Wall Street seeks to change Dodd-Frank rules via trade

U.S. bankers and insurers are trying to use trade deals, which can trump existing legislation, to weaken parts of the Dodd-Frank Act designed to prevent a repeat of the 2008 financial crisis.

While the companies say they are seeking agreements that preserve strong regulations and encourage economic growth, their effort is drawing fire from groups who argue that Wall Street wants to make the trade negotiations a new front in its three-year campaign to stop or alter the law.

Senator Elizabeth Warren, a Massachusetts Democrat who sits on the Banking Committee, said in a May 7 statement that there are “growing murmurs” about Wall Street’s efforts to “do quietly through trade agreements what they can’t get done in public view with the lights on and people watching.”

The U.S. has embarked on three major negotiations aimed at reducing barriers to international commerce, one with the European Union covering most types of trade and investment, and a similar one with Asia-Pacific nations including Japan. A third set of talks, covering only services, is under way at the World Trade Organization.

The Coalition of Service Industries, a trade association whose website lists Citigroup Inc., JPMorgan Chase & Co., American International Group Inc. and The Chubb Corp. as members, told the Office of the U.S. Trade Representative in a May 10 letter that “more compatible regulations for services” should be part of the EU deal.

‘Without Prejudice’

“Such provisions can be accomplished without prejudice to regulators’ authority to adopt or maintain regulations for consumer protection, environmental, health, safety, or prudential reasons,” the coalition’s president, Peter Allgeier, wrote in the letter.

The Securities Industry and Financial Markets Association, Wall Street’s biggest lobbying group, said in a March 1 letter that liberalization of trade in financial services “is often incorrectly equated with deregulation.”

Stephen Pastrick, director for public policy and advocacy at the group, wrote that it supports “strong regulation and prudential standards. However, there is much to be gained” by an agreement “enhancing regulatory efficiency.”

In the U.S., the president starts negotiations on trade agreements with a general mandate from Congress. After they are signed, the agreements are converted into implementing legislation, which can change regulations if the deal requires.

Congress then votes on the proposal, usually under special procedures that bar amendments to the pact’s details.

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