Did cromnibus kill Wall Street reform? (updated)

Back when Congress passed Wall Street reform (the Dodd/Frank bill), many liberals dismissed it as meaningless weak tea. But then, a few of them came around and recognized that - what do you know - Wall Street reform is working!

A couple of months ago, when Paul Krugman took to Rolling Stone in defense of President Obama, he outlined the three most important components of Dodd/Frank:

First, the law gives a special council the ability to designate ''systemically important financial institutions'' (SIFIs) – that is, institutions that could create a crisis if they were to fail – and place such institutions under extra scrutiny and regulation of things like the amount of capital they are required to maintain to cover possible losses...

Another key provision in Dodd-Frank is ''orderly liquidation authority,'' which gives the government the legal right to seize complex financial institutions in a crisis...

A third piece of Dodd-Frank is the Consumer Financial Protection Bureau. That's Elizabeth Warren's brainchild, an agency dedicated to protecting Americans against the predatory lending that has pushed so many into financial distress, and played an important role in the crisis.

So, what was the provision that cromnibus gutted? Here's how Michael Greenberger explained it at Mother Jones:

This provision guts the so-called push-out rule created by the 2010 Dodd-Frank financial reform act. This rule forbids banks from trading certain derivatives—complicated financial instruments with values derived from underlying variables, such as crop prices or interest rates. Instead, banks would have to shift these high-risk trades into separate nonbank affiliates that aren't insured by the Federal Deposit Insurance Corporation (FDIC) and are less likely to receive taxpayer bailouts. If the Citi-written measure becomes law, the largest FDIC-insured banks in the country will be able to make a wider range of these risky trades.

Now, don't get me wrong. Republicans threw this into the spending bill as a very ugly poison pill that was sure to rankle a lot of Democrats. Rightly so. But my point is that it DOES NOT gut the most important provisions of Dodd/Frank.

My suspicion is that Republican leadership threw it in knowing that progressive Democrats would react by joining with tea partiers to try to kill the bill. What John Boehner wanted all along was to watch this bill go down in flames and pass his alternative - a three month continuing resolution that would provide us with a series of government shutdown standoffs next year when all of Congress is controlled by Republicans. They had much more than the gutting of this one part of Wall Street reform in mind. That's why the White House lobbied for passage of a 12-month spending bill - even though they publicly denounced this part of it.

UPDATE: I just learned that the "push-out" rule that is eliminated in the cromnibus was the brainchild of former Senator Blanche Lincoln. So excuse me if I'm a little skeptical about how important it is. Apparently it doesn't affect  all derivative swaps - not even most of them.

In brief, the Pushout required federally insured banks to move-“push out”-some swaps dealing activities to separate subsidiaries that do not have access to federal deposit insurance. This does not apply to all swaps, mind you. Not even to the bulk of them (interest rate swaps, many CDS). But just to commodity derivatives (other than gold), equity derivatives, and un-cleared CDS.