This is astounding. We have former Federal Reserve chair, Paul Volcker, attacking the derivatives reform bill currently in the Senate.
The provision of derivatives by commercial banks to their customers in the usual course of a banking relationship should not be prohibited.
Really? Why is it then only 5 banks, Goldman Sachs, JP Morgan Chase, Citigroup, Morgan Stanley and BoA are 90% of the derivatives market? Yeah right, that's really helping Joe Blow in his small manufacturing business in Ohio. Oh yeah, Joe Blow, running his $20 million dollar part business is really busy trading derivatives to hedge risk in a global market. Right, and he's also hedging to control his energy costs. Uh huh. Show me the numbers on that claim! Even more importantly, Joe Blow is an end user. There is no reason he, as a banking customer, has to trade derivatives with that bank.
FDIC chair Sheila Bair also came out blasting on stopping banks from gambling with customers and taxpayer money.
If all derivatives market-making activities were moved outside of bank holding companies, most of the activity would no doubt continue, but in less-regulated and more highly leveraged venues,” Bair wrote. “Even pushing the activity into a bank holding company affiliate would reduce the amount and quality of capital required to be held against this activity.”
Oh really? Just because derivatives would be out of the banks, no longer guaranteed by the U.S. taxpayer, means one cannot also pass the other reforms to regulate derivatives markets? Uh, right and banks cannot just become end users like any other business trying to hedge and that cannot magically go onto publicly exchanges?
Here's the truth of the situation. Bank lobbyists are swarming capital hill trying to stop derivatives reform. It's a $600 trillion dollar gambling casino.
Seemingly any real reforms to stop the Banksters from being 63% of GDP, to quit the mentality that financial innovation as some sort of legitimate product is considered Populist and therefore invalid. Thank you Washington, we always knew representing the people was somehow considered invalid.
Most derivatives aren't anything but smoke and mirrors. Legitimate hedges worked long before Glass-Steagall was dismantled and the CFMA was passed. Maybe, just maybe it might be a good idea to invest in the real U.S. economy, ya know that stuff which creates jobs and products instead of pouring money into nanosecond dominoes and placing bets on which way they all fall down.
The American people have already lost on financial reform. Stopping too big to fail failed as did the real Audit the Fed. This is the 3rd leg under attack by the Banksters with seemingly the Obama administration, including Paul Volcker, helping on that score.
Below is the Volcker letter and it's so out of character one must wonder if a gun was held to his head to write it.