Obama sounded quite parental scolding the banksters as if they were children at a Sept 14 NY Federal Hall. Meanwhile Barney Frank and Mike McMahon huddled in the audience how they could weaken proposed rules and regulations for the $592 trillion OTC deriviatives mkt. Remember, these are the unregulated derivatives that screwed the US taxpayers of trillions of dollars already. Anything Frank is doing to weaken proposals is conspiratorial. And worse, the freshman congressman McMahon was “worried” Obama’s derviatives plan would punish US corporations and “push jobs in his home district overseas.”
Just where does the greenhorn McMahon get his information that derivatives help keep jobs in his district? Does McMahon have a wall street spoon stuck up his ass or what? And for the record, derivatives like cds are more apt to put a company out of business than keep them in business. It is in the interest of WS to drive companies into bankruptcy so their cds insurance option goes in the money.
McMahon is a member of the dangerous “New Democrat Coalition, a group of 68 self-proclaimed pro-growth democrats. McMahon is clearly off his rocker and a dangerously loose cannon with no idea what the hell he is talking about. Here is a for instance,
“It’s not just the farmers, and it’s not just the Wall Street guys,” said McMahon,
“It’s across the nation. American industry uses these products for a very useful purpose, which keeps down prices and makes consumer products cheaper.”
Frank, for his part, did agree there is a need for “bona-fide hedging” by companies and end users to use derivatives “to hedge everday operations risks, such as currency price, interest rate, and commodity price fluctuations.” Thank god Frank did not go any further than that.
For the most part, most of these derivatives remain what Warren Buffett called weapons of mass destruction. Having them still around should make every taxpayer uncomfortable.And it shameful on Congress and the Obama administration that they have not terminated many of these derivative products. They remain toxic timeebombs waiting to blow up so WS can receive yet another taxpayer funded govt guarantee.
Frank, for his complicity in this mess, drafted a bill last week pertaining to derivative legislation that was too friendly to Wall Street. CFTC chair Gary Gensler and SEC Henry Hu criticized Frank’s bill as having “created too many loopholes [with] potential to exclude all hedge funds from oversight.”
Mr. Frank, this does not reflect well on your already much maligned integrity.
And derivative dealers are whining that regulatiors might “write rules making them similar to exchanges” I kid you not, the whole purpose of an exchange is so products can be regulated and transparent pricing. No, the dealers certainly wouldn’t want that. Franks bill would allow these toxic derivatives “to be executed privately via phone as long as they are reported to regulators.
Keeping these toxic derivatives off exchanges would “protect billions in profit” for the derivative dealers (read banksters).
None of this can be good for taxpayers or for bonfide hedgers. It can only be good for Wall Street.
The top five U.S. commercial banks, including JPMorgan, Goldman Sachs and Bank of America Corp., were on track through the second quarter to earn more than $35 billion this year trading unregulated derivative contracts, according to a review of company filings with the Federal Reserve
Yet the banks cry that an exchange traded system for OTC derivatiove “that publicizes large trades could make it too expensive or impossible to execute customer orders and hedge those trades at the same time.”
Now the banksters can in no substantiate their claims that exchange-traded derivatives with transparent pricing would make it impossible to execute.” Transparent pricing aids execution and narrows price spreads. If the pricing is right and transparent, it will execute. What the banksters are telling us is that the unregulated derivatives they are trading are priced wrong. It is nNo wonder they are doing so well in their trading business this year.
The banksters have found an unintended ally in the Nat’l Assoc of Manufacturing. Their coalition sent a letter to Congress on Oct 2 saying some reform proposals “place an extraordinary burden on end-users of derivatives.
Bloomberg editor Dawn Kopecki noted that in the end, the broker-dealers have found a friend in the manufacturing coalition, “Their interests overlapped and many of the concessins won in the bill for end-users ended up benifting some of the biggest WS banks whose credit default swaps exacerbated the financial crisis.”
What a comfy litle arrangement for the banksters. Hopefully, lawmakers, the CFTC and SEC will find the political will to find a way to help end-users without benefitting the banksters.