In The Beginning………

Daily Agitator

In the beginning there was a massive amount of anger leveled at the Wall Street banks that took the US to the brink of collapse……..so much anger that the Congress set about to stop the gambling on the taxpayer’s dime…..regulation and oversight was the call of the day…..it showed promise….it showed that the Congress got the idea and started acting on behalf of the people……that was in the beginning….now it is something way less than the original intent…..

When the Senate bank reform legislation passed in May, Senate Majority Leader Harry Reid (D-Nevada) said it sent the message to Wall Street that they can no longer “recklessly gamble away other people’s money.” The bill told Main Street, “you no longer have to fear that your savings, your retirement or your home are at the mercy of greedy gamblers in big banks. And it says to them, ‘never again will you be asked to bail out those big banks when they lose their risky bets,’ “

The bill the Senate passed did protect the taxpayers from reckless gambling by the big banks, largely due to the last-minute inclusion of strong derivatives reforms authored by Senator Blanche Lincoln (D-Arkansas). So why is it that Senate and House leadership are now busy behind these scenes trying to kill the best provisions in their own banking reform legislation?

Behind the scenes, Senate Banking Chair Chris Dodd (D-Connecticut) and House Financial Services Chair Barney Frank (D-Massachusetts) have made it clear they are not fans of Lincoln’s proposal. Neither is the U.S. Treasury Department. Treasury official Michael Barr has been running around telling anyone who will listen that these derivatives rules were not part of the administration’s four “core objectives” for financial reform.

But opponents of strong derivatives reform have a big problem. They can’t just yank it out of the bill with an outcry from consumer advocates and reform groups like Americans for Financial Reform, who have been working hard on the issue. So they have cooked up a new scheme. They will replace the Lincoln language with the strengthened version of the Volcker Rule offered (but never voted on) by Senators Merkley (D- Oregon) and Levin (D-Michigan). They want to convince everyone that a strengthened Volcker Rule takes care of all the issues raised by Lincoln.

In case you are not sure what the Volcker rule is…let me help….The Volcker Rule deals importantly, but narrowly, with derivatives trading for a bank’s own account. This is called “propriety trading,” and banks would be barred from trading any financial instrument (mortgage-backed securities and stocks, as well as derivatives) for their own as opposed to a customer’s account. Merkley-Levin would make this reform a statutory ban rather than leaving it to the discretion of regulators and would further crack down on Goldman-style conflict of interest trading. But big banks would still be allowed to deal and trade on behalf of their clients and their derivatives business would still be backed by the taxpayer guarantee.

Watch the slight of hand by the Congress…the bill that is the final version will be far from the regulation needed to prevent the economy from collapsing again….with the Congress being paid by the banks to water any reform down….we can look ahead ten years or so and see all this economic woes occurring again…….Politicians need to think about that when they are so concerned about our children’s future…….

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16 thoughts on “In The Beginning………

  1. When you say trade on behalf of the clients, does that mean individual clients with their own money? If so, I don’t see the problem???

    1. Basically I am speaking of the derivatives that banks and hedge funds gamble with and use the money of others…..and when it fails they get more money from others to cover their butts…..

      1. Yes, I know. But if they only trade with the money of those who have asked them to do so, why does that matter? Or is that not what is meant by the “narrow” definition you refer to?

      2. That be the wrong word in this case…….some of the derivatives were not ask to be traded by anyone other than the leadership of the company and as long as all went well the investors looked the other way…of course when they started bottoming out everyone got nervous……

      3. IF (I repeat, IF) Merkley-Levin does anything close to what is says on the packet, then I’d say it is exactly as far as I’d want to go if I were an American.

        I don’t give damn if these people gamble all day and all night – I’d simply like to see a system that prevents them from doing it with normal banking money that belongs to the average Joe. Banks should concentrate on banking – if they have clients who want them to help them to gamble then that’s absolutely fine by me – so long as they’re doing it with their own money and not with mine!

        When they lose, they can go find a building to jump off, but they wouldn’t get a dime willingly given to help them from me, that’s for sure.

        If banks can’t, or won’t, toe that line then take them all into public ownership for peanuts, clean them up and then sell them on at a profit to decent folk

      4. Have to agree…..as long as they are using retirement funds and mortgage backed securities to gamble with…they need to be whacked on the pee-pee…..

      5. Like I have said if I am gambling with my money and I lose…I am an idiot….but if someone is doing it without my specific instructions they are stealing…..

        Rhubarb?

      6. Yeah, I’ve been there a couple of times, but I have been sort of ignoring it? Maybe I should take a look around more often… thinking… maybe… 🙂

      7. I kinda feel like it is sorta a pain in the ass….I like it because I get short blips on politics and then I do more research…..

      8. Great news today! I have to deal with local bureaucracy and there is a tropical low forming south of Haiti and projected to make it into the Gulf……..shit!

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