We know the Fed likes to rescue foreign banks – those AIG 100% payoffs rather that market based 80% payoffs were forced on AIG so as to not harm foreign banks (and not harm Goldman and a few other friends of Obama US banks). Now Foreign banks are acting like they have been told that the Dodd-Frank rules when issued will have loopholes for foreign banks is they are properly structured, so they can avoid the rules meant to prevent future taxpayer rescues, but then still get rescued by the US Fed in case they get in trouble..

Deutsche Bank last month altered the legal structure of its U.S. operations so that it’s no longer officially a “bank-holding” company, despited holding in the US over $350 billion in assets and having over 8,500 U.S. employees, and Deutsche thinks the new regulations will say this move will mean it can have less capital than its American rivals. Heck, the regulations version of the Volker Rule that in theory bars banks from making risky trades and investing in hedge funds, while still applying to Deutsche, may well get changed so as to be special rules for them. But do not worry about Deutsche ‘s US rescue costing the Germans anything, because Deutsche has had the smarts to have a U.S. subsidiary that will be able to borrow from the Fed when it gets into trouble, For Deutsche, the new game may be the same as the old game before financial reform, a game of taking maximum risk and knowing the Fed will be there to help in case of problems – a repeat of the 2008/2009 financial crisis when the Fed was forced to extended billions of dollars in cheap loans to Deutsche and other foreign banks in order to stave off a worsening of the credit crunch.

And British bank Barclays, which bought the U.S. investment banking operations of Lehman Brothers in the Fed fire sale, is making the same legal moves in hope of having weaker U.S. capital requirements than US Banks.

Still, not holding capital in the US may be just a play to get around any new EU regulation, since avoiding Dodd-Frank US capital holding requirements does not affect the rules that state that the overall capital (total of held in EU and in US) of the foreign banks must a given amount to cover the total of bad loans and other losses in the EU and the US. Avoiding Dodd-Frank would however allow banks like Deutsche to use their draw on the ECB and hold that capital in the EU, and for Deutche, to not be required to raise the $20 billion now needed in the US – BUT do you really believe the ECB in a crisis will allow the US to demand that Deutsche move $20 billion out of Europe and into the US?

Barney Frank knew about this game and put in the law that the Fed could impose capital requirements on foreign banks even if they are not U.S. bank holding companies. Financial firms deemed “systemically important,” meaning their failure could cause problems for other banks, would have to hold more capital in the U.S. whether they are classified as a bank or not.

But such rules are not automatic and Obama would need have the Fed approve such rules. The foreign banks are acting like they know they own Treasury, the Fed and Obama – I wonder how big the campaign contributions were that was the “business expense” that brought the foreign banks such influence, if those banks have the influence that they seem to think that they do.

Meanwhile I would not hold my breathe waiting for Obama to have a Foreign Financial Firms Systemically Important List published any time soon, or only letting go and breathing again when Deutche is force to raise that $20 billion for US capital. Waiting for Obama to do the right thing seems to be a no-win game.