Will We Curb Wall Street's Casino?

[Joanne98]

Even as the health insurance companies draw down on health care reform, another showdown is just beginning in Washington. On Wednesday, the House Financial Services Committee will begin marking up the first legislation to try to curb Wall Street's casino. And if you think the health insurance companies are packing heat, wait till you see the firepower the banks will unleash to frustrate reform.

The Committee will focus on two core reform measures. The first, the regulation of derivatives, goes to the heart of the current collapse. Derivatives are the exotic instruments that Warren Buffett warned were "weapons of financial mass destruction." Derivatives have been traded with little regulation, over the counter, in private deals. This allowed companies like AIG essentially to open a casino on top of an insurance company, and take bets without the prudence required of a Las Vegas bookie. When AIG went belly up and threatened to bring down the entire financial house of cards, taxpayers ended up with a bill totaling over $180 billion and counting.

The reforms call for standardizing derivatives, trading them on a public exchange, with transparency, so prices can be compared and holdings regulated. Common sense, one would think. (for a good summary, see the estimable Harold Meyerson's piece)

But the five largest American banks -- in rough order of declining solvency: Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America and Citigroup -- hold fully 95% of derivatives -- with a notional value of over $290 trillion. In the first six months of the year, they made about $15 billion trading in these things. Not surprisingly, they have leveled their guns at the very notion of a public exchange. They enlisted companies that use derivatives to hedge against foreign exchange risks and the like, arguing that the reforms would raise costs all around. They have largely succeeded in the congressional cloakrooms.

So the bill that the House will consider on Wednesday creates a clearinghouse, not a publicly managed exchange. It also allows banks to decide that a deal is so unique that it needn't be posted on the clearinghouse. The best experts in the field -- like Michael Greenberger of the University of Maryland -- warn that the legislation might end up WEAKENING current law. That is no small achievement, because, as we saw in the collapse of AIG, current law is toothless.

The second basic reform to be considered is a Consumer Protection Finance Agency to protect consumers from getting gouged or defrauded by lenders on the whole range of consumer loans -- mortgages, car loans, payday lending, credit cards. The regulators who currently have some police power failed to use it before the crash -- as exemplified by the systematic fraud practiced in peddling complex subprime mortgages to people who could not hope to pay them back. And after claiming to be born again cops on the beat, the same regulators have failed to do much since the crash -- as exemplified by the record fees banks are exacting from depositors, or by hiking interest rates on credit card holders. The reasons for their failure are both ideological -- the abiding conservative belief that markets are self-regulating and regulation is costly, and institutional -- the regulators' first duty is to insure the health of the banks. If the banks are getting healthy by gouging their customers, the regulators turn their heads.

So the CPFA is designed to create an independent cop on the beat to protect consumers and police the banks and credit card companies. Needless to say, the banks don't like this idea. Already they've succeeded in delaying and diluting the administration's proposal. The current draft strips out the mandate that banks offer customers "plain vanilla" alternatives -- a clean 30 year, fixed rate mortgage, for example, when peddling exotic ARMS with balloon payments. Worse, it now suggests vesting enforcement power in a council of the very same regulators that have failed so miserably in the past and present.

But that's not all. The banking lobby is nothing if not shameless. They hope to use the reforms to WEAKEN current law. They are pushing to make the federal standard the ceiling on reform, stripping the power of states to have higher standards. Basically, they are hoping to find a way to shut down the independent investigations of state attorneys general like New York's Eliot Spitzer and Andrew Cuomo or Illinois' Lisa Madigan. (for a good summary of this see Dave Johnson's blog here)

How do the banks fend off needed reform? Follow the money. A recent report by Paul Blumenthal of the Sunlight Foundation shows that the 27 members of the House Financial Services Committee have received over one-fourth of their contributions from the FIRE (Finance, insurance and real estate sector). Ranking Republican Spencer Baucus from Alabama opposes the CFPA, arguing that we don't need "more regulation," we just need "smart regulation." He received a staggering 71% of his contributions from the finance sector over the first six months of this year (and 45% of his total contributions over his career). Democrat Melissa Bean who leads the effort to gut state regulatory authority over the banks has received fully 42% of her contributions for the first six months from the banking sector. Not surprisingly, the champions of reform like Rep. Alan Grayson, Maxine Waters, Keith Ellison, Adam Putman, and Carolyn McCarthy all pull in the lowest percentage from the sector.

Historically, the banks, as Senator Dick Durbin decried in disgust, "own the place." And they've succeeded thus far in frustrating reform, even while pocketing literally hundreds of billions in support from taxpayers.



Read more at: http://www.huffingtonpost.com/robert-l-borosage/will-we-curb-wall-streets_b_320549.html

[debbierlus]

1. Not with Bernacke & Geithner in the cabinet

[Craftsman]

2. Neither party will even try

Some my pay lib service to it but both sides of the isle get to many checks from them.

[cliffordu]

3. Nope. Not until the bodies of speculators are burning in the streets.

[tomm2thumbs]

4. I guess we have our answer today -'irrational exuberance'

[midnight]

5. Good piece of info. The police of this industry need teeth.....

No more dentures...

[jgraz]

6. We need to make it clear that we will not be conned this time

I used to work in the derivatives market, and they are *explicit* about the fact that they can get away with murder (almost literally) because no one understands what they do.

This time, more people need to do their homework, read Obama's financial "reform" proposal and raise holy hell. If the public shows that they see through the con, we have a much better chance of reforming the system.


Or... we could just chuck this immoral system completely in favor of real, egalitarian economic reform. Either way works for me.

[flyarm]

7. answer no..this pres has surrounded himself with the big boys who rule all of us!n/t

[flyarm]

8. What we are seeing is a Financial Oligarchy ..run by a few with all the power over all of us.

What we are seeing is a Financial Oligarchy ..run by a few with all the power over all of us.

as i posted elsewhere today...from my journal:


What we are seeing is a Financial Oligarchy ..run by a few with all the power over all of us.
Posted by flyarm in Latest Breaking News
Mon Jul 20th 2009, 01:11 AM
Look who Obama has appointed to his Executive Branch...and their memberships to elite groups.



Timothy Geithner, Secretary of Treasury..former Pres of the Federal Reserve Bank
Bilderberg Group, Trilateral Commission, CFR

Ambassador to UN Susan Rice..Trilateral Commission

National Security Advisor, Gen James L. Jones: Bilderberg Group, Trilateral Comm, CFR

Deputy National Security Advisor, Thomas Donilon: CFR

Special State Dept Speical Envoy, Henry Kissinger: Bilderberg Group, Trilateral Commission, CFR

Chairman of Economic Recovery Committee, Paul Volcker: Bilderberg Group , Trilateral Comm., CFR

Larry Summers:

http://en.wikipedia.org/wiki/Lawrence_Summ ...


There are powers at work invested in marginalizing the truth tellers, they try to divide us and sub- divide us to take us into a financial Oligarchy..don't let them!

snip:
As Treasury Secretary, Summers led the Clinton Administration's opposition to tax cuts proposed by the Republican Congress in 1999. <10> Also during his stint in the Clinton Administration, Summers was successful in pushing for capital gains tax cuts. During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.<11> Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.<12>

Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said.<13> "This historic legislation will better enable American companies to compete in the new economy."<13> Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.<14>


snip:

National Economic Council
In 2009, he was tapped by President Obama to be the director of the White House National Economic Council<1><31>. He has emerged as a key economic decision-maker in the Obama administration, where he has attracted both praise and criticism. There has been friction between Summers and former Federal Reserve Chairman Paul Volcker, as Volcker has accused Summers of delaying the effort to organize a panel of outside economic advisers, and has cut Volcker out of White House meetings and has not shown interest in collaborating on policy solutions to the current economic crisis. <32> On the other hand, Obama himself was reportedly thrilled with the work Summers did in his first few weeks on the job. And Peter Orzag, andother top economic advisor, calls Summers "one of the world’s most brilliant economists." <33>

In January 2009, as the Obama Administration tried to pass an economic stimulus spending bill, Oregon Democratic Representative Peter DeFazio criticized Summers, saying that he thought that President Barack Obama is "ill-advised by Larry Summers. Larry Summers hates infrastructure." <34>. DeFazio, along with liberal economists including Paul Krugman and Joseph Stiglitz, has argued that more of the stimulus should be spent on infrastructure,<35> while Summers has supported tax cuts.

Summers has recently come under fire for accepting perks from Citigroup, including free rides on its corporate jet last summer.<36> According to the Wall Street Journal, Larry Summers called Chris Dodd asking him to remove caps on executive pay at firms which have received stimulus money, including Citigroup. <37>

On April 3, 2009 Summers came under renewed criticism after it was disclosed that he was paid millions of dollars the previous year by companies which he now has influence over as a public servant. He earned $5 million from the hedge fund D. E. Shaw, and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money.<38>

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

and From an April post of mine here at DU: and please, don't believe me click the link..it was in the CFR publication!!!!!!!!!!!!!

Remarks by National Security Adviser Jones at 45th Munich Conference on Security Policy

Published February 8, 2009
Speaker: James L. Jones


U.S. National Security Adviser Jones ( edit to add: new advisor hired by Obama!!!!) gave these remarks at the 45th Munich Conference on Security Policy at the Hotel Bayerischer Hof on February 8, 2009.

"Thank you for that wonderful tribute to Henry Kissinger yesterday. Congratulations. As the most recent National Security Advisor of the United States, I take my daily orders from Dr. Kissinger, filtered down through General Brent Scowcroft and Sandy Berger, who is also here. We have a chain of command in the National Security Council that exists today.


Source: http://www.cfr.org/publication/18515/remar ... ...

[katty]

9. no way, not with Ben, Tim and hanky panky paulson

[FiveGoodMen]

10. K&R