Derivatives Reform: 'Tricky Exceptions' Leave Market Unchecked: The Nation

thenation.com:

The Obama administration promised to reform the financial system and make it safe for the rest of us, but recent Congressional action is more likely to reset the fuse for another explosive calamity. The time bomb in this case is that arcane financial instrument known as derivatives--the hedging devices that the big banks sell to investors, corporations and other banks to reduce risk or evade the requirements to hold adequate capital on their books.

Read the whole story: thenation.com

Comments

[nopilikia]

Phil Gramm the banks go to guy back in action.

[MakeAWish]

Why aren't the tea baggers out there protesting against the real monsters who are destroying our country?

[Stop Wall Street]

Yay Stocks surging. Real unemployment (including those who 'stopped looking' lol) is at 20%. once again ,this proves that the government is in the tank for Wall Street or else there would be more jobs even if the jobs arn't considered efficient by economist standards.

good articles: http://financeopinionss.blogspot.com

The only beneficiaries of this 'v shaped' recovery are the bankers, fund managers, and rest of the top 1%

[sonofsamphm1c]

A recovery is instantaneous. The economy switches from shrinking to growing in the blink of an eye.

Unemployment does not respond that quickly.

The emergent recovery has slowed down the loss of jobs. That is how it works. If you are losing over 600,000 jobs a month and you want to get to gaining 600,000 jobs a month, there have to be months in between where you start losing fewer and fewer jobs (where we are now), and then gaining more and more jobs.

You can't possibly believe that growth would come with a the simultaneous move from losing 100s of thousands of jobs a month to gaining 100s of thousands of jobs a month or two.

What would these instantaneous new jobs be?

Goldman Sachs could probably hire back many of the people they laid off. Would you be against that?

[wehrke]

derivatives are nothing but a form of legal gambling. Its time for congress to grow a pair and take on these SOB's.

[iamwatching]

I am a peaceful person, but I believe about all that is left is for the people is to take to the streets and remove the politicians from power. . . peaceful demonstrations and work-stoppage should be taking place all over this country.

[Coastalthinker2]

This is what happens when you bring in the same "deregulators" into an administration:

http://www.pbs.org/wgbh/pages/frontline/warning/

[NoMoreBail2]

There wont be any positive change for middle and lower class form the Obammi administration. Expect more of the same BS that was 2002-2007. More bonuses for wall street, surging stock market, booming economy, widening wealth gap, surging gas, surging food, unfordable education & health care & surging oil prices, continuation of Iraq/Afghanistan wars, and high unemployment.

hat tip to; http://financeopinionss.blogspot.com

[Harrier]

The people in charge of correcting the financial problem and are in favor no regulation and are the exact same people who created the problem. Some people who not only ignored and disagreed with everyone trying to warn them, but also were actively expending great efforts teaming up trying to get those speaking out fired from their jobs and planning to cut their legs out from speaking. I don't approve of the people or the way this is being carried out

[vippy]

A house that cost $ 750,000 now has accumulated 5 million in derivatives. We are in debt for that much for one house. Do you think that Obama would have jumped on this problem and fixed it as soon as he took office, no, nothing is being done, the bubble keeps right on getting bigger. Same with the Hedge Funds and the oil prices. No one is lifting a finger. This is not getting better. Where do you think they are taking us? Now we are down to letting the crooks right their own regulation.
Why are we putting up with this and voting for them over and over again. Granted, we were promised change with Obama but now it seems to me, he sold us a good line. Time to move on and throw them all out of office. Vote for Libertarians, does not matter, which 3rd party, but we have to make a decision.

[Mildmannered]

Maybe Obama should have picked someone not so tied into Wall Street to head up the Treasury Department.

[socialbutterfly]

Derivatives = scary place in fiscal accountability.

Quick, someone fix it!!!!!!!

[Harrier]

Bank has not been forced to write down their bad loans as required. If this was forced, banks work be loaning out more money. What needs to be done to motivate banks is to force banks to reduce principal on people still paying money on home loans. It would not reward people for poor loans, but would also send a message to the banks that tax payers will get their money back over the long run for the banks' misconduct. This would not affect short term profits, but have a definite impact on long term income stream that would be more than fair.

[rbchilds]

“Any bets that derivative legislation won't be watered down completely? We are owned.

http://www.opensecrets.org/industries/summary.php?cycle=2008&ind=F2700

http://www.opensecrets.org/industries/recips.php?cycle=2008&ind=F2700

http://www.opensecrets.org/industries/pacrecips.php?cycle=2008&ind=F2700

http://www.opensecrets.org/industries/summary.php?ind=F2700&cycle=All&recipdetail=M&sortorder=U”

[textynn]

We are owned and we apparently have no democracy.

[rbchilds]

“Buying derivatives is not investing, it is gambling, insurance and high stakes bookmaking. Derivative create nothing, but serve to enrich non-producers at the expense of the people who do create real goods and services. Congressional hearings in the early 1990's, derivatives trading was challenged as being an illegal form of gambling. The practice was legitimized by Fed Chairman Alan Greenspan, who not only lent legal and regulatory support to the trade, but actively promoted derivatives as a way to improve "risk management". Partly, this was to boost the flagging profits of the banks; and at the larger banks and dealers, it worked. The cost was an a increase risk to the financial system as a whole.

All that said, it is the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up -- you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).”

[sonofsamphm1c]

Investing is gambling.

[venusvictrix]

But pure gambling is entirely left to chance.

What Goldman is doing leaves nothing to chance.

[sonofsamphm1c]

Also, it is not lost on derivatives dealers that congress will never do another TARP, and that looming legislation is likely to disallow the Federal Reserve from expanding its balance sheet without congressional approval. They know that there will not be another bailout. People are determined to experience the reality show called the Great Depression 2. It has not curbed the derivative dealers enthusiasm for creating them and trading them one single bit.

After that the Great Depression 2, the bailouts will be an automatic feature of the economy.

[Rosewren]

You mean there will still be an economy in the US to worry about after all that?

[HamletsMill]

"All that said, it (derivatives) is the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up -- you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).”

BINGO! It is now the perfect play! Goldman Sachs is now a SPECULATIVE INVESTMENT BANK now backed by the full facilities of the Federal Reserve and the FDIC just like they were a COMMERCIAL BANK! It just does not get any better than that! The world has not seen anything like it since the Crown Jewels of Spain backed the speculative looting of Inca Gold. And within 100 years Spain was bankrupt!

Why don't the people currently running BOTH our government and our financial institutions know history?

[JohnSawyer]

History harshes their buzz.

[rbchilds]

“The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars. How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want. They can bet money they don’t have, and that is where the huge increase in risk comes in.

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.

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.”

[sonofsamphm1c]

1+quadrillion is a notional number. It's very easy to roll up huge notional numbers. What is notional value of all car insurance policies in the United States, or the world? It's a gigantic number, and it dwarfs the required insurance reserves. Does that mean we should make car insurance illegal?

[HamletsMill]

You should if you know every person on Earth is going to be drunk driving with a 3.00 near death blood alcohol level on a certain day. The problem is that with zero transparency no one would know if everyone knows the specific day. Massive amounts of notational value is bet on many days but when one hits, it can have a massive fissionable chain reaction. With fear of an "Ice Nine" economic effect happening like the fear of lending money to hidden insolvent banks last year due to the AIG CDS implosion.

[venusvictrix]

Only if we know for certain that none of the insured drivers have valid licenses and all drive cars which are known to be death-traps.

That would indeed be a very stupid gamble. . . a sure loser . . . . just like the AIG Credit Default Swaps.

[dadw5boys]

The Gloable Banking needs banks able to take risk .

Or you need to seperate them with a regulator.

Someone had to write the first draft didn't they !

[PhilipTaylor]

So He let the CR00KS write the CR00KS RULES!

[dadw5boys]

Crooks wrote half the laws we live under. Crooked Congressmen !!!!