Re: DERIVATIVES REFORM SUFFERS A MIDNIGHT MANGLING

On Jun 25, 1:07�pm, Riaz Tayob <riaz.ta...@gmail.com> wrote:

"DERIVATIVES REFORM SUFFERS A MIDNIGHT MANGLING Submitted by Mary
Bottari on June 25, 2010 - 11:58

The last day was a long one in the House-Senate conference committee
on financial reform. The conferees had been at it since 9:00 a.m.
and were rumpled and weary. Big bank lobbyists packed the conference
room and trailed out into the hallways. As the clocked ticked into
the wee hours, the chances for meaningful financial reform dimmed.
At issue was the strong and controversial crack-down on derivatives
trading authored by Senate Agriculture Committee Chair Blanche
Lincoln (D-Ark).

TAXPAYER STILL BACK RECKLESS WALL STREET TRADING

At about midnight, House Agriculture Chairman U.S. Representative
Collin Peterson (D-Minn.) offered an amendment to the Lincoln
provision to require big banks to spin off (or push out) their
derivatives desks into a separately capitalized affiliate. The
Lincoln measure was geared toward ending taxpayer supports (FDIC
insurance, Federal Reserve monies) for Wall Street gambling.

Under the Peterson language, the push-out provision was gutted.
Some categories of trading were pushed out: including commodities
(other than gold), equities, junk rated credit default swaps. The
vast majority of OTC derivatives (approximately 90% were not pushed
out.) These include interest rates swaps, foreign exchange trades,
investment grade credit default swaps, gold.

This means that at the end of the day, taxpayers are still on the
hook for the Wall Street casino. Taxpayers will be incensed to
discover this the next time these trades go bad and blow up a "too
big to fail" institution. The New Dem coalition and the New York
delegation who pushed for this hatchet job must be held accountable
in November.

However, a great deal of progress was made to bring derivatives out
of the shadows and into the light of day. The fact that most
derivatives trades will be cleared and exchange traded with capital
requiremen, and will bring real transparency to the marketplace for
the first time. These measures will make it much costlier to engage
in speculation, plus regulators now have the tools to crack down
on speculation. CFTC Chairman Gary Gensler, who had been critical
of oil and gas speculation, now has the tools to pop these speculative
bubbles when they occur.

FRANK FAILED TO PROTECT LOCALITIES

Lincoln also lost her battle to protect state and local government
from bad swaps deals by applying a fiduciary responsibility to swaps
dealers who sell to localities and other government entities.
Activist have identified at least 71 localities who were sold
sophisticated swaps. House Finance Committee Chair Barney Frank
succeeded in gutting this provision and watering it down to a "code
of conduct" requirement leaving states and localities more vulnerable
to the Wall Street con.

BROWN WINS LOOPHOLE IN VOLCKER RULE

The Volcker Rule also took a big hit. The rule bans "proprietary
trading" or trading for the bank's own account rather than for
customers. The committee passed a strengthened Volcker rule by
including the language prepared by Senators Merkley and Levin. The
advantage of Merkley-Levin is that it covers more types of proprietary
trading than the original rule proposed by the administration.

However, conferees blew a hole in the proprietary trading ban at
the request of Senator Scott Brown (R-Mass.), whose vote may be
needed in the Senate to pass the bill. The amendment allows banks
to invest in hedge funds and private equity funds. The rule allows
them to invest 3% of their private equity capital. This sounds like
a small number, but this money can be hugely leveraged. So, for
instance, Bear Stearns put $40 million into a hedge fund during the
heyday of the housing bubble, and had to pony up $3.2 billion when
that investment backfired in 2007 -- literally 80 times what they
put into it.

This may be one of the worst provisions in the bill, and Brown was
aided by the New Dem coalition in his fight to deliver this loophole
to Wall Street.

FUTURE FIGHTS

The lack of progress on separating the taxpayer guarantee from the
big bank derivatives trade leaves taxpayers on the hook for a future
derivatives crisis. When these crises inevitably occur, they will
give new fuel to measures such as that offered by Senators Sherrod
Brown (D-Ohio) and Ted Kaufman (D-Del.) to shrink the size of "too
big to fail" institutions so that taxpayers will not have to go
down with the Wall Street titans."

http://www.banksterusa.org/content/derivatives-reform-suffers-midnigh...
nghttp://snipurl.com/xvzdc

-- ''''''''.'''''''''

__._,_.___ Reply to
sender<mailto:riaz.ta...@gmail.com?subject=Thanks%20for%20the%20money%20and%2
0I%20will%20have%20some%20more%20later....%20derivatives%20
%20rock%20USA> | Reply to
group<mailto:toesl...@yahoogroups.com?subject=Thanks%20for%20the%20money%20an
d%20I%20will%20have%20some%20more%20later....%20derivatives%20
%20rock%20 USA> | Reply via web
post<http://groups.yahoo.com/group/toeslist/post;_ylc=X3oDMTJxNGZ2NnJiBF9TAzk
3MzU5NzE0BGdycElkAzIxNTc3MDcEZ3Jwc3BJZAMxNzA1MDgzNDY5BG1zZ0lkAzIwNTQxBHNlYwNm
dHIEc2xrA3JwbHkEc3RpbWUDMTI3NzQ5MTQ5Nw--?act=reply&messageNum=20541>
| Start a New
Topic<http://groups.yahoo.com/group/toeslist/post;_ylc=X3oDMTJlN2I4cXQ3BF9TAz
k3MzU5NzE0BGdycElkAzIxNTc3MDcEZ3Jwc3BJZAMxNzA1MDgzNDY5BHNlYwNmdHIEc2xrA250cGM
Ec3RpbWUDMTI3NzQ5MTQ5Nw--> Messages in this
topic<http://groups.yahoo.com/group/toeslist/message/20541;_ylc=X3oDMTM2NGcwM
3ZnBF9TAzk3MzU5NzE0BGdycElkAzIxNTc3MDcEZ3Jwc3BJZAMxNzA1MDgzNDY5BG1zZ0lkAzIwNT
QxBHNlYwNmdHIEc2xrA3Z0cGMEc3RpbWUDMTI3NzQ5MTQ5NwR0cGNJZAMyMDU0MQ-->
(1) Recent Activity:

Visit Your
Group<http://groups.yahoo.com/group/toeslist;_ylc=X3oDMTJlbTU0NzlzBF9TAzk3MzU
5NzE0BGdycElkAzIxNTc3MDcEZ3Jwc3BJZAMxNzA1MDgzNDY5BHNlYwN2dGwEc2xrA3ZnaHAEc3Rp
bWUDMTI3NzQ5MTQ5Nw--> MARKETPLACE

Stay on top of your group activity without leaving the page you're
on - Get the Yahoo! Toolbar
now.<http://us.ard.yahoo.com/SIG=15ojhari8/M=493064.13983314.14041046.1329843
0/D=groups/S=1705083469:MKP1/Y=YAHOO/EXP=1277498697/L=c0d84266-8089-11df-bfd3
-87360b29046d/B=nkZkgWKJiVs-/J=1277491497857634/K=s9pXpsOloEHdssElmg9rcA/A=60
60255/R=0/SIG=1194m4keh/*http://us.toolbar.yahoo.com/?.cpdl=grpj>

________________________________

Get great advice about dogs and cats. Visit the Dog & Cat Answers
Center.<http://us.ard.yahoo.com/SIG=15odck75v/M=493064.13814537.14041040.1083
5568/D=groups/S=1705083469:MKP1/Y=YAHOO/EXP=1277498697/L=c0d84266-8089-11df-b
fd3-87360b29046d/B=n0ZkgWKJiVs-/J=1277491497857634/K=s9pXpsOloEHdssElmg9rcA/A
=6078812/R=0/SIG=114ae4ln1/*http://dogandcatanswers.yahoo.com/>

________________________________

Hobbies & Activities Zone: Find others who share your passions!
Explore new
interests.<http://us.ard.yahoo.com/SIG=15ol595kb/M=493064.14012770.13963757.1
3298430/D=groups/S=1705083469:MKP1/Y=YAHOO/EXP=1277498697/L=c0d84266-8089-11d
f-bfd3-87360b29046d/B=oEZkgWKJiVs-/J=1277491497857634/K=s9pXpsOloEHdssElmg9rc
A/A=6015306/R=0/SIG=11vlkvigg/*http://advision.webevents.yahoo.com/hobbiesand
activitieszone/>

[http://l.yimg.com/a/i/us/yg/logo/us.gif]<http://groups.yahoo.com/;_ylc=X3oDM
TJkcmU0NzZzBF9TAzk3NDc2NTkwBGdycElkAzIxNTc3MDcEZ3Jwc3BJZAMxNzA1MDgzNDY5BHNlYw
NmdHIEc2xrA2dmcARzdGltZQMxMjc3NDkxNDk3> Switch to:

Text-Only<mailto:toeslist-traditio...@yahoogroups.com?subject=Change%20Delive
ry%20Format:%20Traditional>, Daily
Digest<mailto:toeslist-dig...@yahoogroups.com?subject=Email%20Delivery:%20Dig
est>
Unsubscribe<mailto:toeslist-unsubscr...@yahoogroups.com?subject=Unsubscribe>
Terms of Use<http://docs.yahoo.com/info/terms/>
.

__,_._,___