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Derivatives on the way out?

May 10, 2010

The provision that would prohibit banks from trading derivatives has alarmed the industry because it strikes at the combination of commercial banking and Wall Street trading that defines the modern industry.

(…)

The financial legislation proposed by the Obama administration and passed by the House would require most derivatives to trade on public exchanges, in the belief that a transparent marketplace will be safer and cheaper. The scope of the exchange trading requirement has been the focus of the debate for months. Opponents argue that the bill would limit the industry’s ability to customize derivatives to match the needs of clients.

Then the chairwoman of the Agriculture Committee, Senator Blanche Lincoln, Democrat of Arkansas, dropped a bombshell in April, introducing language that would require banks to choose between trading in derivatives and remaining under federal protection.

(…)

The Senate has proved to be a difficult audience. When Senator Christopher J. Dodd, Democrat of Connecticut, released a draft of the financial legislation in November, Mr. Strupp and his clients drew up a list of roughly 30 problems that the industry had with the proposals. About two dozen of those provisions remain in the bill.

But the industry has gained important allies in its opposition to the Lincoln provisions. Timothy F. Geithner, the Treasury secretary, has expressed concern about the impact on regulation of derivatives trading. And on Thursday, Paul A. Volcker, the former Federal Reserve chairman, said in a letter to crucial senators that the proposed ban on proprietary trading, which the administration has called the “Volcker rule,” was sufficient to address the most worrisome kinds of derivatives trading.

I think the banks understate the problems that derivatives caused in the current financial crisis, they are trying to protect their profits and executive salaries, but I also think an outright ban is excessive, so normally I would oppose this, but the fact that Geitner and Volcker are opposed to the ban causes a visceral reaction that makes me want to support it. I hate dilemmas.

(source)

Looks like the move to audit the Fed is gaining traction.

-elsewhere-

Obama has chosen his nominee to replace John Paul Stevens on the Supreme Court. I don’t actually know much about her other than she is the Solicitor General and the former head of Harvard Law school. That is enough to give me pause.

Meanwhile The Other McCain goes after her with the gay smear. I am a little tired of this, oppose her on the merits damn it not through innuendo.

Outside the Beltway has some that are a start, they are more forgiving on them that I think I am inclined to be.

Unreligious Right offers suggestions on reducing government spending. While I agree with his suggestions I think he overestimates the amount of money that will be saved in some cases. Example, the Department of Education – it only employees 5000 people with of 62 billion. The LA Unified school district has more employees and a budget of 13 billion dollars all by it self. So yeah the Dept. of Ed. is wasteful but don’t overestimate the effect cutting it will have.

The demise of American manufacturing in about 20 paragraphs

Update: R. S. McCain takes issue with my characterization of his post on Elena Kagen in the comments below. Fair enough, but this is not the first time I have had concerns about this last time McCain responded with the it’s just politics defense. I was convinced that there was no harm meant by other parties so I moved on. Now here we are again. McCain asks how I felt about National Offend a Feminist week? Not much. I thought it was a ploy for traffic that while stupid I didn’t find particularly offensive, and (big difference here) it wasn’t aimed at one person like the Charlie Crist or Elena Kagan posts. Maybe I should have taken it more seriously.

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5 Comments leave one →
  1. May 10, 2010 9:27 am

    “Smear”? Look, Jennifer, this whole thing started — as has been thoroughly documented — because the Obama administration denied Kagan was gay when she was first mentioned as a potential SCOTUS nominee, even though her lesbianism was publicly applauded by her liberal supporters at the time of her appointment as solicitor general.

    Nobody in the conservative blogosphere, to my knowledge, has said that Kagan’s sexual orientation disqualifies her for the Supreme Court. The issue — to the extent that there is an issue — is why the Obama administration denied it, as if it were a scandal, and why left-wing bloggers then falsely asserted that conservatives were responsible for a “whispering campaign” against Kagan.

    As I’ve said, my chief interest in “Kagan lesbian” is traffic-baiting. Barring some unexpected revelation — Kagan owning Halliburton stock — Obama’s clearly got enough Senate votes to get her approved, and her confirmation hearings will be the usual kabuki dance. GOP senators will try to get Kagan on the record for some statement sufficiently controversial to justify 25-30 “no” votes, and she’ll be in like Flynn on a 2-to-1 or 3-to-1 vote.

    And so what? Kagan could scarcely be more liberal than John Paul Stevens, and the balance of the court will remain unchanged. It is because of my general indifference — my refusal to get worked up over the big SCOTUS-confirmation circus — that I resort to sarcastic humor, for otherwise I’d have almost nothing to say about it.

    There’s no “smear” here, dear. Oh, and check “Update III” at my post. Life is too short not to laugh while we can.

  2. May 12, 2010 1:55 am

    Let me just comment on cutting the Department of Education’s budget. Will this budget cut not affect the quality of education that our children needs? There should be an audit of the spending of the Department, not just in the Department of Education but also in other departments and try to see which is unnecessary spending and which can be eliminated. If there is no unnecessary spending then, there should be no budget cut. It would be an irrational move to do such without basis.

    • jenn1964 permalink*
      May 12, 2010 8:02 am

      You make a good point about the audit, and if there wasn’t an abundance of data out there about the (in)effectiveness of Department of Education programs available I would agree with you.

  3. Heryfrenrer permalink
    May 28, 2010 10:50 am

    Just want to say what a great blog you got here!
    I’ve been around for quite a lot of time, but finally decided to show my appreciation of your work!

    Thumbs up, and keep it going!

    Cheers
    Christian, iwspo.net

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