Published on Thursday, October 7, 2010 by BanksterUSA
Is Geithner Planning a Stealth Attack on the Wall Street Reform Bill?
by Mary Bottari
Champions of financial reform who fought hard for a strong Wall Street reform bill this year know they cannot let down their guard. They are tracking and countering the moves of the big banks as they try to weaken the Dodd-Frank law during the implementation phase. They are bracing for a battle with Republicans who are threatening to repeal key parts of the law. What they were not expecting was a rear-guard attack on the recently passed measure from the Obama administration.
Rumors are rampant in Washington D.C. that Tim Geithner's first act as the new head of the Financial Stability Oversight Council, the high-level body created to bring stability to the financial system, will be to blow a hole in the Dodd-Frank law. Evidently, Geithner is interested in exempting the $24 trillion – that is trillion with a “t” – foreign exchange (or forex) market from the clearing and transparency requirements of the act.
Derivatives Chapter Was a Victory for Reformers
The $600 trillion off-book derivatives market was critical in turning the collapse of a domestic housing bubble into a global international catastrophe. In the United States taxpayers found out that they were on the hook for the big bank's reckless bets in the derivatives market and $4.7 trillion in taxpayer funds was disbursed to stabilize the system.
One of the great victories of reformers was the strong derivatives chapter of the Dodd-Frank law which will bring the vast majority of all derivatives trades out of the shadows onto an open exchange with capital requirements to mitigate risk and real-time information about pricing and volume. No longer will Goldman Sachs be able to hire one client behind closed doors to design a toxic product, then turn around and peddle that same product to another client in a secretive, bilateral fashion.
During the debate in Congress, the House passed a version of the derivatives chapter riddled with dangerous loopholes covering only 60 percent of derivatives trades. Reformers, working under the umbrella of Americans for Financial Reform, succeeded in closing those loopholes in the final version of the bill and covering almost all derivatives trades -- over 90 percent of the market -- with a very narrow exception for legitimate end-users.
This triumph over the big banks that want to keep these trades in the shadows may now be in jeopardy.
Financial Instability Council?
One of the Obama administration's much touted reforms in the Dodd-Frank law was the creation of the Financial Stability Oversight Council made up of top state and federal regulators including the Federal Reserve Board Chair, the heads of the FDIC, SEC, CFTC and the new Consumer Protection Bureau. According to the Treasury Department, the Council will provide “comprehensive oversight over the stability of our nation's financial system.”
The first meeting of the stability council took place this week. Treasury Secretary Tim Geithner is the chair. Ironically, It looks like Geithner is considering exploiting language in the law that allows him to exempt the $24 trillion forex market from the clearing and transparency requirements, throwing these trades back into the shadows. The forex market is a worldwide over-the-counter market for the trading of currencies. Forex traders argue that the market performed well during the financial crisis, but the risk is that without transparency in this enormous, interconnected market, the failure of a major dealer could contribute to another crisis which could cascade through the entire financial system.
www.commondreams.org
Is Geithner Planning a Stealth Attack on the Wall Street Reform Bill?
by Mary Bottari
Champions of financial reform who fought hard for a strong Wall Street reform bill this year know they cannot let down their guard. They are tracking and countering the moves of the big banks as they try to weaken the Dodd-Frank law during the implementation phase. They are bracing for a battle with Republicans who are threatening to repeal key parts of the law. What they were not expecting was a rear-guard attack on the recently passed measure from the Obama administration.
Rumors are rampant in Washington D.C. that Tim Geithner's first act as the new head of the Financial Stability Oversight Council, the high-level body created to bring stability to the financial system, will be to blow a hole in the Dodd-Frank law. Evidently, Geithner is interested in exempting the $24 trillion – that is trillion with a “t” – foreign exchange (or forex) market from the clearing and transparency requirements of the act.
Derivatives Chapter Was a Victory for Reformers
The $600 trillion off-book derivatives market was critical in turning the collapse of a domestic housing bubble into a global international catastrophe. In the United States taxpayers found out that they were on the hook for the big bank's reckless bets in the derivatives market and $4.7 trillion in taxpayer funds was disbursed to stabilize the system.
One of the great victories of reformers was the strong derivatives chapter of the Dodd-Frank law which will bring the vast majority of all derivatives trades out of the shadows onto an open exchange with capital requirements to mitigate risk and real-time information about pricing and volume. No longer will Goldman Sachs be able to hire one client behind closed doors to design a toxic product, then turn around and peddle that same product to another client in a secretive, bilateral fashion.
During the debate in Congress, the House passed a version of the derivatives chapter riddled with dangerous loopholes covering only 60 percent of derivatives trades. Reformers, working under the umbrella of Americans for Financial Reform, succeeded in closing those loopholes in the final version of the bill and covering almost all derivatives trades -- over 90 percent of the market -- with a very narrow exception for legitimate end-users.
This triumph over the big banks that want to keep these trades in the shadows may now be in jeopardy.
Financial Instability Council?
One of the Obama administration's much touted reforms in the Dodd-Frank law was the creation of the Financial Stability Oversight Council made up of top state and federal regulators including the Federal Reserve Board Chair, the heads of the FDIC, SEC, CFTC and the new Consumer Protection Bureau. According to the Treasury Department, the Council will provide “comprehensive oversight over the stability of our nation's financial system.”
The first meeting of the stability council took place this week. Treasury Secretary Tim Geithner is the chair. Ironically, It looks like Geithner is considering exploiting language in the law that allows him to exempt the $24 trillion forex market from the clearing and transparency requirements, throwing these trades back into the shadows. The forex market is a worldwide over-the-counter market for the trading of currencies. Forex traders argue that the market performed well during the financial crisis, but the risk is that without transparency in this enormous, interconnected market, the failure of a major dealer could contribute to another crisis which could cascade through the entire financial system.
www.commondreams.org
