Something insane just happened in Congress

Swaps Regulatory Improvement Act - Amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to extend the exemption from the prohibition against federal government government assistance to (bailouts of) swaps entities to any major swap participant or major security-based swap participant that is a U.S. uninsured branch or agency of a foreign bank.

Declares the prohibition against federal government bailouts of swaps entities inapplicable to:

(1) a foreign banking organization supervised by the Federal Reserve; and

(2) an insured depository institution or a U.S. uninsured branch or agency of a foreign bank that limits its swap and security-based swap activities to hedging and similar risk mitigating activities (as under current law), non-structured finance swap activities, and certain structured finance swap activities.

Repeals the exemption from the prohibition for any insured depository institution that limits its swap and security-based swap activities to acting as a swaps entity for:

(1) swaps or security-based swaps involving rates or reference assets that are permissible for investment by a national bank; or

(2) credit default swaps, including those referencing the credit risk of asset-backed securities unless they are cleared by a derivatives clearing organization or a clearing agency registered, or exempt from registration, under the Commodity Exchange Act or the Securities Exchange Act.

The New York Times reported on the front page that Citigroup drafted most of the House bill that allows banks to engage in risky trades backed by a potential taxpayer-funded bailout. The Times notes that "Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill."

Special-interest lobbyists often play a role in writing legislation on the Hill, but such sausage-making is rarely revealed to the public. In this instance, members of Congress and a band of lobbyists have been caught red-handed, and Mother Jones has obtained the Citigroup draft that is practically identical to the House bill.