NYT Editorial: Blanche Lincoln's bill wouldn't ban the Goldman Sachs deal being investigated by SEC

[flpoljunkie]

More loopholes that allow big banks to continuing their reckless and lucrative gambling casinos!)

April 22, 2010
EDITORIAL

After Goldman

After the government sued Goldman Sachs for fraud, a lot of politicians vowed to finally clean up the system. In an important committee vote on Wednesday, 13 senators — including one Republican for a refreshing change — approved a measure that would go a long way toward regulating derivatives, the complex instruments at the heart of the bubble, the bust, the bailouts and the Goldman case.

It is still not tough enough to avoid another catastrophe. While the bill rightly calls for most derivatives deals — currently private contracts — to be traded on regulated exchanges, it has too many loopholes. And it doesn’t ban the sort of excessive speculation that characterized the Goldman deal.

What all those proposals don’t address is whether the type of derivative Goldman was selling should even be allowed to exist. The Goldman deal was nothing more than a bet on the mortgage market, in which one side was destined to win and the other to lose, without “investing” anything in the real economy. The C.D.O. did not hold actual mortgage-related bonds, but rather allowed the participants to stake a position on whether bonds owned by others would perform well, or tank. And that helped to further inflate the housing bubble.

That is not investing. It is gambling, and it is abusive. It has no place in banks that can bring down the system if they fail.

Yet none of the pending reform bills would ban abusive derivatives. Instead, regulators would be limited to gathering information about potential abuses and reporting their concerns to Congress.

http://www.nytimes.com/2010/04/22/opinion/22thu1.html?ref=opinion

[joeybee12]

1. the same Blanche Lincoln who had a fund-raiser scheduled with Goldman Sachs this week?

Until she was shamed into canceling it?

She's a disgrace.