financial reform

Derivative Reform Under Attack by Lobbyists

What a surprise. A non-bank coalition is trying to gut derivatives reform. Hold onto your iPhone, that's right, Apple is among them. Seems they don't want to put up real money to cover their bets. There is some speculation that this end users coalition has actually been orchestrated by the dealers, the mega banks themselves.

Here is what the Huffington Post says is the meat of the lobbying gut efforts. Unfortunately the actual letter is not available.

  • Deleting provisions in the current Senate bill, authored by Banking Committee Chairman Christopher Dodd (D-Conn.) and Agriculture Committee Chairman Blanche Lincoln (D-Ark.), that call for swaps dealers, like JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup, Morgan Stanley and Wells Fargo, to hold higher amounts of capital to support their derivatives bets;
  • Deleting a term defining major derivatives users, which calls for higher capital requirements and mandates that they clear their derivatives deals through transparent venues that require parties to post margin. By deleting this provision, the coalition wants to exempt an entire class of derivatives users from having to post cash upfront to support their bets.

Senate to Debate Financial Reform Bill

The GOP has removed their block against moving forward with Financial Reform.

The bill was reported to the floor Wednesday night and debate is set to begin on Thursday.

The real question is what compromised, watered down, ineffectual, lobbyist driven compromise was made? (as if the Dodd Bill itself wasn't swiss cheese).

Senate Republican Leader Mitch McConnell (Ky.) released a statement Wednesday afternoon touting “a key agreement” to resolve disagreements over a $50 billion fund to liquidate troubled banks.

As a result, there will not be any more votes on the Senate floor Wednesday and Democrats will not keep the chamber in session overnight.

Warren Buffett Denied by the Senate, GOP Stopped Current Bill

Update: The GOP managed to stop the current bill by a vote of 57. Back to "negotiations" it goes. "Democratic" Ben Nelson voted with the GOP.

Did you know Warren Derivatives are Weapons of Mass Destruction Buffett was lobbying Congress to exempt existing derivatives contracts from collateral requirements? Did you know that Brookshire Hathaway, Buffett's company, has a $63 billion derivatives portfolio?

Well, this is a first. Warren Buffett's lobbyists were denied a derivatives provision in the Senate bill, according to The Wall Street Journal.

$50 Billion "Too Big to Fail" Bail Out fund may be History in Financial Reform Bill

Looks like we might be seeing some movement to stop Too Big to Fail for real, or we might just see some politickin' instead. Bloomberg is reporting:

Senate Democrats likely will scrap a proposal for a $50 billion fund to wind down big failing companies in an effort to draw Republican support for financial- overhaul legislation being considered later this week.

Senators Susan Collins and Olympia Snowe, both Maine Republicans who are seen as potential supporters of the bill, told reporters yesterday they oppose the fund. Treasury Secretary Timothy Geithner told Collins that the Obama administration also is lukewarm to the idea.

Simon Johnson points to amendment to break up the "Too Big to Fail" Financial Institutions

Simon Johnson is pointing to the Kanjorski amendment as a way to break up the 6 large banks who pose systemic risks, right now.

This is to patch up the Dodd bill and gives an in to go ahead and break up the 6 big banks now.

The approach in the Dodd bill simply will not work.

There is still a feasible alternative, based on a different approach – that proposed by Representative Paul Kanjorski (chairman of the Capital Market Subcommittee of the House Financial Services Committee) and adopted as an amendment in the House bill.

Kansas City, Kansas City Here I Come - Fed President Hoenig Speech

The Kansas City Federal Reserve President, Thomas Hoenig, spoke truth to power in a speech to the U.S. Chamber of Commerce, titled The Financial Foundation for Main Street. This is how it starts out:

If we stray from our core principles of fairness or ignore the rule of law, we distort the playing field and inevitably cultivate a crisis. When the markets are no longer competitive, firms become a monopoly or an oligopoly and it matters more who you know than what you know.

Then, the economy loses its ability to innovate and succeed. When the market perceives an unfair advantage of some over others, the very foundation of the economic system is compromised.

Dodd Planning Vote on Financial Reform TODAY, Massive "Managers Amendment"

Reform Ramrod! If you can believe this, they are planning on voting on Dodd's bill at 5pm EST. Attached is Dodd's manager's amendment. So, this is being introduced, no time to read it and they are going to vote this bill out of committee, now.

This is bad, we know the bill already has gapping holes on derivatives, which are labeled the swiss cheese derivative reform. Yet there is no time to read this latest amendment, and clearly the bill is just being ramrodded out of committee with no debate.

While of course Republicans are out to make it much worse, even Tim Geithner (of all people), thinks this bill is ineffective and is demanding real financial reform instead of a watered down bill:

Dodd to release Senate Financial Reform Bill Monday, a few details now

Both the New York Times and the Wall Street Journal have been finding out details before the Senate Financial Reform bill is released.

Some key points these reporters mention:

  • CFPA - the much fought for Consumer Financial Protection Agency, has been put under the Federal Reserve. Bear in mind advocates have been fighting for an independent agency as well as the Federal Reserve has always had consumer protection power. Banksters - score 1, Americans - 0.
  • Federal Reserve to oversee banks with $50 billion or more, and a vaguely defined "systemically risky institutions", in other words the same players who brought you the bail out are still running the show.

Banksters ready to side-step new credit card rules

This is interesting on two levels. First, the obvious level that the banks which issue credit cards are, as dakinikat writes, "taking steps to ensure we continue our indentured servant status." But the second level I want to point out is how discipline is imposed within the economics profession to ensure the continued apologia for the banksters and their financialization of the economy.

Let's hold the champagne and party favors!

As reported earlier, Obama has taken a new populist stance regarding Wall Street. However, as John Carney points out, Big Banks Have Already Figured Out The Loophole In Obama’s New Rules.

Big banks have already begun poking the holes in Obama’s new rules—holes they expect their banks to pass through basically unchanged.

The president promised this morning to work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.