That's the message that Blanche Lincoln wants to deliver, and Politico obliges.
A new proposal by Senate Agriculture Committee Chairwoman Blanche Lincoln would require sweeping changes to the $450 trillion derivatives market, including forcing big banks to spin off “swaps desks” that handle the complex financial instruments — a more aggressive approach than either the White House or other congressional committees have advocated so far, according to the Arkansas Democrat and her aides.
Lincoln’s plan is likely to burnish her standing with progressive groups inside the Democratic Party ahead of her May 18 Senate primary, where she is facing a challenger from the left. Lincoln drew fire from liberals in her party for opposing the public health insurance option in the recent health care reform bill....
Lincoln, who is briefing Democrats on the Agriculture Committee on Tuesday afternoon about her initiative, is focusing on four main areas:
— first, Lincoln will propose regulating foreign currency swaps, an action even the Treasury Department has opposed;
— second, Lincoln would bar any “major swaps dealers,” including big banks, from receiving federal financial assistance in the event of a market meltdown;
— third, the Arkansas Democrat would require dealers to consider their “fiduciary duty” to all governmental agencies, pension plans, endowments or retirement funds during any transaction;
— and fourth, swaps dealers or other traders in the complex financial instruments would be open to fraud actions brought by federal government, if they engage in a transaction with another party knowing the deal could be used to defraud other investors or the public.
As of yet, that's as much as we've seen of the Lincoln proposal. On the other hand, Ryan Grim reports on one aspect of Lincoln's plan that could conflict with the White House and create a loophole in derivatives reform--an exemption for end users of derivatives that could keep these transactions out of public and regulatory scrutiny.
End users are farmers, airlines, dairy producers or other companies that use derivatives as an integral part of their business, rather than as tools to manipulate the market or profit from speculation. The administration wants derivatives contracts to be traded on exchanges or centrally cleared. Banks are seeking exemptions for end users, however, as a loophole to keep the derivatives market in the dark, as it is currently. Brokers and swaps dealers have been pressuring end users to lobby Congress for an exemption.
It's unclear from the reporting thus far whether these end users fall into the "nearly all users of derivative contracts" category in the broad outline we've seen. Until the actual language of her proposal is released, we don't know if this really does close all of the loopholes in the House and Dodd proposals, as Lincoln said in a statement for Politico. But, as Yglesias says her proposal seems to be on the "right track."