Morgenson tells us that on November 13th, 2008, a month after the nine biggest players in the derivatives market accepted bailout money, these same folks created a lobbying group: "The CDS Dealers Consortium."
The new group has been lobbying intensively this session to limit the amount of regulatory oversight that'll be imposed upon them by Congress with regard to their efforts to put a saddle on the credit default swaps industry.
We're told there are two schools of thought with regard to the development of legislation to impose stricter controls over the industry; two camps as it were:
"One camp, which includes legislative leaders, is pushing for trading on an open exchange -- much like stocks -- where value and structure are visible and easily determined. Another camp, led by the banks, prefers that some of the products be traded in privately managed clearinghouses, with less disclosure."
Treasury Secretary Geither is very much in favor of the Wall Street solution to this effort (privately managed clearinghouses with less disclosure).
Critics in both the financial world and Congress say relying on clearinghouses would be problematic. They also say Mr. Geithner's plan contains a major loophole, because little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default.
"The banks want to go back to business as usual -- and then some. And they have a lot of audacity now that everyone has bailed them out," said Yra Harris, an independent commodities trader who was involved in an effort to regulate derivatives nine years ago. "But we have to begin with the premise that Wall Street doesn't want transparency, because more transparency means less immediate profits."
She cites an anecdote mentioned by Senator Tom Harkin (D-IA) about a visit Geithner made to the Democratic caucus on Capitol Hill about three weeks ago: "Mr. Harkin said, he challenged Mr. Geithner to 'define customized swaps.' Mr. Harkin said the Treasury secretary told him he would have to get back to him."
Harkin, discussing the government's efforts to more heavily regulate the credit default swaps' marketplace, said:
"The swaps and derivatives people are all over the place up here," Mr. Harkin said. "They sure are trying hard to win. A lot of money is on the line."
Morgenson reminds us that Wall Street forked over no less than $152,000,000 in political contributions in 2007 and 2008. She also informs us that Representative Collin C. Peterson, (D-MN), has introduced a bill that specifically bars derivatives trading in clearinghouses regulated by the New York Federal Reserve. Peterson said:
...a clearinghouse regulated by the New York Federal Reserve, which he said in an interview "is a tool of the big banks" that "wouldn't do much" to regulate the contracts.
"The banks run the place," Mr. Peterson said. "I will tell you what the problem is -- they give three times more money than the next biggest group. It's huge the amount of money they put into politics."
In a highly publicized story about a month ago, the number two ranking Democrat in the Senate, Senator Dick Durbin (D-IL), said pretty much the same thing: "Frankly, banks own the place."
Are you okay with this? Isn't the long-term answer to this mess all about transparency? Real transparency?
It's simple, either we push for that now, not just with strong regulations with regard to the credit default swaps sector, but in terms of how we oversee the largely-unsupervised Federal Reserve System, as well. Legislation's been introduced of late to audit this entity; you remember them, right? They're surreptitiously distributing trillions of taxpayer funds now, and our government has next to no information about any of that. Are you okay with that, too?
I'm not okay with the status quo carrying on as they have up until now. It would certainly appear the Treasury Secretary Geithner, despite his comments to the contrary, is in favor of keeping things pretty damn close to how they've been all along, despite words from him and others about heavier regulation going forward.
I'm tired of the lip service. Are you?
And, as Paul Krugman reminds us, also in this morning's NY Times in, "Reagan Did It," it's all about either letting Reagan's laissez faire policies continue, or putting a stop to that once and for all.
One of my favorite sayings applies. We can either "do what we've done, and we'll continue to get what we've got," or we can push hard for real change right now. All of this legislation is being formulated and/or introduced into the House starting this week. A powerful financial services lobby is working hard to setup a scenario that is little more than one big "Groundhog Day" for Main Street. We've been watching that story, and it doesn't end well...at least not for us.
Let's not go there again. It is time to put a real saddle on Wall Street. And, if we don't scream about that right now, it's not going to happen.