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Thread: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

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    Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Aug. 31 (Bloomberg) -- Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.

    Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.

    “Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics, which analyzes banks for investors.

    The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives. This time could be different. The reason: widespread public and Congressional anger over the role derivatives such as credit-default swaps played in the worst financial crisis since the Great Depression.

    “Public sentiment isn’t very much in their favor,” said Richard Lindsey, a former director of market regulation at the U.S. Securities and Exchange Commission who worked at Bear Stearns Cos. from 1999 to 2006, referring to Wall Street firms. “In some places, they’re not going to have anybody who wants to listen to them.”

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    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    I honestly see absolutely no realistic way that this market could be regulated. I'm guessing that the Administration's plan will involve handing over regulatory power to the SEC, which is already notoriously underfunded. But aside from regularly auditing these five corporations that control 90% of the market, which I don't see as realistic at all, what could they actually do that has any chance of working?
    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    There is one easy way of doing it... break up the banks.
    PeteEU

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    The only solution I can see, is to have a legal risk rating system on these derivatives. By doing so the government has no need to impede on the trading of these derivatives, but at the same time, investors may be protected as these derivatives will have actual real ratings as to the real risk associated with them. The government may hold the right to audit such ratings and if they are not in accordance, fine the seller of the derivative.

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Quote Originally Posted by tlmorg02 View Post
    The only solution I can see, is to have a legal risk rating system on these derivatives. By doing so the government has no need to impede on the trading of these derivatives, but at the same time, investors may be protected as these derivatives will have actual real ratings as to the real risk associated with them. The government may hold the right to audit such ratings and if they are not in accordance, fine the seller of the derivative.
    Or here is a thought...

    ban derivatives trading...
    PeteEU

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Quote Originally Posted by PeteEU View Post
    Or here is a thought...

    ban derivatives trading...
    Derivatives could still be used to get qualified home buyers a lower interest rate. This was how things first began in the U.S. housing market. Then lenders began making riskier loans and hinding them in the bundles of derivatives and passed them on to unknowing investors. The meltdown occurred in the banks, therefor they are the ones that should be punished, not the investors.

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Quote Originally Posted by tlmorg02 View Post
    Derivatives could still be used to get qualified home buyers a lower interest rate. This was how things first began in the U.S. housing market. Then lenders began making riskier loans and hinding them in the bundles of derivatives and passed them on to unknowing investors. The meltdown occurred in the banks, therefor they are the ones that should be punished, not the investors.
    The banks could not have pushed their drugs without willing investors and they could especially not have pushed their crap if they had not bought off the regulators and legislators to make it possible in the first place.

    Face it, massive deregulation, the lack of regulation, transparency and oversight lead to the melt down pure and simple. Wall Street bought off the politicians and the government with fake economic growth and were left to do what they wanted. When it all came crashing down, they came crying back to big daddy who was forced to bail them out or face total economic collapse of a whole nation. Had big daddy been the parent as he should, then it would never have happened, but instead big daddy broke to the great greed god instead of doing his job.

    Hence threaten to ban derivatives, break up of banks, heck threaten nationalization if you have too, to get the financial sector off the drugs and back down to reality and live with-in their means and the rules.

    But I aint holding my breath, since big daddy is still hooked on the money train from Wall Street and cant let go.
    PeteEU

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    Quote Originally Posted by PeteEU
    Hence threaten to ban derivatives
    Given the size of the national and international derivatives markets and the impossibility of enforcing such a ban, I doubt anyone would take it seriously.


    Face it, massive deregulation, the lack of regulation, transparency and oversight lead to the melt down pure and simple. Wall Street bought off the politicians and the government with fake economic growth and were left to do what they wanted. When it all came crashing down, they came crying back to big daddy who was forced to bail them out or face total economic collapse of a whole nation. Had big daddy been the parent as he should, then it would never have happened, but instead big daddy broke to the great greed god instead of doing his job.

    Hence threaten to ban derivatives, break up of banks, heck threaten nationalization if you have too, to get the financial sector off the drugs and back down to reality and live with-in their means and the rules.
    Both the country's largest banks and the US government have profited enormously off of this crisis.
    Last edited by Khayembii Communique; 08-31-09 at 01:00 PM.
    "I do not claim that every incident in the history of empire can be explained in directly economic terms. Economic interests are filtered through a political process, policies are implemented by a complex state apparatus, and the whole system generates its own momentum."

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    Re: Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

    I say leave them alone.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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