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There are some aspects of the financial reform bill hammered out over the past week in conference and in back-room meetings that are stronger than many expected going in. There are a few elements that are worse, and a few that are essentially a wash, depending on your perspective and how much you have invested in spinning the results. For instance, to take the Wall Street perspective, who better than the Wall Street Journal?

In two important ways, the agreement is tougher on the banking industry than officials in the Treasury Department anticipated when they first drafted their version of the bill 12 months ago.

Lawmakers agreed to a provision known as the "Volcker" rule, named after former Federal Reserve Chairman Paul Volcker, which prohibits banks from making risky bets with their own funds....

The bill also includes a provision, authored by Sen. Blanche Lincoln (D., Ark), which would limit the ability of federally insured banks to trade derivatives.

Wall Street calls it tough, because any kind of restriction on banksters is going to be tough, as far as they're concerned. One of the toughest, reform-minded Congressional Democrats isn't so sure. "'This bill gets weaker by the day,' complained Sen. Byron Dorgan, D-N.D., the chairman of the Senate Democratic Policy Committee." Dorgan's displeasure is unlikely to be enough to lead him to vote against the bill.

To get a sense of where it all comes down, here's a look at some of the key elements.

CFPA: The Consumer Protection Agency that emerged wasn't as strong as the original contained in the House bill--a fully independent agency, like the EPA. But it's strong enough to have gained Elizabeth Warren's support.

"I'm disappointed that Congress seems to be taking the side of auto lenders and big banks over the Pentagon, community banks, and all the public interest groups that oppose an auto dealer carve-out, and there are some other problems as well," said Warren. "But right now the bureau has the authority and the independence it needs to fix the broken credit market. I keep waiting for an incoming missile that means the banks have won their fight to destroy this consumer agency, but that hasn't happened so far -- and I don't think it will."

As the person who originated the idea of the agency, her blessing, though limited, is a good indicator that it's pretty decent. The Bureau will be housed in the Federal Reserve. The Fed won't have authority over it, but will be required to fund it. What's important in that part of the provision is that it won't be subject to the political whims of Congress--Congress won't be able to cut of it's funding.

Credit rating agencies: Remember the scandal revealed a few months ago, when we found out that the credit ratings agencies, like Moody's and Standard and Poor's "knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees." Al Franken introduce an amendment to stop those bribes. The result:

They’ll now be liable for their negligence like any other trader. A study (one of over 30 in the bill) would have to come up with a way to end the issuer-pays model for rating agencies, and would give priority to Al Franken’s solution of an SEC office assigning the products for initial ratings. Most of the statutory language around mandating top-rated NRSRO products will get excised from the regulatory code.

Volcker: What it was intended to do, as Paul Volcker envisioned, was to have forced banks to stop trading their own, FDIC-insured (taxpayer backed) money to speculate in financial markets. Those are the deposits made by regular customers--individuals, businesses, the like. Volcker's argument was that those funds, backed by the FDIC and securing access for banks to cheap funds from the FED, shouldn't be used as a subsidy for banks to speculate with. How it turned out:

After days of leaks to the news media that the Senate was looking to ease the restrictions, on Thursday afternoon Senate conferees confirmed the rumors: banks could invest up to three percent of their tangible common equity in hedge funds and private equity firms. Tangible common equity -- considered to be the strongest form of bank capital -- is comprised of shareholder equity.

A few hours later, the Senate amended its proposal, changing the metric from tangible common equity to Tier 1 capital. Banks have more Tier 1 capital than they have tangible common equity, so changing the requirement to the weaker form of capital allows banks to invest more of their cash in hedge funds and private equity funds. The concession was confirmed by Steven Adamske, spokesman for House Financial Services Committee Chairman Barney Frank.

Using JPMorgan Chase, the nation's second-largest bank by assets with more than $2.1 trillion, as an example, the bank would be able to invest an additional 40 percent of its cash, or an extra $1.1 billion for a total of $4 billion, in the activities that Volcker wanted to prohibit banks from engaging in, according to the firm's latest annual filing with the Securities and Exchange Commission.

In addition to allowing banks to use more of this capital for speculation, the Senate gave Scott Brown his loophole, carving out exceptions for a specific class of financial institutions, namely "State Street Corp., the nation's 19th-largest bank with $153 billion in assets, and BNY Mellon, the nation's 13th-largest bank with $221 billion in assets." Both banks are in Massachusetts.

There are some limits to how much of our tax-payer backed money banks can take to the casino. On the other hand, it's a stronger provision than was originally in the Senate bill, which was basically telling regulators to study whether they should implement the Volcker Rule. Now it instructs them to study a ban on banks trading their own money, and instructs them to issue rules on how to implement it based on that study, not whether to implement the rules.

Here's Merkley's take, from an e-mailed press release:

“The inclusion of a ban on proprietary trading is a victory.  If implemented effectively, it will significantly reduce systemic risk to our financial system and protect American taxpayers and businesses from Wall Street’s risky bets.  This is an important step forward from the current system that has placed few limits on speculative trading by either banks or other financial firms.  Now banks will be prohibited from doing these trades and other financial giants will have to put aside the capital to back up their bets.

“Unfortunately, there is some danger to the principle posed by a loophole that allows for so-called ‘de minimis’ investing.  While the overall Merkley-Levin framework is stronger than either the House or Senate bills, we will now be dependent on regulators to make sure that this exception does not weaken the rule."

Derivatives:This one could almost be categorized a loss, but I'm being charitable. Lincoln's "Sec. 716" proposal, would have forced the big banks to spin off their swaps trading desks into subsidiary institutions, separately capitalized. How did it turn out? David Dayen:

So what have they done? Put half of the trades, the riskiest ones including credit default swaps, onto the separate subsidiaries, while allowing the bank to still trade interest rate and currency swaps as before. This makes almost no sense to me. It bifurcates the market in derivatives and allows plenty of risky trading to still accrue in the bank. Or does it:

Under the agreement banks would only spin off their riskiest derivatives trades. Banks get to keep some of their lucrative business based on trades in derivatives related to interest rates, foreign changes, gold and silver. They could even arrange credit default swaps, the notorious instruments blamed for the meltdown, as long as they were traded through clearing houses. Banks also would be allowed to trade in derivatives with their own money to hedge against market fluctuations.

So basically, Blanche Lincoln lost most of the measure. She rode in on her white horse and just gave up at the end. I’m sure this will position her well for re-election.

Banks will also be allowed to continue "deal interest rate and foreign exchange swaps, 'credit derivatives referencing investment-grade entities that are cleared,' derivatives referencing gold and silver, and the firms would be allowed to hedge 'for the banks' own risk.'"

Swipe fees: My first inclination was to put this one under the win column, but it still leaves some of the most vulnerable consumers in the cold, so while it's an improvement on the status quo, it's not a complete win.

The deal, struck between Sen. Dick Durbin (D-Ill.) and key House negotiators, leaves out some elements that consumer advocates had been fighting for. It allows fees charged to reloadable, prepaid debit cards -- generally used by the poor -- to remain unregulated. And it allows an exemption for states that use debit cards to dole out benefits. But, for the first time, banks and credit card companies will face restrictions on the fees they can charge merchants for the privilege of accepting credit and debit cards.

This was a win for merchants, who pay exorbitant transaction fees to Visa and MasterCard with every swipe of a debit or credit card. In the long run, the savings could be passed on to consumers.

Auto dealers: Used-car salesman got a win. Auto-dealers who offer financing to customers will be exempt from regulation by the CFPB. So that element of predatory lending remains essentially unfettered, despite the best efforts of the Pentagon and the administration. Soldiers are particular targets for the less-honest of care dealers.

Lawyers who defend soldiers against car dealers in lawsuits say they have seen auto loans with rates as high as 25 percent, as well as other harmful practices.

Army Spec. Martin Garcia said that in 2009 he tried to buy a used Dodge Neon from a dealership outside his base at Foot Hood, Tex. He paid $12,000 for the car, putting $2,000 down.

A few days later, the dealer asked him to return to the lot. The managers then informed Garcia that he had to pay another $2,000 because his loan contract was not approved by the lender. Meanwhile, he said, an employee of the dealer parked a car to block the Neon from leaving the lot. Garcia handed over the keys and had to arrange other transportation. He said the dealer sold his car the next day to another customer and kept Garcia's down payment.

Garcia said he filed a lawsuit to try to recover the money.

So if you thought that the Pentagon ruled Congress, they got nothin' on the car dealers.

In other, less prominent issues, Lincoln did get a win for Wal-Mart. Well, for the Walton family, which is the same thing. "She got a special exception to new banking rules for the Walton family's bank."

There's a ton more in the bill. If you want a quick and dirty trad med review of provisions, this one is as good as any.

Prospects for passage, despite the fact that every Republican in the conference ended up voting against the conference report, seem good. Yesterday, Chuck Grassley made some noises about not supporting the bill if Lincoln's derivatives reform didn't come out intact. His vote can probably be spared, unless Scott Brown reneges after getting his carve-out. If Feingold stays true to his word, he'll probably be a "no." The weakened derivatives will recapture the New Dems in the House, so passage there isn't threatened.

Originally posted to Daily Kos on Fri Jun 25, 2010 at 12:40 PM PDT.

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Comment Preferences

  •  I wish I had the faith that this bill (14+ / 0-)

    will do what it is intended to do...

    But in the end- I do not.

    •  It will do what it intended to do.,. (13+ / 1-)

      Help the Banks, Auto Dealers, and give the President A Bill To sign, and put a checkmark on the list...

      Doing ANYTHING for the American People??  THERE it appears to leave a LOT to be desired.. as sadly expected..

      Kinda like Health Care """reform""" no?

      •  Still better than nothing (4+ / 0-)
        Recommended by:
        Iberian, Frank Palmer, papicek, Egalitare

        though it will keep more from being done now that Wall Street Reform has "happened".  I just keep asking myself what would have been done had the parties been reversed, and I keep answering that we'd be in a lot worse condition if the Republicans were in charge.

        Sure, it's not what we'd prefer, but I feel it's better than another scenario, so I'll take it and keep writing/phoning.

        •  Gotta love the "better than nothing" strategy. (9+ / 0-)

          Democrats have run that to perfection with health care, Wall Street, taxes, education, jobs.

          Wish Obama had run on that from the beginning so I could have saved my money and voted someone else.

        •  Good approach. (5+ / 0-)
          Recommended by:
          Frank Palmer, KenBee, ColoTim, papicek, JesseCW

          It's better by far for the country that it passed. But yeah, there's still systemic risks, and judging by the behavior of the banksters of late, one doesn't get a great sense that they learned from the experience. Of course, the big guys still got theirs, so why should they have?

        •  Personally (5+ / 0-)
          Recommended by:
          Iberian, Julie Gulden, ColoTim, papicek, Loge

          It is far better than I thought we were going to get. I thought Blanche would cave totally in the end. Volker would be a complete shell of the originally idea. And consumer protection would disappear all together. One the whole I'm please that sausage making turned out more sausage than empty casing.

          In the choice between changing ones mind and proving there's no need to do so, most people get busy on the proof.

          by jsfox on Fri Jun 25, 2010 at 01:20:29 PM PDT

          [ Parent ]

        •  Bill Does Nothing About "Too Big To Fail" (3+ / 0-)
          Recommended by:
          papicek, George Hier, JesseCW

          No matter what happens, the biggest financial institutions can continue to make bets, and if they lose, taxpayers will bail them out just like before.  If the bets win, the banks get the upside.

          I'd sure like to be able to head over to Las Vegas and fund my gambling with a government credit card.  Especially one that allows me keep all that I win.  

          TOO BIG TO FAIL:  Grade: F

          The new regulation does not directly address either the repeal of Glass Steagall or TBTF. The crisis legacy is a financial services sector that is highly concentrated with dramatically reduced competition. The six largest financial firms — combined assets: $9.4 trillion — will still dominate the industry.  Too-Big-to-Fail remains the law of the land.

          •  There's more than just that in the bill (0+ / 0-)

            and that's what I'm getting at.  If we hang everything on a single measure (e.g. a public option), we wind up ignoring or even denigrating the good parts of the bill.

            If we could do single-issue bills, I think that would be great, but apparently they have to have these huge bills filled with all sorts of gifts just to have anything pass.

          •  That's misleading (0+ / 0-)

            It doesn't repeal Glass-Steagall, but that's not necessary since the firms that failed with the biggest consequences to the system, Lehman, Bear, and AIG, didn't combine investment banking with deposit taking.  

            It also has the Senate's provisions governing wind-down authority.  Since it's not a separate fund set up for that, I'd give it a B-minus, but it's not an F.

            "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

            by Loge on Fri Jun 25, 2010 at 05:31:10 PM PDT

            [ Parent ]

        •  It's a matter of perspective (1+ / 0-)
          Recommended by:

          As a consumer protection act, it's way better than nothing.

          As an overhaul of regulations for the FIRE sector....

          well, looked at that way it's pretty darn close to nothing, and runs the risk of draining off the drive for reform without accomplishing what such an overhaul needs to.

          "Israel does not any longer occupy the West Bank or Gaza. They left." Rep. Weiner

          by JesseCW on Fri Jun 25, 2010 at 02:21:28 PM PDT

          [ Parent ]

      •  A couple of minor things, like swipe fees (4+ / 0-)

        and it will hopefully allow the CFPA to build on last years Credit Card reforms, requiring clearer and simpler loan terms for mortgages ect.

        But it doesn't really do that much to remove the risk of systemtic collapse, and it does pretty much nothing about the too big to fail firms.

        An ok consumer finance bill with some extras.

        A far cry from overhaul of the financial system.

        "Israel does not any longer occupy the West Bank or Gaza. They left." Rep. Weiner

        by JesseCW on Fri Jun 25, 2010 at 12:57:58 PM PDT

        [ Parent ]

      •  HR is out of line NT (1+ / 0-)
        Recommended by:
        George Hier

        "Israel does not any longer occupy the West Bank or Gaza. They left." Rep. Weiner

        by JesseCW on Fri Jun 25, 2010 at 02:19:03 PM PDT

        [ Parent ]

    •  If your only major "loss" is the auto-dealer (0+ / 0-)

      provision, then this is fucking good bill....

      When the storm blows hard you must stand firm, for it is not trying to knock you down, it is trying to teach you to be strong. Lakota saying

      by dizzydean on Fri Jun 25, 2010 at 02:44:26 PM PDT

      [ Parent ]

    •  Some progress. (0+ / 0-)

      It does some of what needed to be done.

      Had I been in Congress, I would have voted for it.

      More needs to be done.

      Campaigning against the guys (and gals) who blocked particular reform makes sense. Bitching against the people who worked for reform because they didn't deliver enough makes no sense.

      Corporations are people; money is speech.
      1984 - George Orwell

      by Frank Palmer on Sat Jun 26, 2010 at 08:54:23 AM PDT

      [ Parent ]

  •  I hope the Pentagon launches a campaign (6+ / 0-)

    to educate service members about the perils of car dealers. Since Congress won't protect them from sharks, the military must do every thing it can to arm its members with information.

    You don't bring a knife to a gunfight and you don't bring a chicken to the doctor.

    by beltane on Fri Jun 25, 2010 at 12:48:59 PM PDT

    •  "arm its members"? (2+ / 0-)
      Recommended by:
      beltane, oceanstateliberal247

      Interesting choice of words, there, slim...

    •  They already do, to a considerable extent. (0+ / 0-)

      But they can't simply ban...

      Or could they.

      I wonder if they could hire credit counselors and simply require that everyone under Major/E-5 get all loans over a certain ammount (maybe, a grand) cleared by them...

      "Israel does not any longer occupy the West Bank or Gaza. They left." Rep. Weiner

      by JesseCW on Fri Jun 25, 2010 at 01:01:24 PM PDT

      [ Parent ]

    •  Is there a Pentagon-related Credit Union (2+ / 0-)
      Recommended by:
      be the change you seek, Loge

      they could just steer service members into that would serve them honestly? That seems like a better way to protect them from the unfair practices of car dealers and pay day loan sharks.

      There should never be a tax benefit for companies that screw over American workers.

      by bear83 on Fri Jun 25, 2010 at 01:27:47 PM PDT

      [ Parent ]

      •  why can't servicemen and women (1+ / 0-)
        Recommended by:

        get in the regular fed employee credit union, if there's not one already?

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Fri Jun 25, 2010 at 05:32:43 PM PDT

        [ Parent ]

    •  The DoD already blasts us with financial help (0+ / 0-)

      programs all the time. Doing taxes, buying a house, buying a car, etc. There's plenty of programs sponsored by the DoD or the respective services. You just gotta call them. Sadly, a lot of folks just tune that stuff out and go into negotiations completely unarmed.

      It doesn't help that a lot of fresh recruits are getting a steady paycheck for the first time in their life. When your food, housing, medical and dental is already paid for, and you've just gotten through the hell of basic training, that $1500 a month in basic pay starts burning a hole in your pocket awfully fast. I know a lot of guys who ran out and bought big screen TVs and trucks, just because they knew they would have a steady paycheck for the next 6 years and could "pay it off".

      I'm writing in Lizard People on my next ballot.

      by George Hier on Fri Jun 25, 2010 at 09:34:02 PM PDT

      [ Parent ]

  •  CPFA is not Elizabeth Warren's idea. n/t (0+ / 0-)
  •  Paging Dr. Freud (2+ / 0-)

    targets for the less-honest of care dealers.

    Or maybe that should be Tom Lehrer? "Who can turn a car into a care?"

    Republican ideas are like sacks of manure but without the sacks.

    by ontheleftcoast on Fri Jun 25, 2010 at 12:51:40 PM PDT

  •  Things like this are why I come here (3+ / 0-)

    I feel I get a much better feel for legislation through reviews like this than I get through my paper (day late and multi-dollars short), TV or other sources.

    •  I usually try to get news (1+ / 0-)
      Recommended by:
      George Hier

      from the Times, and come here to kvetch, but if you read the NYTimes article about the bill, it was really two separate articles -- 3/4 was about the politics and process of it, and the substance of the bill was interspersed into that.  Ineffective.

      "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

      by Loge on Fri Jun 25, 2010 at 05:33:56 PM PDT

      [ Parent ]

  •  I hope that the fact that (2+ / 0-)
    Recommended by:
    skyounkin, beltane

    no mention was made of payday lenders means that there was no carveout to exempt them from regulation by the CFPA.

    But I'm not givin' in an inch to fear, 'cause I promised myself this year. I feel like I owe it to someone.

    by Its the Supreme Court Stupid on Fri Jun 25, 2010 at 12:53:10 PM PDT

  •  Happy for the good (0+ / 0-)

    And for the not so good we have work to keep doing.  

  •  so auto-dealers and Wal-Mart winning (0+ / 0-)

    make it a mixed bag?! lol.  My guess is that you also think that the U.S. winning in soccer by one goal is also a mixed bag.

  •  It may be that Pay Day lenders... (2+ / 0-)
    Recommended by:
    osterizer, beltane

    ...have the most to lose from the "Bankification" of Wal-Mart. I realize that is cold comfort, but on the face of it I'm willing to take the admittedly marginally lesser of two evils in that particular battle.

    I hope other retailers are not explicitly excluded from entry into that game.

    "Power concedes nothing without a demand. It never did and it never will." -- Frederick Douglass

    by Egalitare on Fri Jun 25, 2010 at 12:57:25 PM PDT

    •  I don't see the Pay Day lenders as (0+ / 0-)

      the greater evil.

      Their terms are posted clearly.  They are nasty loan sharks, but they are also pretty transparent to the borrower.  You know what you owe.

      "Israel does not any longer occupy the West Bank or Gaza. They left." Rep. Weiner

      by JesseCW on Fri Jun 25, 2010 at 01:04:46 PM PDT

      [ Parent ]

  •  So who are the 2-3 Repubs in the Senate going (1+ / 0-)
    Recommended by:

    along with this bill?

  •  Nothing is perfect (3+ / 0-)
    Recommended by:
    Iberian, BarackStarObama, moonpal

    the bill is a whole lot better than nothing. But then it still hasn't passed.

    Practice tolerance, kindness and charity.

    by LWelsch on Fri Jun 25, 2010 at 01:04:35 PM PDT

    •  In what ways, exactly? (2+ / 0-)
      Recommended by:
      skyounkin, George Pirpiris

      In what ways is this bill better than nothing? I don't see it yet and would love for someone to tell me.

      •  Some of the ways (2+ / 0-)
        Recommended by:
        Iberian, Loge

        Limits Banks on Derivatives Trading

        Cutting Into Credit Card Transaction Fees

        Bar proprietary trading by banks for their own accounts

        "Orderly liquidation" process for financial firms on the verge of collapse

        Protection of financial consumers would be enhanced by increased government regulation.

        Council of federal regulators would try to monitor the entire financial forest, not just the trees

        Private equity and hedge funds would have to register with regulators and open their books to scrutiny

        Banks would have to set aside more capital to ride out tough times, but will get several years to comply

        Fees charged on debit card transactions would be reduced

        Practice tolerance, kindness and charity.

        by LWelsch on Fri Jun 25, 2010 at 01:28:01 PM PDT

        [ Parent ]

      •  Read (1+ / 0-)
        Recommended by:

        The diary. It is explained there. It's important to read. It benefits you.

        Arizona is the meth lab of democracy

        by Iberian on Fri Jun 25, 2010 at 01:30:08 PM PDT

        [ Parent ]

        •  Read the comment (0+ / 0-)

          I was answering the question.

          Practice tolerance, kindness and charity.

          by LWelsch on Sat Jun 26, 2010 at 01:36:25 AM PDT

          [ Parent ]

        •  The comment I was responding to asked (0+ / 0-)

          In what ways is this bill better than nothing? I don't see it yet and would love for someone to tell me.

          I provided a list of ways that the bill is better than nothing. Perhaps the person who asked should read the article. But that was not the point.

          Read the comment being responded to before before saying READ.

          Practice tolerance, kindness and charity.

          by LWelsch on Sat Jun 26, 2010 at 09:35:48 AM PDT

          [ Parent ]

  •  Bad bill, no reform: the usual (4+ / 0-)

    Here is how msnbc website is playing win/loss for just consumers (that's us):

    Consumers - win

       (1) * New rules to protect consumers from risky financial products could only be overturned by banking regulators if they believe the rules could threaten the financial system or banks' deposits.
       (2) * A new consumer regulator would be added to the Federal Reserve, which has been criticized for failing to rein in the risky lending that contributed to the financial crisis.
       (3) * The consumer regulator would get funding from the Fed and would have the authority to request more funds from Congress.
       (4) * The regulator would be able to write and enforce rules for a slew of products such as mortgages and credit cards.

    OK, here are my comments on 1-4:

    (1) Since EVERY rule to protect consumers would reduce the excessive profit of financial systems/banks, don't hold your breath waiting for protection unless you look good blue.
    (2) The Federal Reserve? That's where our regulator will be stationed? More vaseline, please.
    (3) The "authority to request"? Now, that's some fancy bullshit there. Everyone has the authority to request. This is a pile of fluffy nothing, surrounded in an aura of seeming something.
    (4) Again, the regulator is at the Federal Reserve, and the Fed is the consortium of private banks that have been screwing us generously, and this person will enforce consumer=friendly aspects of mortgages and credit cards when pigs fly.

    •  Oh, and a postscript ... (3+ / 0-)
      Recommended by:
      JesseCW, George Pirpiris, TimmyB

      You gotta love them loopholes. Auto dealers are exempt from rules. It's an industry that nearly everyone has to contend with -- and it got a huge carve-out.

      What a world we live in. "It's time for more honesty and accountability -- well, for some of us, and except for the below named exempt who can continue their shady, shoddy practices ..."

      I'd shoot myself if I could afford bullets.

      This "reform" sucks as badly as health care "reform," and all the other "reforms" we've been seeing.

      Count me not just unimpressed. Count me pissed.

  •  CNN crowing about big bank win (5+ / 0-)

    some such nonsense...anything to undercut support for anything this congress and Obama does, with specious financial mumbo jumbo they can capitalize on the technical criticisms heard from both R and L about Obama and the banking reform attempts.
       Specious self serving motives all around...I'm sick of it, literally, as I hear the horror stories, see and participate in the  death of all the dreams we dared dream  ...

    CNN and the rest of the oligarchy can go straight to hell.

    Does this rec make my head look fat?

    by KenBee on Fri Jun 25, 2010 at 01:07:37 PM PDT

  •  Thanks for the great analysis. (1+ / 0-)
    Recommended by:
    George Pirpiris

    My biggest concern with this passing is that Obama and Dems will spin this as a win over Wall Street and for reform...when we all know the systemic risk persists.

    When the market crashes again, which it will, people will turn to Republicans...because, seriously, why would people turn to Democrats when our leaders just looked them in the eyes and lied to them (even worse, knowingly?)

    From having worked both at a hedge fund and in risk management/corporate governance, I think that corporate culture--still unrestrained--will drive us to another crash in their continued pursuit of profits in an unstable economy (b/c THEY know that the most profits can be gained by those who have money and use it to destabilize, then restabilize the economy--great wealth transfers happen here).

    With our luck, it will crash in 2012 before the election.  And then the Democrats & WH--Frank & Dodd's teary eyes aside--will have screwed us all.

    •  Looking At Europe, Maybe September? nt (0+ / 0-)

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Fri Jun 25, 2010 at 01:16:21 PM PDT

      [ Parent ]

      •  Perhaps, (0+ / 0-)

        But the Europeans are more smart--England and Germany are in the process of regulating swaps much more heavily, and I believe France has already done something similar.

        When it happens again it will mostly be the States with its pant around the ankles.

        What a shame.

  •  Dylan Ratigan is Enraged and he Blames Dems (4+ / 0-)

    He was on Thom Hartmann screaming. His show's 10 minutes in right now and when commercial break ends I'd expect he's going to be a very unhappy camper.

    He's been shifting into evil "government" mode and rarely if ever mentioning Republicans the last few days in his corruption rants.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Fri Jun 25, 2010 at 01:15:24 PM PDT

  •  Currency Swaps Were Always off the Table (0+ / 0-)

    they don't figure into an evaluation of the legislation.

    Going forward, I think we'll see that once-removed regulation via the CFPA will be prominent in winning financial reform.  It seems destined, since it's politically uncharged and immune, to be the citadel for the financial consumer that the FDIC has historically been.

    "ingratiation and access . . . are not corruption." -- Justice Kennedy (Citizens United v. Federal Election Commission, 2010)

    by Limelite on Fri Jun 25, 2010 at 01:16:37 PM PDT

  •  one more issue you didnt mention (1+ / 0-)
    Recommended by:

    I heard a long time ago that banks were fighting even harder to make sure that regulators at the state level could not do more than what this law demands. This was apparently the banks' biggest issue.

    Can you please explain what happened to this?

  •  "BANK STOCKS SURGING". Wall St knows banks won. (1+ / 0-)
    Recommended by:

    Bank Stocks SURGING On Financial Reform News

    As with health care, since lobbyists largely wrote the bill, they know better than most how big the banks and Wall Street won with no real reform.

    They are buying!

    •  Or it's because there's less uncertainly n/t (1+ / 0-)
      Recommended by:
        •  Uggh. That's not "Forbes", it's one of Forbes' (0+ / 0-)

          editors, their resident left wing one.  Yes, we know that left wing economists hate this bill (as do right wing economists for the opposite reasons).

          Left wing economists also trashed the reforms passed in FDR's day as "sell out" "not good enough" whatever phrase meaning "lame" you want to use.

          But any bill they wouldn't hate wasn't passable.  How hard is that to understand?  Damn, even mcjoan says this is "mixed", and she's jumps at any opportunity to trash something as horrible.

          •  Forbes "left wing editor". That's a joke right? (0+ / 0-)

            Robert Lenzner is National Editor of Forbes magazine. He joined Forbes as a Senior Editor in September 1992. His areas of expertise include Wall Street, investment banking, finance, the oil industry, corporate takeovers, insider trading and litigation.

            Prior to joining Forbes, Mr. Lenzner was a Columnist for the Boston Globe and the Dallas Morning News from 1990 to 1992. He was New York Correspondent for the Boston Globe from 1971 to 1982 and their New York Bureau Chief from 1983 to 1990. He was also a Correspondent for The Economist from 1973 to 1992.

            From 1969 to 1970 Mr. Lenzner was Manager of the Arbitrage Department at Oppenheimer & Co., and he was assistant to the partner in charge of trading and arbitrage at Goldman Sachs & Co. from 1962 to 1968.

            Mr. Lenzner has appeared on "Forbes on Fox," "Forbes on Radio," the BBC, CNN, CNBC and MSNBC. He can address Wall Street, the market, interest rates, white-collar crime, housing, the dollar and corporate governance.

            He is the author of The Great Getty, a biography of J. Paul Getty, which spent 13 weeks on the New York Times bestseller list, rising to number three. His articles have also appeared in Barron's, Vanity Fair, the (London) Financial Times, the New York Observer and the Rocky Mountain News, among others.

            Mr. Lenzner has a B.A. (cum laude) from Harvard University and an M.B.A. from Columbia University. He also attended Oxford University from 1957 to 1958.

  •  From what I see (1+ / 0-)
    Recommended by:

    The cycle of bubble-burst`is primed to rear its again & soon. When it does, we will still have too big-to-fail, we will have to bail them out again, and they will remain intact...a win? Nothing is in place to stop what happened a year ago, to happen again.

    I did campaign on the public option, and I'm proud of it! Corporat Democrats will not get my vote, hence I will not vote.

    by Jazzenterprises on Fri Jun 25, 2010 at 01:34:30 PM PDT

  •  Just make derivatives illegal (1+ / 0-)
    Recommended by:

    The problem with Lincoln's bill is that it didn't start with THAT as the premise.

    •  That's never going to happen (1+ / 0-)
      Recommended by:
      be the change you seek

      For all sorts of reasons. They're too deeply entrenched in today's financial system to eliminate them, not just in terms of opposition from firms that use and trade them, but technically speaking. It would be like trying to build a modern computer without a hard drive or monitor. You could do it, but it would be MASSIVELY disruptive and expensive. Plus, derivatives, properly used and regulated, do serve a useful purpose, much the same way that other risk-management instruments do, like insurance. The key is to regulate them to the point where they can't be used and abused in ways that cause massive financial and economic harm, like when reinsurers bet vastly more money than they have in assets on securities that are inherently vastly overvalued, which in turn are overvalued because they themselves are dishonestly valued derivatives.

      "Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" --Alexander Hamilton

      by kovie on Fri Jun 25, 2010 at 01:41:48 PM PDT

      [ Parent ]

      •  there are derivatives... (0+ / 0-)

        and then there are derivatives. It's an awfully broad brush. Futures serve a useful purpose. Other derivatives are merely excuses to boost the bottom line, avoid taxes, and wrap risk in pretty packaging.

        Saying that derivatives can useful leaves out tons of examples of needless risk.

        What has a "political realist" done for you lately?

        by papicek on Fri Jun 25, 2010 at 02:31:53 PM PDT

        [ Parent ]

        •  Some are useful, others not (0+ / 0-)

          Which clearly means that derivatives as a general tool CAN be useful. But the idea of banning all of them is a pointless as it is unwise. You can't put that genie back.

          "Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" --Alexander Hamilton

          by kovie on Fri Jun 25, 2010 at 03:26:50 PM PDT

          [ Parent ]

          •  again, that broad brush... (0+ / 0-)

            which says pretty much nothing. So let's try and be specific:

            You think commodity futures are ok?

            How about stock futures?

            Forex trading?

            Credit derivatives?

            These are entirely different business models - whatever devices may appear similar in execution. Each is a separate with entirely different areas of expertise required. Each is a growth of different business cultures. Each has it's own barriers to entry, unique ways in which the markets can be abused and manipulated, as well as levels of risk to the rest of society. So it's useless to just say "some derivatives are useful". That statement really doesn't mean anything.

            What has a "political realist" done for you lately?

            by papicek on Fri Jun 25, 2010 at 06:59:02 PM PDT

            [ Parent ]

            •  I don't argue with pointless pedantry (0+ / 0-)

              "Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" --Alexander Hamilton

              by kovie on Fri Jun 25, 2010 at 07:46:24 PM PDT

              [ Parent ]

              •  sounds like you don't know (0+ / 0-)

                what WTF you'e talking about.

                Simple commodity futures trading is actually helpful in stabilizing prices. I like commodity futures trading. It's a win-win proposition for all concerned - even consumers.

                Equites futures are considerably less useful, and much more wide open to abuse, but they cushion traders (and therefore markets) from total wipeout during macro events, like what we saw in 2008. Same thing with forex trading. Forex traders claim that currency derivatives (IR swaps, currency swaps, currency futures, but mostly currency shorts in what follows) have been instrumental in exposing sovereign financial weaknesses, but that's a load of crap, because it's those same financial institutions which have always been in there facilitating sovereign waywardness with fiscal policies, and in many cases, the markets' determination of debt tolerance is highly arbitrary. Ask Spain, who'd always been praised for it's fiscal prudence, but is now part of the justification for attacks on the Euro.

                Credit derivatives are actually useless. They spread exposure to all kinds of debt risk, and it's often impossible to determine just how these derivatives are supposed to deliver the returns those selling them claim they will. The fact is, even senior tranches mostly failed to do so.

                The only derivatives markets that are generally useful are commodity futures markets. All other derivatives are much more dangerous and merely ways for the wealthy to stuff their pockets. Banks use them to dump risk on the gullible and generate big revenues for doing so, pure and simple.

                BIS figures show that there's $600 trillion in existing derivatives credit and currency derivatives contracts. That's ten times the world's GDP (source: World Bank Development Indicators).

                Pedantry my ass. Derivatives are a million times more dangerous than whatever benefit they allegedly bestow. And that benefit is a million times more likely to benefit the TBTF institutions alone than anyone else. Practically all derivatives creation and trading needs to be stamped out just as a measure of prudence on the part of any other business which depends on credit to survive.

                What has a "political realist" done for you lately?

                by papicek on Fri Jun 25, 2010 at 09:17:40 PM PDT

                [ Parent ]

                •  Ban derivatives (1+ / 0-)
                  Recommended by:

                  WHat purpose do they serve?

                  I understand the idea of futures and price stabalization- but those are simple FUTURES.

                  You should be able to buy wheat futures, for instance.  I'm hedging on the price of 1 item, wheat.

                  Anything more complex is bullshit, pure and simple.

  •  Insert competition into the "over 30" studies (0+ / 0-)

    A study (one of over 30 in the bill) would have to come up with a way to end the issuer-pays model for rating agencies, and would give priority to Al Franken’s solution of an SEC office assigning the products for initial ratings.

    In government science programs, when there is a tough problem, the government often solicits proposals for multiple competitive studies because a competitive process can often identify innovative or alternate approaches. In addition to going to the usual panel of experts or in-house teams, perhaps the government should solicit proposals from universities.  I have never been employed by a university, so this is not about what this could do for me.  But I have seen on the aerospace R&D side, the force of competitive pressures often drive teams towards superior solutions than internal government committees.  If there are over 30 studies called for, perhaps some of these might be suitable for an approach by which, at a minimum, competitive proposals from university groups would be solicited in parallel with in-house efforts.

    Just a thought.  

  •  If the used car financing is the worst loss (1+ / 0-)
    Recommended by:

    I'll take it. That doesn't sound like a monumental problem, and consumers really should take some responsibility in not letting themselves be taken for a 'ride' there.

  •  one problem with otherwise excellent post... (1+ / 0-)
    Recommended by:

    ". . . forced banks to stop trading their own, FDIC-insured (taxpayer backed) money to speculate in financial markets."

    It's not the bank's money. It's the depositors' money. The bank may have use of it, but not ownership. It's not a nitpicking argument when you consider the government's assumption of the speculative risk-taking by banks.

    *     *     *

    My problems with the bill lie not so much in what I'm reading it contains, but it's utter inadequacy in face of the known financial environment.

    The credit default swap clearinghouse was set up over a year ago and has been a clearinghouse for CDS's for a long time. It is called ICE Trust:

    "In March 2009, ICE acquired The Clearing Corporation (TCC), which provides the clearing technology for ICE's credit default swap clearing house, known as "ICE Trust." Approved by the Board of Governors of the Federal Reserve in March 2009, ICE Trust, is a member of the Federal Reserve and is a New York bank holding company and is the leading CDS clearing house globally. Today, ICE employs over 750 professionals across the U.S., Europe and Asia."

    This is disingenuous to say the least, and I don't know why it hasn't been reported on and debunked sooner. The family of ICE companies is only nominally a New York based bank holding company, yet it is a member of the Federal Reserve.

    Alarm bells, anyone? There ought to be.

    ICE Trust is owned by ICE US Holding Company:

    "ICE US Holding Co., which was established in 2008 as the parent of ICE Trust U.S., is located in the Cayman Islands. Yet none of the owners of ICE US Holding Co. are based in the Caymans. International Exchange, Inc., which owns 50 percent of ICE US Holding, is headquartered in Atlanta, Georgia. Among the other owners of the Caymans company are Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch and Morgan Stanley, which are headquartered in New York. Bank of America, which now owns Merrill Lynch, is based in Charlotte, North Carolina. Deutsche Bank (Frankfurt), and UBS and Credit Suisse (Zurich) are also part owners."


    Revenues generated by the CDS clearinghouse are, of course, tax free. The Cayman Islands levies no direct taxes. As such, it becomes a handy way for New York and European banks to move money freely around the globe completely unregulated and free of tax.

    *     *     *

    As I write this, I see skyounkin's comment titled, "I wish I had the faith that this bill" . . . . and Losty's reply.

    I'm afraid skyounkin's concerns are well founded, and here's why:

    The Volcker Rule would have been a step in the right direction, but even Larry Kudlow is happy with the revised version. I'm concerned with this because of recent experience. Scotland's Northern Rock had to be nationalized after it's CDO activities blew up in its face. However, it's CDO trading wasn't even conducted by Northern Rock proper, but by a subsidiary, Granite Master Issuer plc, based in one of the tax/regulatory havens in the Channel Islands (Jersey, I believe). Spinning off Granite Master Issuers wasn't enough to insulate Northern Rock from the risks of the derivatives markets, and I don't see how even a full-strength Volcker Rule would have had little effect. Because in a crisis, all market correlate, and banks would still have had exposure even under a full blown return to Glass-Steagall.

    I don't know what the final details of the bill will be, but thus far, I'm not at all reassured by what I hear. I see a continuation, largely, of business-as-usual.

    What has a "political realist" done for you lately?

    by papicek on Fri Jun 25, 2010 at 02:22:50 PM PDT

  •  25 percent auto loans? (0+ / 0-)

    Man.....I don't know where these guys are going....most auto dealers are practically giving money away.

    "Philosophy is useless; theology is worse"--Dire Straits

    by Bush Bites on Fri Jun 25, 2010 at 03:41:21 PM PDT

  •  When the wannabe insiders at Daily Kos (1+ / 0-)
    Recommended by:

    call it a mixed bag, that means it was a complete defeat.

    For the elite there are no material problems, only PR problems. Time for a new elite.

    by Paul Goodman on Fri Jun 25, 2010 at 04:35:56 PM PDT

  •  Well (1+ / 0-)
    Recommended by:

    Compared to healthcare reform, given the political constraints at hand, it seems like it is the best bill possible right now. It's not that bad of a sellout.

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