ efforts to make the financial system safer. The merchant banking that Wells Fargo is embracing is riskier than investing in private equity funds with outside investors, where a bank shares any losses with others. Some critics warn that the Volcker Rule is banning the safer of the two activities, and allowing the one that could lead to bigger losses for a bank.

Some argue that banks should be blocked from any form of private equity investing. Sheila Bair, the former chairman of the Federal Deposit Insurance Corp, which guarantees the deposits of banks like Wells Fargo, said private equity and merchant banking are too far removed from regular banking.

“Is that really what you want institutions that have safety net support doing? Is that an appropriate use for a government backstop?” she told Reuters.

Wells Fargo’s quest for profits even through risky means is yet another indication that many Wall Street banks, undeterred by the financial collapse, are seeking any loophole they can find to continue raking in huge profits regardless of the potential cost. In January, Bloomberg reported that Goldman Sachs had set up a secret hedge fund-like entity meant to skirt the Volcker Rule, and banks have been fighting to weaken the rule since before Dodd-Frank became law. Those efforts have continued since, even in the face of the stunning JP Morgan Chase trading loss that prompted Senate Democrats to call for the closure of massive loophole that exists in the draft version of the rule.

Former bank executives, however, have made the case that a strong Volcker Rule is “necessary to correct a mistake that poses a major risk to our economy.” And while a forceful Volcker Rule would indeed make large banks less profitable, it would do so in a way that would also ensure that they pose less of a risk to the health of the American economy.

Rep. Dan Campbell (R-CA), in a smart move, wants to require the biggest banks to hold more capital against potential losses (meaning they have a bigger cushion, and thus less potential need for a bailout, if the economy goes south). However, he plans to pair his legislative push for higher capital requirements with the repeal of two other important parts of the Dodd-Frank financial reform law:

U.S. Representative John Campbell plans to offer legislation aimed at reducing the size of “too- big-to-fail” banks by requiring them to hold more capital including long-term debt. [...]

His legislation would also repeal Dodd-Frank’s heightened standards for systemic institutions and its ban on proprietary trading, known as the Volcker rule. Campbell said that with additional capital requirements, a ban on proprietary trading would be unnecessary.

The first measure Campbell wants to repeal allows regulators to place more stringent regulations on the biggest banks, making them adhere to even stricter requirements than their competitors that are small enough to be allowed to fail. The GOP has wanted to do away with this provision for years, which amounts to ignoring the problem of too-big-to-fail, not mitigating it.

Campbell’s bill would also repeal the Volcker Rule, which is meant to prevent the biggest banks from engaging in trading for their own benefit taxpayer-backed dollars. Congressional Republicans have done the bidding of the financial services industry by watering this rule down to a shell of its former self, but it still would help reduce some of the risky practices that contributed to the financial crisis.

The Royal Bank of Scotland will have to pay more than $600 million to U.S. and UK regulators for its role in rigging the LIBOR interest rate. RBS is one of several banks that rigged LIBOR in order to make huge profits, as regulators looked the other way.

The Commodity Futures Trading Commission today released transcripts of electronic conversations between RBS traders and their clients that reveal just how explicit they were about rigging the rate in order to boost their respective bottom lines. Here are some of the highlights:

Yen Trader 1: where would you like it[,] libor that is[,] same as yesterday is call

Yen Trader 4: haha, glad you clarified ! mixed feelings but mostly I’d like it all lower so the world starts to make a little more sense.

Senior Yen Trader: the whole HF [hedge fund] world will be kissing you instead of calling me if libor move lower

Yen Trader 1: ok, i will move the curve down[,] 1bp[,] maybe more[,] if I can

——————

Senior Yen Trader: its just amazing how libor fixing can make you that much money

[…]

Senior Yen Trader: its a cartel now in london[.] they smack all the 1yr irs ..and fix it very high or low

——————

Yen Manager: for choice we want lower libors…let the [Money Market] guys know pls

Yen Trader 2: sure i am setting today as [Yen Trader 1] and cash guy off [Primary Submitter]

Yen Manager: great set it nice and low

——————-

Swiss Franc Trader: can u put 6m swiss libor in low pls?

Primary Submitter: NO

Swiss Franc Trader: should have pushed the door harder

Primary Submitter: Whats it worth

Swiss Franc Trader: ive got some sushi rolls from yesterday?

[…]

Primary Submitter: ok low 6m , just for u

Swiss Franc Trader: wooooooohooooooo[,] 0.01%? thatd be awesome

Primary Submitter: 1.33

Swiss Franc Trader: perfect[.] u r a nice man

These emails are right in line with those uncovered at other banks that were rigging LIBOR. This rigging may have cost U.S. taxpayers billions of dollars, but by and large, U.S. media have ignored it.

London became one of the globe’s primary financial hubs partly through its so-called “light touch” regulatory approach — effectively trusting some of the world’s largest and most powerful banking enterprises to manage their own affairs without much government intervention. As a result, the U.K. central bank alternately ignored the burgeoning business of LIBOR-rigging and actively colluded in it at some level, advising banks to raise or lower their estimates in order to create an illusion of stability in the system.

For those not versed in the acronym-littered world of international lending, LIBOR stands for the “London Inter-Bank Offered Rate.” It represents the interest rate banks pay to borrow from each other for a short-term period in ten different currencies and 15 separate durations.

The strange bit comes in during the creation and publication of the rate — a survey of various banks’ estimates of the rate they think they would pay to borrow, for instance, 10 million yen for a one-week period. Those estimates are aggregated, the lowest and highest are knocked out, and the rest are averaged and published each day by the British Bankers’ Association, a private trade organization.

It wouldn’t take a financial mastermind to see how traders could abuse this system. The LIBOR represents a benchmark for derivatives and securities with a nominal value of $350 trillion or more. Skewing the rate by a single point could generate hundreds of thousands of dollars in paper profits, as Bloomberg News showed last week:

There were no rules at RBS and other banks prohibiting derivatives traders, who stood to benefit from where Libor was set, from submitting the rate — a flaw exploited by some traders to boost their bonuses.

The next morning, RBS said it would have to pay 0.97 percent to borrow in yen for three months, up from 0.94 percent the previous day. The Edinburgh-based bank was the only one of 16 surveyed to raise its submission that day, inflating that day’s rate by one-fifth of a basis point, or 0.002 percent. On a $50 billion portfolio of interest-rate swaps, RBS could have gained as much as $250,000.

Of course, it’s not as if the banks are getting away scot-free — Barclays Bank coughed up more than $400 million in fines last summer for its part in the scam, Swiss giant UBS paid over $1.5 billion to regulators on both sides of the Atlantic, and RBS will probably pay close to $800 million in settlements, Reuters reports.

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Our guest blogger is Daniel Pereira, Managing Editor at Brafton Inc.