Figuring out if HR 922 is a good idea or not is up for grabs. We know that conservative elements in the House and Senate have continuously taken issue with the Dodd Frank Wall Street reform Act that certainly appeared to be necessary once it was determined that derivative swaps based on bundled mortgages was the culprit causing the collapse of the US economic system and the ensuing recession.
The bill questions if Dodd Frank went too far and proposes an amendment to correct that perception. The bill is based on amending a provision in Dodd Frank that aimed to protect taxpayers from having to bail out large derivative failures as we did after the collapse. Basically if an entity is doing swap trades with another, Dodd Frank requires that the entity being done business with does not have access to federal financial assets such as discount windows and other roads to bailout money. Therefore, if the deals fail, we don’t get stuck with the cost, those companies fold, some investors lose money and that is the end of it.
Supporters of HR 922 believe that the Dodd Frank provision it would amend makes life difficult for what we might call legitimate swaps trades that, the bill report tells us, had nothing to do with the economic instability the mortgage-based derivative swap created. Those innocent entities utilize swaps and other investment strategies to hedge against a future rise in prices of a necessary commodity, such has jet fuel for the airlines or other transportation fuels necessary to big industry.
They are probably right about the majority of swaps concerning themselves with commodity hedging which, in the end, helps keep consumer prices down. And those entities seeking commodity price protection through commodity Swaps are required to stay within those types of swaps with some vague reference to requiring that a foreign entity must have some back up from its government.
If it is all about protecting us from the cost of bailouts the bill will probably come through but what it doesn’t do is protect us consumers from spikes in the price of energy that the commodity swap trades do for commodity buying industries. We know that the slightest ripple in the Middle East has caused gasoline prices to hike up significantly as a result of speculators betting against a further rise or fall of oil over a few months, raising the cost-of-living for all who drive.
The solution to that was offered in a motion to recommit the bill, the last chance the minority has to amend the bill before vote on passage. The motion offered by Rep Brownley (D-CA) would have sent the bill back to committee to be returned with the provision that prohibits any restriction on the ability of financial regulators to ensure that financial institutions comply with laws prohibiting the manipulation of commodity markets, especially with regard to speculation in oil and bio-fuel contracts.
The motion failed on party lines just as the bill passed on party lines. There was the opportunity not so much to compromise but to make a bill better by extending the reach of its protections. There is a good reason to do this; there are far more people out here who are not investors needing protection but consumers needing protection.
October 24, 1795
Constituents Tell Senator How to Vote
The presumed right of the people to instruct their elected representatives extends back to colonial times. In drafting the Bill of Rights in 1789, the House of Representatives briefly considered recognizing such a right, but then overwhelmingly rejected it. The House response underscored representatives’ traditional desire to temper their constituents’ views with their own knowledge and opinions.
This issue hit the early Senate with special force. Unlike the House, whose members were elected by a diffused constituency of individual citizens, senators came to their seats through the choice of their state legislatures—bodies skilled in framing expressions of opinion. Soon after the Senate first convened in 1789, its members began receiving letters of instruction. In 1791, the Virginia legislature directed its two senators to vote to end the Senate’s practice of meeting behind closed doors—the better to keep senators accountable. When senators received instructions with which they agreed, some made a great show of following them. When they disagreed, however, they faced a choice: they could ignore the instructions, or they could resign.
On October 24, 1795, the Kentucky Gazette printed a petition from the inhabitants of Clark County to that state’s legislature. The petitioners angrily denounced U. S. Senator Humphrey Marshall for his vote in favor of ratifying a controversial treaty. The citizens urged the legislature to instruct Marshall to oppose the treaty if it should come before the Senate again.
Noting that Marshall had five years remaining in his term, others traced the problem to the length of senators’ terms. Six-year terms endangered “the liberties of America,” they argued, by destroying senators’ sense of responsibility and enabling “them to carry into execution schemes pregnant with the greatest evils.” These petitioners requested their state legislature to instruct both of Kentucky’s senators to propose a constitutional amendment permitting a state legislature to recall senators by a two-thirds vote.
A Federalist facing a hostile Jeffersonian-Republican legislature, Humphrey Marshall appealed directly to the people through a series of articles explaining his ratification vote. He asserted that as a senator he was less interested in winning popularity contests than in doing his duty to the nation—“according to my own judgment.”
Shortly afterwards, a mob dragged Marshall from his house. Only by seconds did this skilled orator talk the crowd out of throwing him into the Kentucky River. Stoned by angry citizens in the state capital, he kept a low profile for the remainder of his term.
November 30, 1804
Senate Tries Supreme Court Justice
On November 30, 1804, for the third time in its brief history, the Senate began an impeachment trial. The first trial in 1798 and 1799 had involved a senator previously expelled on grounds of treason. Because that senator no longer served, the Senate dismissed the case citing lack of jurisdiction. The second trial, in 1804, removed a federal judge for reasons of drunkenness and probable insanity. More than the first two proceedings, however, third trial challenged the Senate to explore the meaning of impeachable crimes.
Samuel Chase had served on the Supreme Court since 1796. A staunch Federalist and a volcanic personality, Chase showed no willingness to tone down his bitter partisan rhetoric after Jeffersonian Republicans gained control of Congress in 1801. Representative John Randolph of Virginia orchestrated impeachment proceedings against Chase, declaring he would wipe the floor with the obnoxious justice. The House accused Chase of refusing to dismiss biased jurors and of excluding or limiting defense witnesses in two politically sensitive cases. Its trial managers hoped to prove that Chase had “behaved in an arbitrary, oppressive, and unjust way by announcing his legal interpretation on the law of treason before defense counsel had been heard.” Highlighting the political nature of this case, the final article of impeachment accused the justice of continually promoting his political agenda on the bench, thereby “tending to prostitute the high judicial character with which he was invested, to the low purpose of an electioneering partizan.”
At the time the Senate took up the case against the Federalist justice, its members included twenty-five Jeffersonian Republicans and nine Federalists. Chase appeared before the Senate on January 4, 1805, to declare that he was being tried for his political convictions rather than for any real crime or misdemeanor. His defense team, which included several of the nation’s most eminent attorneys, convinced several wavering senators that Chase’s conduct did not warrant his removal from office. With at least six Jeffersonian Republicans joining the nine Federalists who voted not guilty on each article, the Senate on March 1, 1805, acquitted Samuel Chase on all counts. A majority voted guilty on three of the eight articles, but on each article the vote fell far short of the two-thirds required for conviction. The Senate thereby effectively insulated the judiciary from further congressional attacks based on disapproval of judges’ opinions. Chase resumed his duties at the bench, where he remained until his death in 1811.