FLASH: Derivative Reform? in [Market-Ticker]

Posted 2010-04-14 23:41
by Karl Denninger
in Regulatory

FLASH: Derivative Reform?

April 15 (Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and their biggest rivals would be forced to wall off derivatives trading operations from their commercial banks under a measure to be introduced by Senate Agriculture Committee Chairman Blanche Lincoln, a congressional aide said.
Lincoln, an Arkansas Democrat, will propose a “no-bailout provision” as part of an overhaul of derivatives regulation she plans to unveil today, according to the aide, who declined to be identified because the plan isn’t public. The measure aims to ensure banks don’t endanger depositors’ money with risky trading of over-the-counter derivatives, the aide said.

It gets better, although I can't find a bill - yet.

Along with forcing commercial banks to spin off their swaps dealers to a different corporate entity, Lincoln’s derivatives legislation would bar dealers, exchanges, clearinghouses and other swaps-market participants from being able to take advantage of emergency lending from the Fed, according to the aide.

Good! Trade with your own money - not with backstopped loans or "liquidity" that is really your depositor's.

It would also increase protections for clients by requiring swaps dealers to treat them as a fiduciary -- obligating them to put customers’ interests ahead of the company’s, the aide said.

Oh they won't like that.

You mean the Goldman CDOs they created for hedge funds to short subprime couldn't be sold off to dupes, er, "investors" without disclosing to them that the entire instrument exists only because a very high-qualified entity at least as smart as you (and they might even have to name them!) wants to bet that you will lose every penny you put up?

No, the banks won't like that at all!

The measure requires most over-the-counter derivatives to be traded on exchanges or through clearinghouses.

There is a God.

Companies that use swaps to hedge the cost of materials or other non-investment purposes would be exempted from the requirements, the aide said. Like the Volcker rule, which would ban commercial banks from proprietary trading, the wall-off provision would separate derivatives trading from traditional banking activities such as taking deposits and making loans.

Ok, there is a God and I will go to Church.

Treasury Secretary Timothy F. Geithner, speaking at the White House yesterday, said Lincoln’s plan was promising.
“Based on what she has laid out in public, it looks like a very strong bill, very close to where we are,” Geithner said.

And I'll go to confession Saturday.

Wow.

More once I get ahold of The Senator's offices tomorrow.

Discussion below (registration required to post)

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User Info	FLASH: Derivative Reform? in forum [Market-Ticker]
Jcwaliski Posts: 2458 Incept: 2008-10-01	Don't fool yourself, Gen. Blanche Lincoln needs to win an election down here. Hell, she is even facing Democratic competition in the May primaries. Guess who has been hounding her office, though, about introducing legislation like this? Edit: If you ever find yourself up here, give me a call or PM. I know a great place to eat. Last modified: 2010-04-14 23:52:04 by jcwaliski 2010-04-14 23:51:10 Permalink
Genesis Posts: 130804 Incept: 2007-06-26	Well, she may need to win an election, but if she gets that in the bill.... I'm going to call in the AM and try to get a copy out of one of her legislative assistants. ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2010-04-14 23:54:49 Permalink
Jcwaliski Posts: 2458 Incept: 2008-10-01	I will call as well. Most of my "connections" are with Sen. Pryor's and Rep. Marion Berry's office, but I will do some digging and "encourage" Sen. Lincoln as well. She could very well be out in Nov, though. This needs to get some PR. Do you think Mish has picked up on it yet? Right now, her chances of re-election are rather slim. Gilbert Baker is making a name for himself on the Republican side, and there are a lot of****ed off Arkansans who feel like she was a "traitor" with her Obamacare cloture vote. When it comes down to it, the farmers will make or break her in Nov. Most of my farmer friends have shown disapproval of her recently. She will no doubt be campaigning in the area - If all else fails, I will try and schedule a face-to-face. As an aside, Congressman Marion Berry, though he did not listen to me on the Bailout/Stimulus vote, did personally call me several times to solicit my thoughts on major legislation. Though he is stepping down, he made the right call by outing Obama and voting "nay" on the HC bill. Last modified: 2010-04-15 00:04:01 by jcwaliski 2010-04-14 23:59:24 Permalink*
Anti Posts: 4303 Incept: 2007-10-09	It is suspicious that Geithner had something nice to say about the bill. ---------- Health is better than health insurance http://gerson.org/ Over the past 60 years, thousands of people have used the Gerson Therapy to recover from so-called “incurable” diseases such as cancer, diabetes, heart disease and arthritis. 2010-04-15 00:04:22 Permalink
Jinroh Posts: 779 Incept: 2009-05-05 Room 101	Very.This looks more like a desperation move on her part.And even then I see it being watered down to nothing in the end.As someone in DC recently opined "The Banks own this place" Still here's to hoping it gets legs. ---------- Constitution Class taught by Michael Badnarik : http://www.archive.org/details/Michael_Badnarik I say we take off and nuke the entire site from orbit. It's the only way to be sure. 2010-04-15 00:14:17 Permalink
Throxxofvron Posts: 10339 Incept: 2009-02-17 Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off	Quote: Ok, there is a God and I will go to Church. ! I know a nice little church, right there in Niceville; where the Pastor's Daughter used to play the piano and organ. There was this one hymm that I can't remember the Name of... Lunch after is on Me, Karl. Jcwalski: PM Me, or Better -post Lincoln's State office Phone Number; and I'll call tomorrow to offer support... We All should if this is actually offered as Legislation. ---------- DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell Last modified: 2010-04-15 00:35:11 by throxxofvron 2010-04-15 00:29:42 Permalink
Jcwaliski Posts: 2458 Incept: 2008-10-01	Throxx, I'm working on getting some aides names from a friend. She is kind of being an ass to me, but I will remind her of all of those tests I helped her pass so she could obtain a degree. I will PM you something in the morning at the very least. Perhaps Goforbroke can dig something up as well. She is a whiz at this stuff. Her phone lines need to be white hot tomorrow. http://lincoln.senate.gov/contact/locati.... Quote: Washington D.C. Office 355 Dirksen Senate Building Washington, DC 20510-0404 Phone: (202)224-4843 Fax: (202)228-1371 Little Rock Office 912 West Fourth Street Little Rock, AR 72201 Phone: (501) 375-2993 or toll free 1-800-352-9364 Fax: (501) 375-7064 Dumas Office 101 East Waterman Dumas, AR 71639 Phone: (870)382-1023 Fax: (870)382-1026 Community Affairs Specialist: Raymond Fraizer Jonesboro Office Federal Building 615 South Main Street Suite 315 Jonesboro, AR 72401 Phone: (870) 910-6896 Fax: (870)910-6898 Community Affairs Specialist: Roger Fisher Fayetteville Office (Under Construction) 4 South College Avenue Suite 205 Fayetteville, AR 72701 Phone: (479) 251-1224 Fax: (479)251-1410 Community Affairs Specialist: John Hicks Fayetteville Office (Temporary) 208 North College Avenue, Suite A Fayettevile, AR 72701 Same number and fax Texarkana Office Miller County Courthouse 400 Laurel Street Suite 101 Texarkana, AR 71854 Phone: (870) 774-3106 Fax: (870) 774-7627 Community Affairs Specialist: Ed French Last modified: 2010-04-15 00:35:01 by jcwaliski 2010-04-15 00:33:38 Permalink
Jcwaliski Posts: 2458 Incept: 2008-10-01	We need to try and poke some holes in this as soon as it comes out - that way it can be tightened up before being introduced. This could seriously be a great thing if it passes, because lincoln NEEDS this to work to save her image. Here is a snippet of a conversation that I had with one of my trader friends tonight regarding this bill. Quote: JCW: http://networkedblogs.com/2VkCw holy crap! smeone is trying to win an election JEP: walling off is pointless - it won't work because money is fungible JCW: exactly - thats why I am going to call her office and insist on some kind of phone conversation or face to face when she is in the area so poke holes in it - all you can JEP: suppose they got rocked in the derivatives unit. they'll just shutter it, take the massive equity hit on their corporate balance sheet if that puts the bank in danger of too little capital.... then you've got a failing bank on your hands again ipso facto, you've got insured deposits at risk once again JCW: ok, so propose something that would make sense...seriously. I would like something to tell her or her aides JEP: it's a nice thought, but there's no way to hide the truth: trading involves risk. that's not a bad thing but there's no way to sugar-coat it if you win, you get money. if you lose, you give money 2010-04-15 00:42:35 Permalink
Throxxofvron Posts: 10339 Incept: 2009-02-17 Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off	Thank You, Jcwaliski. I'll be on THIS. I'll voice My Strong Support of the Legislation. -& leave the choice of Electing Your Representation to You... &, Karl: THIS kind of Legislative Imperative is being driven to some degree by Persons such as Yourself -and is *****n Important!* Whether Lincoln is doing this for Her own Political gain or not; this could be a 'Come to Jesus' moment. I'm gonna be waiting to hear Paul Volker, Elizabeth Warren -& Congress; weigh in on this... ---------- DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell 2010-04-15 00:43:40 Permalink
Bertdilbert Posts: 2666 Incept: 2008-12-22 CA	Last I checked with the BIS site, the market value of the intrest rate dirivatives alone were 15 trillion. I assume then that the banks are carrying 15 trillion on the books related to these instruments... If the banks are carrying 15 trillion on the books, how do you take that off and have them remain solvent? http://www.bis.org/statistics/otcder/dt1.... ---------- Dear Euroland: Relax, Germany has a plan for your money! Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro. 2010-04-15 00:51:20 Permalink
Goldbrick Posts: 2946 Incept: 2008-01-23 Indiana	So long as her bill isn't attached to another POS, this is something that all TFers should support. ---------- "The higher I go, the crookeder it gets." --Michael Corleone "Instead of cursing the darkness, light a CONgressman." 2010-04-15 00:54:11 Permalink
Jcwaliski Posts: 2458 Incept: 2008-10-01	Please don't deify her on here, but on balance she has been a fairly moderate Democrat. 2010-04-15 00:55:37 Permalink
Etz Posts: 13893 Incept: 2007-06-26 LA	puhlease... who's asking for skittle ***ting unicorns now? ---------- Legal chicanery and beneficent darkness are the banker's stoutest allies - F.Pecora. 2010-04-15 01:01:42 Permalink*
Donethat Posts: 771 Incept: 2009-04-22	Lincoln seems to be a prime candidate for a Trojan Horse, Geithner likes her bill???? About the only senators I figure aren't bought off by the Banks are Wyden and Merkely. 2010-04-15 02:19:58 Permalink
Icanhasbailout Posts: 9939 Incept: 2009-03-10 Imaginationland	Surely we are all to experienced by now to believe that this political class will do a damn thing to solve the problem? ---------- 2010-04-15 02:29:44 Permalink
Donethat Posts: 771 Incept: 2009-04-22	Bertdilbert, the OCC publishes the Banks Derivative holdings, notional and net. http://www.occ.treas.gov/deriv/deriv.htm Sigtarp. http://www.sigtarp.gov/reports.shtml dtcc.com will have the Goldman spin that those credit default swap Trillions just cancel out, Jefferson county not withstanding. They must be collecting IP addresses though. Just love this oxymoronic named web site heh? http://www.financialstability.gov/ http://www.financialstability.gov/docs/F.... 2010-04-15 02:39:18 Permalink
Mikek31 Posts: 4360 Incept: 2009-05-04 Chicago	If Timmy likes this bill, then it'll look like swiss cheese by the time all the holes are found. If Timmy is just doing what he does best - lie - then we may have something here. Then it'll be the bankers punching holes and crucifying anyone who supports this. ---------- Intentional manipulation of markets is usually thought of as a crime, not a benefit, and should lead to indictments, not praise. -Karl 2010-04-15 04:26:47 Permalink
Gillianx Posts: 65 Incept: 2010-01-07	Don't believe this will get anywhere. In case you all forgot, Goldman owns the place. http://www.marketwatch.com/story/fed-end.... 2010-04-15 07:53:31 Permalink
Patentleathershoes Posts: 9997 Incept: 2007-09-13 On the Daisy Chain	Thankfully it's a quiet time at work. I'll be calling also. Gen's going to Church and confession . There is a God. ---------- "An unborn child's property rights are protected by law. His right to life is not." Ronald Reagan 2010-04-15 08:15:38 Permalink
Robert17 Posts: 81 Incept: 2009-03-15 Judsonia, Arkansas Banned	Nice try Blanche. You're still not getting my vote, you Harry Reid Harlot. 2010-04-15 08:18:37 Permalink
Docj Posts: 1000 Incept: 2009-09-10 Duck & Cover	Well, good for Sen. Lincoln on this one. Sure, this is probably little more than election year - gotta save my sorry bacon for another 6-year membership in the Millionaire's Club - hat-tip to the great unwashed, but if this proposal is actually real (a big if) and can get implemented without being watered down to nothing (an even bigger if) then kudos and bravos are indeed owed to the gentlewoman from Arkansas. And I can't wait for the Party of Stupid (that would be the GOP) to get on the wrong side of this. I'm sure they're already hard at work trying to figure that out. ---------- The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams 2010-04-15 08:19:45 Permalink
Asimov Posts: 104068 Incept: 2007-08-26 East Tennessee Eastern Time Online	Now THAT'S a bill I'll stand behind. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2010-04-15 08:21:32 Permalink
Steelhead23 Posts: 2043 Incept: 2008-09-09 Portland OR	In today's world, when we (TFers) see a senator putting forth a bill that makes us want to "go to church" it is time to pass the collection plate. If we want her to succeed, for such courage to be rewarded, we need to write checks. Here is my view. Money in politics sucks. But its there. If we don't give money to candidates we would like to vote for, they will lose. The other side is certain to write checks. So, even if you don't live in Arkansas, you can support Senator Lincoln. ---------- "Give me control of a nation's money and I care not who makes it's laws" —~~Mayer Amschel Bauer Rothschild~~ Benjamin Bernanke For-profit commercial banks are a menace and should be eradicated 2010-04-15 10:12:37 Permalink
Genesis Posts: 130804 Incept: 2007-06-26	Legislative text not yet available - will be tomorrow. ---------- I don't care* if it makes sense -- only if it makes money. -- Me* Bank (n): See scam, fraud and theft. *Eat a bankster -- they're low-carb.* *What part of "shall not be infringed" was unclear?* 2010-04-15 10:13:10 Permalink

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