Blowing A Hole In Dodd-Frank

prospect.org:

Treasury Secretary Timothy Geithner is close to a decision to exempt the $4 trillion-a-day foreign-currency market from key provisions of the Dodd-Frank Act requiring greater transparency in the trading of derivatives. In the horse-trading over the final conference version of that legislation last year, both Geithner and financial-industry executives lobbied extensively to give the Treasury secretary the right to create this loophole. As the practical reach of Dodd-Frank is defined by the executive branch, this will be the first major decision to signal whether regulators will act to strengthen or weaken the reforms.

Read the whole story: prospect.org

Comments

[jtabs]

12:07 PM on 03/19/2011

Very murky area, as it's been a while since I been involved in currency exchanges, acquiring fixed exchange rates on other currencies to fill future contractual obligations and I have always been aware of arbitrage, but now that I think of it the use of derivatives would be a given, although I understand Geithner's position I don't really see any downside to regulation as it should be apparent that nothing in the financial system works well untended. I guess banks deciding which rate to give customers, rather than applying rate at time of execution and pocketing the difference is okay.

[sposton]

12:00 PM on 03/19/2011

This reminds me of the nuclear situation in Japan a day before the earthquake hit. ;-)

Safety measures costs money and corporations do not like costs. Therefore they will always end up acting recklessly, finally ending in a disaster. I am sure that storing spent nuclear rods on top of nuclear reactor buildings also "saved" a lot of money.

We will have changes after Americans overthrow the dictatorship of Big Money. How is that going to happen with a critical mass of citizenry utterly brainwashed?

“These capitalists generally act harmoniously and in concert, to fleece the people” -- Abraham Lincoln

[BocaMom]

11:59 AM on 03/19/2011

President Obama and his cabinet doesn't have a clue on how to fix the economy and get 20 million Americans back to work and bring back the housing industry. Sad.

[Frank Choi]

11:45 AM on 03/19/2011

The fed should be dissolved, treasury reformed, and Bernanke and Geithner should he tried for crimes against humanity. Anything less would be akin to allowing sex offenders to teach kids in a private room with no windows or doors.

[alan2a]

11:31 AM on 03/19/2011

What financial reform?? Not only is this Administration a joke but its supposed legislative successes are also. Health Care is nothing but a huge transfer of wealth to the very criminals who murder people by their policies. Financial reform was and is so full of holes and exceptions and avoidance of the core issues as to be more a PR stunt that any real effort to actually deal with the issues. But that is the hallmark of this President and Administration. Spin and rhetoric and policies designed to please the moderately conservative among us.

[Lauramae]

11:21 AM on 03/19/2011

I'm not even surprised by these kinds of stories any longer. Geithner should never have been put in charge of the chicken coop based on past sins. Picking and grabbing your officials from other anti-jobs, anti-ordinary American administrations (Clinton and Bush) just means that this whole administration is more of the same. In order to get high up in your individual state party organization, you have to have the script down. Imagine the robotic obedience at the national level. Oh sure, there are pockets of resistance like Cantwell and Murray, and Pelosi, but so many willingly scramble over all the bodies to get to top of the heap. It is in times like this that the clarity is difficult to ignore. It is clear that the Obama administration isn't passively indifferent, they are actively engaged in propping up the ruling class, of which they are a part.

[Dan Kushner]

11:10 AM on 03/19/2011

Hi there, did anyone here actually read the article? Geithner isn't "blowing" a hole in the financial regulation, he's "closing" a hole. The headline is the 100% opposite of the article it links to. More anti-Obama propaganda from the most anti-Obama website out there.

[Lauramae]

11:34 AM on 03/19/2011

The article is in the American Prospect and that is the title from American Prospect. Geithner insistst that the foreign market derivatives And from the article:
"Sen. Maria Cantwell, one of the most effective advocates for strong derivatives regulation during the Dodd-Frank debates, says, "I can't believe the first decision the administration would make to carry out Dodd-Frank would be an anti-transparency decision. The idea that the foreign-exchange markets are not at risk is preposterous -- we now know that they required multitrillion-dollar bailouts. Anytime you have a lack of transparency, there is potential for abuse."

He's actually saying that there is no need for there to be transparency or application of Dodd-Frank to the foreign derivative market. He's saying it is perfectly fine for it not to be subject to the rules requiring more transparency to transactions.

And the article says that without the transparency rules, none of us would know the extent to which Geithner himself was involved in propping up this exact same sort of derivative swapping just a couple years ago.

How is all of that opposite of the title of the article?

[Dan Kushner]

04:47 PM on 03/19/2011

Yeah I'm just blind. Totally wrong on that one. It was pre-coffee.

[Roy E Pearson]

11:40 AM on 03/19/2011

I did, but it seems that you and I read different articles. The Derivatives involved are in the Foreign Exchange Markets, which is also a gambling house. In fact, this highlights the very problem with the manipulation of money. The article clearly uses an example of how Banks "make" money by manipulating when they buy and sell. The banks make money on a customers trade by using that money for something other than what the customer asked them to do.

It is rather like taking money that you are given to buy groceries by your mother, but along the way you stop to play some craps. You win at craps, go on to the store and buy the groceries. You give the groceries to your mom and you have "made" money.

The regulations that Geithner seeks to take away are those that govern transparency in Foreign Currency Exchanges. The new regulations require disclosure of the rate at the buy and the sale of the currency. (this is a gross ove rsimplifcation but I have only 250 words - but it is accurate). At present the banks can buy at the peak rate and sell to the customer at the low rate, pocketing the difference. So effectively they are using their mother's grocery money.

It is all fine as long as you win at craps (or time the buy and sell right). If you don't the grocery money vanishes and you are unable to buy the groceries. Mom gets pretty angry.

[Dan Kushner]

04:47 PM on 03/19/2011

No, I messed it up. I guess I was a bit cross eyed this morning before I had my coffee.

[den1953]

11:04 AM on 03/19/2011

Let the dice rolling begin!

[USNDC]

11:04 AM on 03/19/2011

Who appointed Geithner ?

[jc62]

10:59 AM on 03/19/2011

Support transparency and help pull the veil off this direct theft from the American people. Contact your congressional representative (202-224-3121) and have them co-sponsor House Resolution #459, which calls for a complete “Audit of the Federal Reserve”.

[SoCalGrandma]

10:59 AM on 03/19/2011

When Geithner was being vetted to become Secretary of the Treasury, the vetting process revealed that when Tim G. worked in Europe for the International Monetary Fund, he deliberately did not state his European income on his U.S. Federal Income Tax returns. The IMF reminded him; he ignored the reminders. Ultimately he paid $45K+ but that isn't the point. The arrogance, elitism, and lack of honesty, respect, and integrity are dumbfounding. And this guy is in charge of our money!

[Littlewords]

11:14 AM on 03/19/2011

...and he is a Republican. Any surprises?

[Roy E Pearson]

11:51 AM on 03/19/2011

Not to imply that most Republicans are not money grubbing traders in the market of securitized souls, but the issue at hand is not a Democrat v Republican issue. The International Soul Exchange is non-partisan.

[AZreb]

10:55 AM on 03/19/2011

Campaign season is warming up - do not look for any regulations that will stop the big donors from further harming our economy.

"Too Big to Fail - Too Rich to Jail". While Geithner does little to help the economy, Holder refuses to charge and prosecute the financial insitutions who caused the financial crisis. Add Napolitano and you have my choices for the "Three Stooges" in the cabinet.

[Roy E Pearson]

10:55 AM on 03/19/2011

Derivatives are not in any way investments, they are gambling pure and simple. They are the single most damaging of the so-called "Financial Instruments" that there are.

Geithner's denial of this danger and destructiveness is akin to the the Right Wing denial that what we do in our environment has an effect.

That said, something has to finish off this dysfunctional economy so we can hit bottom. Only then can we rethink and rebuild an economy that is informed by current realities.

Maybe while we are at ti we can also figure out why people don't seem to be able to govern themselves.

[Paul Sta]

11:08 AM on 03/19/2011

The Derivatives market which worked very well for years, also can be a massive revenue stream with little risk for banks as they were secure in the knowledge that politicians would force taxpayer bailouts if they actually lost, its the citizens that bear the burde of banks risky behavior. As long as banks control the Govt, its a win-win for the megas, lose-lose for everyone else.

[Roy E Pearson]

11:58 AM on 03/19/2011

I beg to disagree. You are right about the "massive revenue stream" but that stream is devalued revenue. Also Banks should not be the place where such activities go on. After the Depression such high risk speculation was removed from the banks.

So there are at least two issues here. The transparency issue, which allows people to know who their money and transactions are being handled, and the very nature of what a derivative is and why it is a bad idea.

The Exchanges and those people who act as brokers for these activities need to be watched like a fox hired to care for the hens.

[Ordinary Citizen]

10:48 AM on 03/19/2011

So how many dollars did the lobby group put in to get there way? How many lobby dollars do you "Joe citizen" have in your pocket to pay out and get things done your way? Lobby activities should be abolished its nothing short of bribe pay outs. These politicians are disgusting human beings...I'm tired of reading of all the ways they have devised to screw the ordinary citizen and stash the lobby payments in their coffers for doing it.

It's not surprising to see the uproar in Egypt and other countries....our country is no different. Instead of one dictator cleaning out our pocket we have many cleaning our our lives. It wouldn't surprise me to see the same up roar here one day...it wouldn't surprise me at all.

[Sabrina1]

11:05 AM on 03/19/2011

Wisconsin is a good example.

[OB-GYN]

10:47 AM on 03/19/2011

I mean, what can one say?

He was given the go ahead years ago by our President who waxes Elitism for America.

Pity the middle class, the poor and the old in America. Our day are numbered.