Key point is that derivatives *can *be used to hedge, and they *can *also be used for leveraged risk amplifying bets.
Saint-Etienne Swaps Explode as Financial Weapons Ambush Europe. this Bloomberg story will give you an idea of why this is much bigger than just US housing bubble gone bad. Small European towns getting a $100k in lowered financing costs that ends up costing them tens of millions of dollars.
Also you should read the vanity fair excerpts from Michael Lewis’ The Big short.
And it’s not like this is new. Remember the Orange Country$1.6B derivatives loss bankruptcy? Here’s a case study.
At this point I’m wondering what GOP Congresspeople are doing that couldn’t just as easily be accomplished by marking down 41 “No” votes on any piece of legislation that changes the status quo. Think of the potential savings!
I was gonna open a GQ thread about the upcoming bill, but figured this thread might be sufficient – what are the Republicans’ objections to the bill (preferably specific, but even general)?
I understand that one objection, mentioned in Cisco’s link, concerns the creation of “a $50 billion bank liquidation fund”. While I don’t see that as being much different than the way the FDIC is funded (I think), fine – that’s a specific point that can be examined and debated. But the prevalent objection seems to be take the bill back to the ‘drawing board’, which is simply crap.
Oh, BTW, all 41 Republicans have pledged to filibuster (see Update 1).
Gonna be tough.
First off, you got your Clintonista, centrist, business friendly Dems who are beholden to Big Money. Not as beholden as a Pubbie, kinda like an indentured servant compared to a slave, but still. Remember, the Supremes clanged the dinner bell for corporations to pursue their civic virtue by generous contributions! Nice little incumbency you’ve got here, shame if anything were to happen to it.
And they wouldn’t even have to show their colors, they can cut a deal to simply not support it as strongly as they might.
Then you’ve got the awesome persuasive power of money. As Mark Shields said Friday, every lobbyist not currently under indictment, or in prison or de-tox is being hired. Mighty bucks were spent trying to stymie HCR, but you ain’t seen nothing yet! We’re talking great hulking wads of raw cash, Godzillabucks. They’ll take hostages!
Impossible to paint the Pubbies as the protector of the proletariat against the running dog jackals of Wall Street? Maybe. But they’re sure as shit gonna try!
Not as long as Geithner’s Wall Street buddies are around!
The Dems are every bit as corrupt as the republicans, in this area.
We’ll see how the fraud charges against Goldman Sachs pan out…
Mark Shields is a smart man. What gives me hope that the Godzillabucks won’t take this time is that Chris Dodd is retiring, so he doesn’t need reelection money. Also Teddy Roosevelt got the anti-trust bill passed at the height of the Gilded Age, so it is possible to take on the financial interests and come out on top. Obama needs to channel his inner Teddy or FDR.
I suspect the Democrat’s strategy will be to eliminate the $50 billion liquidation fund and see if any Republicans will then bite. Geithner seems pretty confident that the bill will get GOP votes.
Even the Tea Partiers will bail on the Repubs if they block this one. Most American want something done to give the Financial Sector a little pain for the disaster their theft caused. I think McConnel is making a mistake.
But the question isn’t whether something will be done. It’s whether there’ll be strong financial reform. It’ll be easy for Republicans to direct any reform into directions that have a lot of bells and whistles but no teeth. And as elucidator and ralph wrote, the Democrats won’t be pushing very hard in the other direction. When the dust settles we’ll have some paper reforms that people can claim solved the problems regardless of whether it really changed anything.
Yes, but the Republicans seem to be set on a motif of ‘No, no. You have to tear what you have up and start over to be bipartisan!’
And that isn’t going to fly.
What is Dodds going to do when he retires? What is Geithner going to do with himself when he’s no longer the Treasury topper? Both bills are written by banking lobbyists anyway so whether they include a liquidation fund or not or whether they include or leave out some other thing is just kabuki. If the legislation doesn’t include laws on how big firms can be and how much leverage they can operate it won’t be worth the paper it’s written on, and it won’t.
It looks like the GOP is going to play ball after all:
Republicans are going to spin this progress as their fault:
In reality Obama/Reid called their bluff and now they’re backpedaling.
Obama is due to give a speech tomorrow on financial reform (now cleverly referred to as wall street reform by democrats) and a test vote will take place on Monday.
Wasn’t it only about a week or so ago that the only question was whether Obama would sign the Articles of Surrender to the Republicans in the Rose Garden or in the Oval Office?
But they’re being allowed a cover story, however threadbare:
If the GOP are agreeing to support a bill then that means the banks got everything they wanted. As far as we currently know the only area where there may be effective new regulation is the regulation of derivatives but let’s see what the final bill looks like, how it works in practice and how much loosening of any effective new regulation the bank lobbyists can wrangle two or three years down the line. What I can say with absolute certainty is that the really important stuff to regulate won’t be. OK, not absolute certainty but as near as you can get. The only time I’m ever wrong about these people these days is when I’m not cynical enough.
www.drudgereport.com
It seems that Obama has hosted the president of G-S 4 times this past year…and will not return the campaign contributions from G-S.
Anybody who thinks Obama intends ANY serious regulation of G-S (and firms like it) are smoking crack! :mad:
So Goldman/Sachs head honcho goes to see Obama, it therefore follows that Obama will allow him to write the bill? The evil is that the wealthy have access to the White House. But whether Obama caves is yet to be proven.
It distills down to campaign finance reform. We need public funding. As long as campaigns cost 700 million to run, the candidates will have to come to the rich to fund them. They don’t give their money away without strings. It disenfranchises the poor and middle class. We have no access or input.
The present campaigns help TV, newspapers and TV news stations. The corporate conglomerates are quite happy with the system as it is. It would be very difficult to fix.They will not permit the opponents to have time to air their side.