Derivatives Lobby Hooks Up With New Dems To Water Down Reform Bill

Bloomberg News reports Friday morning that the derivatives lobby has put a bug in the ear of the New Democrat Coalition.

JPMorgan Chase, Goldman Sachs, and Credit Suisse lobbied New Dem Reps. Mike McMahon (D-N.Y.) and Melissa Bean (D-Ill.) "to expand the ways the legislation allows dealers and major investors to trade the contracts," according to Bloomberg.

The result of the banks' lobbying effort seems to be draft legislation that could actually exempt most financial firms from a wide swath of derivatives regulations. The discussion draft put forth by House Financial Services Committee chairman Barney Frank (D-Mass.), Bloomberg reported Thursday, would not regulate derivatives used by financial companies for the rather ambiguous purpose of "risk management." (Check out HuffPost's Jason Linkins' take on the wild world of derivatives here.)

At stake in the legislation could be a significant portion of the tens of billions of dollars that commercial banks make in the largely unregulated derivatives market each year. U.S. banks made $5.2 billion in the second quarter of 2009, a 225 percent increase from the same period last year.

New Democrats praised Frank last week for the bill. New Dem chairman Rep. Joe Crowley (D-N.Y.) said in a statement, "I congratulate my fellow New Dem Members, 15 of whom serve on the Financial Services Committee, for their work with Chairman Frank to reform our financial system to provide greater protections for American consumers and businesses while ensuring continued access to valuable tools to manage risk."

At a Wednesday hearing on the legislation, administration officials called Frank's plan too weak. Gary Gensler, the chairman of the Commodity Futures Trading Commission, said the bill would allow financial firms too many exemptions from regulation.

"We stay particularly vulnerable because we haven't filled the [regulatory] gaps," Gensler told the Huffington Post Investigative Fund in an exclusive video interview this week.

Derivatives, despite their role in the near-collapse of the entire world economy, were not important enough for a some members of the House agriculture committee to sit through a hearing on their regulation in September. Instead, Reps. Blaine Luetkemeyer (R-Mo.) and Kathy Dahlkemper (D-Pa.) skipped out for fundraisers.

Check out Bloomberg's awesome story here.

Comments

[KDog76A]

12:49 PM on 10/12/2009

Democrats:

Here is an example of the Change you voted for.

Keep the blinders on, Obama will save us all.

[Rentug]

10:45 AM on 10/12/2009

Obama needs to carry out more reform. He needs to get things done instead of just talking and planning because his voters are becoming impatient and the robber barons are at it again.

Good articles: http://pie.im/af30

2 party system gives no results.

[ImissBush]

10:30 AM on 10/11/2009

cha ching

[jojony]

09:48 AM on 10/11/2009

I've said it once. I'll say it again, "Change We Can Believe In".

When someone point out "change", please wake me up.

[PhilipTaylor]

06:02 AM on 10/11/2009

Just watched on CSPAN three so called "EXPERTS" say "Unfortunately Wall Street Broke NO LAWS!"
I nearly Fell out of my chair with Amazement!

* G0LDMAN and WallSt set up subsidiaries to develop sub-prime loans to feed into their DERIVATIVES MAKING MACHINES. Sub-prime loans were "SURE FAIL TRICK&TRAP" Mortgages, and were legal through buying their legality. No Crime!

* It is what they then did with those "SURE-FAIL" mortgages that is Illegal violating TWO important Laws: Manufactured "1nsider Trading" and Selling "Product they Misrepresented" to their buyers.

1. “PREMED1TATED MANUFACTURED 1NSIDER TRAD1NG”
a. Make SureFailMo rtgageProd ucts knowing they will fail
b. Buy Massive and Repeated A1G CreditDefaultSwaps Bets that the “SURE FAIL Derivatives” would FAIL!

Make it to fail&bet it will fail: "Manufactured-Insider-Trading" 100% Sure BETS.

2. Misrepresentation of High Risk Products and sold as Low Risk"AAA" Product all over the World.
__________ __________ _

Laws on books - LACKING IS AN HONEST ADMINISTRATION TO PROSECUTE!

“Misrepresentation” is contract law concept, meaning false statement of fact made by one party to another party, which has effect of inducing that party into a contract. For example, false statements/promises made by seller of goods regarding the quality/nature of the product that the seller has may constitute misrepresentation.

“Insider Trading” is trading securities by individuals with access to non-public information about product/company. Taking advantage of non-public information by an insider during performance of insider's duties, or in breach of fiduciary duty/relationship of trust/confidence.

[research]

03:37 PM on 10/10/2009

in the ten years since CDS investment insurance was unregulated,

Derivatives trading has gone from 10% of the market, to 10 times the market.

CDS is Fraud.

[StJames]

10:13 AM on 10/10/2009

This morning just for the heck of it I Googled Wealth Distribution in the United States. Found much interesting stuff and many more alarming numbers. Lately the pundits have been saying the top 1% owns 28 % of the wealth...I think that may be a downsized number. In 2004 the top 1% held 34.3% of all privately held wealth and the next 19% (professional, managerial & small business owners) owned 50.3% of the privately held wealth. That left just 15% of the wealth to be distributed amongst 80% of the population. (wage and salary workers) No one should ask why Americans got into so much debt. Furthermore, between 1930 and the mid 1970's wealth was much more evenly distributed. Frankly, if there were any justice in the world the banks would be forced to forgive all credit card debt and reduce the principal of every mortgage held by people in that lower 80% by half or ever 75%. Then maybe we would be even.

[mick7191]

08:20 AM on 10/10/2009

Tell 'em to stick it, boys and girls.

[thnk4selfagain]

09:10 PM on 10/09/2009

Derivatives in the form of CDSes, which were privately traded, made opaque the risk to Wall Street when the dominoes from securitization of known bad loans and irresponsible undercapitalization began to fall. There was no way to know who was exposed to what or whom after Lehman, so the credit markets froze and runs ensued. In order to prevent *runs* in the future, casino CDSes should be outlawed, and other derivatives should be regulated and traded in public manner to promote trust and confidence.

If the so called "new Dems" mission -- from their website -- is to "support policies to expand economic growth and ensure that all Americans have the opportunity to benefit from that growth" then they should support Obama's reform proposal. In fact they should insist it go further by assuring *all* derivatives are under CFTC oversight and publicly traded.

Hyprocrisy, that's our government, by and for the lobbyists.

[agroman]

04:03 PM on 10/09/2009

u cannot regulate business until u smoother all new creative ideas...eniff room needs to be left for business to grow...the problem with derivatives was not regulation but pure greed, enuff people saw it coming ....even those who were supposed to regulate..... but they did nothing.....

[breakingpoint]

04:01 PM on 10/09/2009

Obama wins the peace prize for what, raising troop levels in Afghanistan?
Democrats on the take from Wall Street and Big Insurance.
Republicans stand and dodge behind the likes of Sarah Palin and Glenn Beck.
And the majority of the American People remain silent.

What parallel universe have I fallen into?

Seems like this blatant in your face corruption and admired stupidity is all part of this new American Landscape and something we better get used to and expect from our leaders fast.

Just one caveat, they can do it and get away with it whereas, if you're not in their class or adapt their particular philosophy, if you do anything close to the justification of their corruption will certainly end up doing time in jail.

This is the same mindset that invades those who signed the Polanski petition, no limits, no justice, just greed.

Bill Clinton bucked the trend when in 1994 he called us all consumers instead of Americans.

[LightGreen]

03:29 PM on 10/09/2009

And the winner for the 2009 Nobel Prize for Economics is..........................Charlie Rangel !!

[middleofthemiddle]

03:21 PM on 10/09/2009

Meet the Democrats. Don't worry lobbyists there are no new rules for you to learn. Its the same thing, just show up with lots of cash but instead of going down stairwell A you will use stairwell B. Thank you, have a nice day.

[MyTalkRadiou]

03:20 PM on 10/09/2009

Obama needs to do actual reform instead of just talk & plan

good articles: http://br.st/tU

~~

[MalteseTiger]

03:47 PM on 10/09/2009

Maybe the spineless congress people need to get their heads out of corporations wallets and do what the president wants .

Blame the right ppl... congress

[rbchilds]

04:29 PM on 10/09/2009

The government’s takeover of Fannie Mae and Freddie Mac was not actually a bailout of the mortgage giants. It was a bailout of the financial derivatives industry, which was faced with a $1.4 trillion "event of default" that could have bankrupted Wall Street and much of the rest of the financial world. What caused AIG to be on the brink of bankruptcy? Their division that sold derivatives.

Top Recipients of FM&FM campaign contributions, 1989-2008
Christopher Dodd - $133K; John Kerry - $111K; Barack Obama - $105,849; Hillary Clinton-$75,550; Paul Kanjorski-$65,500

Top AIG Recipients of Contributions;
Dodd-$281,038; Schumer-$111,875; Obama-$110,332; McCain-$99,249; Baucus-$90K; Kerry-$85K;
Johnson-$75,400; Sununu-$69,049; Clinton-$61,515; Lieberman-$57,900; Rangel-$53,000.

[dnegri]

03:12 PM on 10/09/2009

Anyone else see Obama's speech today on regulatory reform? He spelled it out very clearly. And the Chamber of Commerce and the "New Dems" (and of course Republicans) won't be happy.

Now he just has to get Congress to do it!

[kylie]

03:39 PM on 10/09/2009

Just holding my breath, waiting for all that "reform" and "regulations".
Are the Democrats going to open the gates wide to the lobbyists and end up being phase II of ineffective politicians not at work gang?
Will they "pass go" and end up in the same tank as the Republicans?
Let's have more action and less speeches.