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Sent: Wednesday, November 25, 2009 1:07 AM
Subject: Reining in Wall Street
QOTD
by digby
Kevin Drum:
I remain pessimistic on the ability of Congress to rein in the financial
community in any
serious way. They just don't have the power.
.
digby 11/24/2009 09:30:00 PM Comments (4) | Trackback (0)
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Reining in Wall Street
By Kevin Drum | Tue November 24, 2009 10:43 AM PST
But Noam Scheiber reports today that maybe the lobby is about to lose a battle.
Barney Frank's
draft legislation to force all derivatives to be traded on a public exchange
originally included an
exemption for "end users" that is, ordinary corporations that simply want to
hedge the price of
oil or pork bellies or whatnot:
But independent experts who studied the measure came to a different conclusion:
that it
could exempt between 60 and 80 percent of the standardized market because of its
vague
wording, including many firms who were speculating rather than simply hedging
risk....Which, as it happens, was precisely the idea. Though the end users
arguably had a
legitimate gripe, the banks had long viewed them as a means to deflect
additional
regulation. “The original plan on derivatives was basically pushed by the
industry,” says
one bank lobbyist. “What they wanted was, ‘Hey, let’s get the dopey end users to
go out
and be the face of reform. We don’t have the credibility.'” This lobbyist says
the banks
helped organize a group called the Coalition for Derivatives End Users, which
weighed in
with Congress in favor of a robust end-user exemption.
....But a funny thing happened on the way to securing the loophole: A
confederation of
consumer and investor groups, labor unions, environmental activists and a
progressive
organization called Americans for Financial Reform (AFR) started raising hackles
of their
own. In several meetings with Frank, these groups stressed that the exemption
was too
porous, and that it wasn’t just an obscure, technical issue of interest only to
banks,
regulators, and lobbyists.
....By early this month, the pressure from [CFTC chairman Chairman Gary Gensler]
and
the progressive groups had the desired effect. Though Frank believed their
concerns were
somewhat overblown, he pronounced himself open to tightening the language to
make
sure the bill didn’t give speculators a pass. “Barney likes to say redundancy is
your
friend,” says one financial services committee staffer. “If people have
concerns, we’ll
tighten up the language...hedging done by corporations is what we’re looking to
protect.”
To be honest, this seems like only the tiniest ray of sunshine to me. The
derivatives legislation is
important, but it's never really struck me as the core of financial reform, and
the end-user
loophole was so obvious that it's frankly hard to believe it was there in the
first place. Getting rid
of it just means that the financial lobby failed in a longshot effort, not that
it failed on any point
of truly central concern.
Anyway, we still haven't seen the revised wording from Frank's committee, we
still haven't voted
on the bill, we still haven't seen the Senate version of the bill, and we still
haven't seen the
conference report. There's plenty of time for even this minor victory to get
sanded down to
nothing. I remain pessimistic on the ability of Congress to rein in the
financial community in any
serious way. They just don't have the power.
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