One of the nation’s leading banks wants Congress to amend federal law adopted in the wake of the 2008 financial crisis so it and other Wall Street institutions can go back to gambling with risky investments and have taxpayers cover the losses again if they bet wrong.

Under the Dodd-Frank Act of 2010 (pdf), banks can no longer use monies backed by the Federal Deposit Insurance Corporation (FDIC) to invest in high-risk derivatives, such as “swaps.” This prohibition was adopted because derivatives crippled numerous key players on Wall Street five years ago, including Countrywide Mortgages, Bear Stearns, AIG, Lehman Brothers, Washington Mutual, Wachovia and others.

One of those “others” was Citigroup, which had to be bailed out by the federal government to the tune of $45 billion. A Citigroup lobbyist, though, was primarily responsible for authoring the Swaps Regulatory Improvement Act, which was approved by the U.S. House of Representatives two weeks ago.

The bill would wipe out Section 716 (pdf) of Dodd-Frank that requires banks to use a non-bank entity for trading commodity, energy and other swaps. In other words, if the legislation becomes law, financial institutions could return to conducting high-risk trading with funds that are backed by the FDIC (i.e. the taxpayer).

Dennis Anderson, who’s running for Congress from Illinois, says “to propose an easing of the controls on such behavior is irresponsible.”

“The behavior of these large banks and financial institutions cost all of us in loss of value in our retirement accounts, in lowered property values and, most importantly, in the general and deep recession that followed the failure of their gambling,” Anderson wrote at Daily Kos. “The idea of ‘too big to fail’ is still with us, and has grown even more threatening as these institutions have continued to grow.”

Citigroup was responsible for recommendations made in 70 lines of the 85-line bill, according to Eric Lipton and Ben Protess of The New York Times. In fact, reported the writers, a couple key paragraphs in the bill had been copied word for word from Citigroup’s submitted draft, which it had developed in conjunction with other Wall Street banks.

The legislation cleared the House on a 292-122 vote that saw 70 Democrats join all but three Republicans. Republicans voting against the measure were Representatives John Duncan of Tennessee, Walter Jones of North Carolina and Thomas Massie of Kentucky.

One of the Democrats supporting the change was Representative Carolyn Maloney of New York, the second-ranking Democrat on the House Financial Services Committee. She told The Hill that the bill would “protect safety and soundness,” per Federal Reserve Chairman Ben Bernanke.

“Even Federal Reserve Chairman Ben Bernanke opposed Section 716 as written, stating that the way it forces these activities out of insured depository institutions ‘would weaken both the financial stability and strong regulation of the derivatives activities,’” she said.

Bernanke has supported certain changes to the law, but never backed the Citigroup bill, according to the Times.

The White House said it opposes the bill, noting that the law is still being implemented by regulators. Legislation to amend it is “premature and could be disruptive and harmful to the implementation of these reforms,” it added.

Only about 40% of the rules required by the law have been implemented to date. Whether the Citigroup bill passes or not, such attempted legislation has “a chilling effect on regulators,” according to the Times.

“After inflicting so much pain and suffering on the American people, now is not the time to let the largest banks back into the casino,” Representative Maxine Waters (D-California) said in a statement.

Why are so many other Democrats supporting a bill that the Obama administration opposes? House aides interviewed by the Times theorized that “Republicans have enough votes to pass it themselves, so vulnerable House Democrats might as well join them, and collect industry money for their campaigns,” wrote Lipton and Protess.

Indeed, lawmakers who currently support bills advocated by big banks have, this month, received double the amount of donations from Wall Street firms as those who opposed such bills, according to MapLight, a nonprofit group that analyzes campaign financial records.

Additionally, Wall Street has, in the past few weeks, hosted special fundraisers for the bills’ co-sponsors.

A Democrat who supports the industry bills and is a top cash recipient of Wall Street—Representative Jim Himes of Connecticut, who was once a Goldman Sachs banker—confessed that the “system” has “problems.” “It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption,” he told the Times. “It’s unfortunately the world we live in.”

-Noel Brinkerhoff, Danny Biederman

To Learn More:

Heard about the Swaps Regulatory Improvement Act (H.R.992 - 113th Congress)? (by Dennis Anderson, Daily Kos)

House Votes for Bipartisan Change to Dodd-Frank on Bank Swaps (by Pete Kasperowicz, The Hill)

House, Set to Vote on 2 Bills, Is Seen as an Ally of Wall St. (by Eric Lipton and Ben Protess, New York Times)

Banks’ Lobbyists Help in Drafting Financial Bills (by Eric Lipton and Ben Protess, New York Times)