New Derivatives Legislation “Was Probably Written by JPMorgan and Goldman Sachs”
New Derivatives Legislation "Was Probably Written by JPMorgan and Goldman Sachs"
As I have repeatedly written (see this and this), the new derivatives legislation is so bad that it probably increases - rather than decreases - the risk to the financial system.
William Greider has a great piece in The Nation pointing out:
Who drafted this dubious piece of legislation? Bankers (or their lawyers) did. The leading sellers of derivatives are an exclusive club of five very large financial institutions--Citigroup, JPMorgan Chase, Bank of America, Morgan Stanley and Goldman Sachs--that hold 95 percent of the derivatives exposure among the largest banks (the total contract value exceeds $290 trillion). These are the same folks who toppled the global economy and compelled government to intervene with gigantic bailouts.
Michael Greenberger, a University of Maryland law professor and veteran federal regulator, studied the House committee's 187-page bill and detected the fine needlework of Wall Street lawyers. "It had to be written by someone inside the banks," Greenberger said, "because buried every few pages is a tricky and devilish 'exception.' It would greatly surprise me if these poison pills originated from anyone on Capitol Hill or the Treasury."
A well-informed Congressional source confirmed that the original language in the draft legislation was written by financial-industry experts. It "was probably written by JPMorgan and Goldman Sachs," he told me, "and possibly the Chicago Mercantile Exchange."
Of course. Our politicians call on the conflict-of-interest ridden Wallstreet banksters to write their own rules to regulate derivatives. We already tried that. Alan Greenspan and Ben Bernanke both let and are currently letting the Wallstreet banksters police themselves with their own made up self-written rules. It's why we are in trouble. It's why the banks failed last year. Clearly, we should not be letting them formalize their own bad habits with crafty legislation that have exceptions and loop-holes in all the right places. After all, they know how how to work the exceptions for same or greater profit while only risking public money (due to our easy to bail them out).
I have a better plan. First, tell the banks and corporations they don't get any more mulligans (second chances). We should take the legislation they wrote and find all the exceptions. We then ensure that those exceptions aren't just plugged but studied extensively to see what they have been doing or what they want to do. Can we then accuse them of financial terrorism if something juicy is found? Aren't you terrified of loosing your job in this economy?