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There is a surprisingly tough provision in the current financial reform bill that would force commercial banks to spin off their derivatives trading desks, but big bank lobbyists are fighting

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There is a surprisingly tough provision in the current financial reform bill that would force commercial banks to spin off their derivatives trading desks, but big bank lobbyists are fighting hard to make sure Congress strips the language out of the bill.

One rumor floating around Washington is that Democrats will hold off on an amendment that weakens the language until Senator Blanche Lincoln’s primary election in Arkansas on Tuesday. The derivatives language originated in the Senate Agriculture Committee, chaired by Lincoln. A delay will essentially help Congress avoid electoral accountability for caving in to the big banks.

Wall Street executives are pushing for the change to be made behind closed doors, out of the sight of the public. Today’s Washington Post quotes an anonymous executive spelling out their strategy with startling clarity:

Several senior industry executives, who spoke on the condition of anonymity so they could discuss the matter freely, say that based on recent meetings with congressional staff, they expect the rule to be dropped through backroom negotiations “in the dead of night with no recorded votes” on the measure.

Big banks love derivatives for the same reason they want legislation to be negotiated in the “dead of night”: they want to be able to do their dirty work with little oversight, transparency, or accountability.

Market transparency would put an end to their derivatives gambling profits, and democratic transparency would keep Congressional leadership from taking the side of the big banks, against the interests of the American people.

Congress has done this before. As Big Bank Takeover notes, an infamous provision in the Commodity Futures Modernization Act (CFMA) of 2000 opened a giant loophole for a Houston-based energy company that continues to deliver profits for Wall Street banks — at the expense of American consumers.

The Enron Loophole, a regulatory exclusion for energy-based derivatives, has since been blamed for rampant speculation in various energy markets. In 2000, Barack Obama and his presidential campaign blamed high gas prices on the “Enron loophole,” and subsequently Congress passed somewhat watered-down legislation to close the loophole.

That loophole has since been blamed on former Senator Phil Gramm, a Republican from Texas. The Senator was close to Enron, and his wife joined the company’s board shortly after the passage of the CFMA. The story goes that Gramm slipped the provision into the bill in the dead of night, and that the Senate was essentially unaware of what it was voting on.

Gramm has denied that this is the case, and there is plenty of evidence that the Clinton administration — including Larry Summers, currently a top official in the Obama administration — was partially complicit in the passage of the Enron loophole.

This fuzzy blame game is a direct result of a lack of transparency surrounding that legislation, and that’s what the bank lobbyists want now; they are calling for the same sort of “dead of night” situation that gave rise to the Enron loophole. No transparency means no accountability, and that’s a recipe for disaster when the big banks and their army of insider lobbyists are working the Hill.

One difference between this legislation and the CFMA: in 2000, Republicans controlled Congress, and Clinton was in the White House. Now, with Congress in the hands of the Democrats, and Obama in the White House, there will only be one party to blame for a dead-of-night provision that leads to further financial catastrophe — all for the sake of big bank profits.

As it turns out, some of the original Enron lobbyists are still on the scene, including Samuel Woodall, who has been engaged to work for a consortium of big banks, and scored the single most lucrative big bank lobbying contract in 2009.

Will he get his way this time?