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Did a Secret Wall Street Memo Make Geithner Go Soft on Derivatives?
Given that credit default swaps caused the largest financial crisis since the Great Depression, you'd think that the folks responsible for them, people who are now surviving on the taxpayer dime, might be laughed out of Washington if they were to suggest that they be the ones to decide how to regulate them. Sadly, it's the opposite.
On Monday, the Times' Gretchen Morgenson published a little-noticed but excellent piece about the CDS Dealers Consortium, a group created in November by the nine biggest participants in the derivatives market to lobby against stricter regulation of derivatives. The move came a month after five of them had received bailout money. The group's head lobbyist, Edward J. Rosen, who was paid $450,000 by the banks for four months, wrote a secret policy memo that he shared with the Treasury Department and leaders on Capitol Hill. A few months later Tim Geithner released a suspiciously similar regulatory plan.
It gets much worse: in February Rosen testified before Congress on derivaratives without disclosing his ties to the CDS Dealers Consortium. From 2007 to 2008, five banks in the consortium spent a combined $47.7 million on campaign donatations and lobbying.
Geithner's bank-friendly plan to regulate derivatives would force them to be traded on a privately-managed clearinghouse, rather than on an open exchange, similar to the stock market, where many experts believe that they'd be less subject to manipulation. Morgenson reports:
Critics in both the financial world and Congress say relying on clearinghouses would be problematic. They also say Mr. Geithner's plan contains a major loophole, because little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default. . .
But increased transparency of derivatives trades would cut into banks' profits — hence the banks' opposition. Customers who trade derivatives would pay less if they knew what the prevailing market prices were.
The Times piece is long, but reading it goes a long way towards understanding what is often a huge gulf between the Obama Administration's rhetoric and its tepid approach to bank regulation.
$47.7 million
in a year, in campaign donations and lobbying? It is way past time for campaign finance reform. Maybe a 50% tax on corporate donations and lobbying fees, all of it to be spent on infrastructure, would be a start. On second thought, make that 75%.
"You signed the papers. You wanted to be here!" -Drill Sgt. Leach, 1971
Bleak House
Go Figure, between putting a stopper on fraudulent Cap-and-Trade and the ratification of critical Universal Health (as implemented in ALL other developed countries) the money at issue is staggering!!!
The magician flourishes his wand, and all eyes follow that hand (al-Qaeda & Sotomayor)—in fact, the other hand is the one to watch!!!
WHAT???!!! Under Cap-and-Trade the Energy Industry simply passes-on Higher Costs directly to the consumer—with no decrease in emissions!!!
Instead, institute a Cap system, with 0-interest Govt. loans when necessary…
Here Read:
+ The Case Against Carbon Trading / Transnational Institute:
–”…Citigroup’s Peter Atherton confessed that the European Union’s Emission Trading Scheme had ‘done nothing to curb emissions.’ He admitted, ‘Prices up, emissions up, profits up …’ Who wins and loses? Coal and nuclear-based generators–biggest winners. Hedge funds and energy traders–even bigger winners. Losers … Consumers!”
+ Canadian Health Insurance: Lessons for the United States / Government Accountability Office (GAO):
--“If the universal coverage and single-payer features of the Canadian system were applied in the United States, the savings in administrative cost alone would be more than enough to finance insurance coverage for the millions of Americans who are currently uninsured.”
+ Single-Payer Protests Challenge Democrats / Washington Post, 06/06/09:
--“The White House and Democratic leaders have made clear there is no chance that Congress will adopt a single-payer approach -- named for the idea that a single government-backed insurance plan would pay for all Americans' medical costs -- because it is too radical a change.”
+ The Truth About Drug Companies / Mother Jones:
“… Angell attacks major pharmaceutical industry -- whose top ten companies make more in profits than the rest of the Fortune 500 combined -- for using “free market” rhetoric while opposing competition at all costs.”
Why not Universal Health Care with a $25 deductible after the first annual visit?
Instead of a sensible approach our attention to the radicals Al-Qaeda and Sotomayor!!!
+ Clinton Let Bin Laden Slip Away and Metastasize / LA Times:
--“President Omar Hassan Ahmed Bashir, who wanted terrorism sanctions against Sudan lifted, offered the arrest and extradition of Bin Laden and detailed intelligence data about the global networks constructed by Egypt's Islamic Jihad, Iran's Hezbollah and the Palestinian Hamas. The silence of the Clinton administration in responding to these offers was deafening.”
+ In College Thesis, Sotomayor Appeared to Support Puerto Rican Independence / Wall Street Journal:
--“Ms. Sotomayor was born in the Bronx of Puerto Rican parents … she dedicates her paper ‘to the people of my island … there has been … a growing Americanization of the island.’”
But Sotomayor's Anti-Americanism actually isn't even a true issue here…
Consider how The Civil Rights Act of 1871 was enacted to provide protection against the misuse of power (the KKK), yet in O’shea v. Littleton (a federal class action by African-Americans against racially-motivated illegal acts by two state judges) the Supreme Court held:
“The Complaint fails … to allege an actual case or controversy”
Though the Dissent Opinion stated:
“These allegations of wrongdoing clearly state a case or controversy.”
That Court held:
“None of the named plaintiffs is identified as himself having suffered any injury in the manner specified.”
Yet the Dissent stated:
“The charges concerning the named plaintiffs are as follows …”
Then that Court’s Train Completely Jumped theTracks:
“Past exposure to alleged illegal conduct does not in itself, show a present case or controversy … if unaccompanied by any continuing, present adverse effects.”
I’m not a lawyer either, but you don’t have to be to “understand” such drivel-and another Supreme Court case cites O'Shea:
“The Forest Service does not deny that the checkpoint was impermissibly operated … The mere fact that the checkpoint was used at the 1996 gathering was unconstitutional cannot alone give Ms. Parks standing. We do not think that the use of checkpoints in 1997, 1998, and 1999 is relevant …”
Here consider how the Endangered Species Act of 1973 requires each federal agency to consult with the Secretary of the Interior to ensure that any action funded by the agency is not likely to jeopardize the continued existence or habitat of any endangered or threatened species. A subsequent rule limited the scope; environmental groups sued…
Bottom line, the Majority held that the plaintiffs lacked standing to sue—but the Dissent related:
“Congress has found that a wide variety of endangered species of fish, wildlife and plants are of ‘aesthetic, ecological, educational, historical, recreational, and scientific value to the Nation and its people.’ Given that finding, we have no license to demean the importance of the interest that particular individuals may have in observing any species in its habitat …”
Mr. Harkinson, You're a
Mr. Harkinson,
You're a moron. Credit default swaps did not cause the financial crisis. Please educate yourself on what went wrong before pretending to finger people for blame.
Start with securitization of loans and then move on to mortgage brokers giving liar loans to people who didn't have to prove they had an income.
Or, just don't write about things you don't understand. It will save people a lot of wasted time and keep misinformation from spreading.