Joe Oliver, Minister of Finance of Canada, during a session at the Annual Meeting 2015 of the World Economic Forum in Davos, January 21, 2015. (Photo: World Economic Forum/Benedikt von Loebell)In her attacks on Obama’s pending trade deals, Elizabeth Warren has argued that could undermine US financial regulations like Dodd Frank. The Administration has taken to trying to dismiss Warren as not knowing what she was talking about. More skillful defenders of the traitorous trade deals took the tact of saying that Warren could in theory be right, but the odds of her fears playing out were so remote as to not be worth worrying about.

In a long, careful article in The Nation, George Zornick explains even with the limited information that we have now about the contents of proposed treaties like the TPP and its ugly European step-sister, the TTIP, Warren’s worries are valid. For instance:

Like with TPP, we don’t know all the details of TTIP yet, but advocates have many fears. One is that the Federal Reserve’s plan to impose separate liquidity requirements on foreign banks might be scotched… And it’s not just Dodd-Frank: the leaked EU proposal for TTIP has a provision that new regulations first be “analyzed” to determine if they have an unacceptable impact on trade. Americans for Financial Reform (AFR) worries that this could “impose a presumption that regulations must be judged on the basis of their trade impact rather than their effectiveness as public interest policies promoting financial stability.”

Keep in mind that by design, a substantial portion of Dodd Frank implementation was kicked down the road to allow lobbyists to have a second go at weakening it, with studies required before rules would be written. Significant portions of rulemaking have yet to be completed and would appear to be subject to the TTIP analysis requirement, giving the banking industry yet another change to gut legislation.

But an example of Warren’s concerns came out of left field, as reported by the Wall Street Journal:

A US rule that prohibits banks from taking risky bets with their own money violates the North American Free-Trade Agreement because it bans US banks from trading triple-A-rated Canadian government debt, Canada’s finance minister said Wednesday… Canadian concerns about the Volcker rule’s treatment of sovereign debt aren’t new. In 2012, Canada joined European countries and Japan in raising concerns about the law’s reach.. Mr. [Joe] Oliver noted that the Volcker rule reflects concerns about the credit standing of some foreign securities. That concern doesn’t apply to Canada, he said, because Canada’s credit rating is better than the US government and US municipalities… “I believe – with strong legal basis – that this rule violates the terms of the Nafta agreement,” Mr. Oliver told a securities industry audience in New York that included the US ambassador to Canada, Bruce Heyman. “I hope the United States administration sees that changing the Volcker rule is in its own best interests and that of its biggest trading partner.”

Pretending that the only risk of holding foreign securities is credit risk is disingenuous. Foreign bond investors are also subject to currency and interest rate risks. Needless to say, the Treasury Department disagreed firmly with Oliver’s view.

One has to wonder, given that Canada has been unhappy about how the Volcker Rule applied to Canadian government debt since 2012, why the Nafta argument was hauled out at this juncture. Has the negotiation of the TPP led Canada to look at trade treaties more seriously as a way to get its way? Regardless, the fact that Canada thinks it has a strong case for having its bonds exempted from the Volcker Rule looks to be a harbinger of the creative ways these pending, toxic trade deals could be deployed, given their far more sweeping provisions.