It makes a future market melt-down more likely. Today the Senate takes up Senator Blanche Lincoln’s amendment to regulate over-the-counter derivatives. The Lincoln bill is very, very bad, but don’t take out word for it, ask the Federal Reserve. Fed Staffers released a four page, seven point critique saying the Lincoln bill would “impair financial stability and strong prudential regulation of derivatives; would have serious consequences for the competitiveness of US financial institutions; and would be highly disruptive and costly, both for banks and their customers.” The first point of …
Sponsors of derivatives “reform” legislation claim it will reduce costs to derivatives users. Just how more government regulation is supposed to reduce costs in the private sector has never been exactly clear, but discussion at Wednesday’s Senate Agriculture Committee mark-up of derivatives reform legislation revealed that the “reform” will cost taxpayers big time: a 50% increase in staffing (and other costs) at the Commodity Futures Trading Commission (CFTC), the agency that would enforce the new regulations. CFTC Chairman Gary Gensler, announced at the mark-up that the bill would require 250 …
So now President Obama is threatening to veto financial reform legislation Democratic leaders in Congress are working to pass if it is not tough enough on derivatives. There is really no disagreement between Obama and Congressional Democrats on the issue, just a bizarre attempt to make non-news. Obama is in high dudgeon because his advisors claim derivatives caused the 2008 financial crisis. The problem is this claim is false, and the proposals Obama offers would make future crises in the derivatives market more rather than less likely. There is actually …
Senator Chris Dodd’s monstrous 1336-page financial reform draft includes a whopping 217 pages devoted to “improving” over-the-counter derivatives markets. Dodd the derivatives section may be replaced by a yet-to-be-released bipartisan compromise from Senators Jack Reed and Judd Gregg. But the Dodd draft suggests that legislators are focused on bureaucratic imperatives rather than improving markets. The biggest blind spot in Dodd’s draft is the assumption that only command and control regulation can improve markets. In fact, beginning even before the financial crisis, an international cooperative effort of derivatives market participants led …
Last night on The Ed Show, Rep. Barney Frank (D-MA) debated Ralph Nader. Honesty ensued. Watch: [youtube]http://www.youtube.com/watch?v=uXPwr-MxvDQ[/youtube]
Two House committees this week approved derivatives legislation that composes a significant part of the Obama Administration’s Financial Services reform plan. Remarkably, for a plan crafted significantly by uber-liberal Barney Frank (Chairman of the House Financial Services Committee), the bill is notably less bad than the Administration’s original proposal, but still is flawed. The House Agriculture Committee also added amendments to the bill. Heritage noted before that derivatives market participants are rapidly changing their business practices and structures in a voluntary, cooperative effort, albeit under government sponsorship. The biggest danger …
