Reply #19: How ‘Hard to Fathom’ Derivatives Rule Emerged in U.S. Senate

[Demeter]

http://www.businessweek.com/news/2010-05-06/how-hard-to...

Of all the new rules for Wall Street being considered by Congress, few have the potential impact of a derivatives plan that emerged from nowhere and, to the surprise of its authors, has so far survived the debate.

The provision in the U.S. Senate’s regulatory overhaul bill would require Goldman Sachs Group Inc., JPMorgan Chase & Co. and about a dozen other lenders that dominate the $605 trillion over-the-counter derivatives market to wall off swaps trading from their commercial banking operations.

The firms argue that the rule would disrupt the economy and make it difficult for them to continue in the business. Others expressing opposition include Federal Reserve Chairman Ben S. Bernanke, Treasury Secretary Timothy Geithner, and senators from both parties including Banking Committee Chairman Christopher Dodd, author of the overall bill. Still, in a sign of the toxic political climate facing banks, Democrats and administration officials have been reluctant to cut it from the legislation.

Regulators “have come out in a really unusual way and said, and I’m paraphrasing here, that this is a really, really stupid idea,” Senator Judd Gregg, a New Hampshire Republican, said in a recent floor speech. “Where this idea came from is hard to fathom because on the face it makes absolutely no sense. Yet for some reason it has found its way into this bill.”...

PLEASE IGNORE JUDD GREGG--ALL THE SMART PEOPLE DO. JUST DON'T TURN YOUR BACK ON HIM....