The US House of Representatives is expected to pass what'll be known as the Dodd-Frank Law tomorrow, following what's expected to be a last-minute doomed effort to introduce a half-hearted effort to do something about Fannie Mae and Freddie Mac, writes Edward Mills of FBR Capital Markets in a repor to clients. It's also possible that Wall Street's friends among New York Congressmen, and other "moderate Democrats", will vote No in an effort to keep bankers' campaign funds coming in, "but passage in the House should not be a problem."
The Senate could prove a tighter squeeze. Sen. Robert Byrd (D-WV)'s death means one less Democrat. The Ds will have to hold Republican Sens. Snowe and Collins of Maine and Scott Brown of Massachusetts, who's balking at the $20 billion bank and hedge fund tax tacked into the bill ast the last minute. Maybe past opponents Sens. Grassley (R-Iowa), Cantwell (D-Wash) or Feingold (D-Wis.) will end up backing the bill, Mills suggests.
Last-minute changes: Blank Rome's Financial Reform Watch notes that House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) got interest-rate, currency, gold and high-rated credit-default swaps exempted from the No-Bank-Derivatives rule; while the Volcker Rule ban on proprietary trading is still controversial. Senate vote had been slated for Wednesday.
Still opposed: "The financial crisis was not caused by crooks on 'Wall Street'... even though there was a great deal of fraud," thunders veteran bank analyst Richard X. Bove of Connecticut-based Rochdale Securities LLC in a note to clients. "The financial crisis was caused by the creation of too much money, and too few solid investment opportunities."
Bove says the fragmented G-20 meeting in Toronto confirms his view: "Countries with healthy banks" (Germany, China) "rejected, in total, the suggestions being made by the United States" and its allies, who wanted more sweeping changes to bank rules.
"The crisis is a classic," Bove adds. ""So-called wealthy industrialized nations" like the U.S. have lost most of their productive manufacturing base. But "they have not lost the desire to acquire" stuff they can't really afford anymore. So rich countries "create money" so their cosnumers can borrow it to buy stuff from "the so-called poorer emerging nations... until such time as it becomes evidence that the debtors cannot pay, and failures and crises develop." Fraud is a symptom of bloated Western economies, and not the cause, Bove concludes.