A Finance Overhaul Fight Draws a Swarm of Lobbyists

[TomCADem]

Source: NY Times

Assessing the battle to overhaul the nation’s financial regulations recently, Jamie Dimon, the chief executive of JPMorgan Chase, left no doubt about the consequences if Congress cracked down on his bank’s immense business in derivatives, Edward Wyatt and Eric Lichtblau report in The New York Times.

“It will be negative,” he said. “Depending on the real detail, it could be $700 million or a couple billion dollars.”

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The derivatives bill, which is expected to be folded into the sweeping overhaul of the nation’s banking system, would also require most derivatives trades to be routed through a third party, known as a clearing agent. That would provide each of the parties a guarantee that they would be paid if the other party defaulted or went out of business. The bill would also require most derivatives to be traded on an open exchange.

Currently, the only way to trade many derivatives is to call up various dealers and ask for the price at which they are willing to buy or sell. The securities dealer profits from the difference between the prices at which it buys from one party and sells to another. Investors rarely, if ever, see details on the other side of the trade. Wall Street has signaled that it can live with a clearinghouse approach, but it is strongly opposed to exchange trading of derivatives, which would introduce price competition and lower the profits.



Read more: http://dealbook.blogs.nytimes.com/2010/04/20/a-finance-overhaul-fight-draws-a-swarm-of-lobbyists/?src=busln

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Here is the reason why McConnell has been leading the fight to stall and delay the financial reform bill with demands that everyone start over. Its not the non-existent bailout. Its derivatives.

[nyy1998]

1. I want this battle

I cannot figure out a viable strategy for the Republicans to win on this issue. Everyone knows McConnell is full of **** on this issue and the Democrats have a huge advantage. All Dodd and Reid is offer something to the lowest bidder(aka Collins, Corker, Shelby, or Snowe)and we get a great bill.

It's a great bill because it's good policy and it's good politics. I think this by itself will really give the Dems a boost in the polls.