Banks Keep Derivatives Units, Volcker Rules Softened; House-Senate Con

[laughingliberal]

After nearly 20 hours over two final days filled with backroom dealing, House and Senate negotiators struck a grand compromise to merge the two chambers' competing bills to reform the nation's financial system in a party-line vote. But the long hours of closed-door meetings also appear to have fulfilled Wall Street's greatest wish: Many of the measures that offered the greatest chances to fundamentally reshape how the Street conducts business have been struck out, weakened, or rendered irrelevant.

Democrats unanimously supported passage; Republicans unanimously voted against it, warning that the bill doesn't accomplish its central objective: ending the perception that some financial firms are too big to fail.

The two most high-profile provisions were the last items to be considered. Neither emerged intact. One would have forced banks to stop trading financial instruments with their own capital and give up their stakes in hedge funds and private equity funds, named after its original proponent, former Federal Reserve Chairman Paul Volcker. The other would have compelled banks to raise tens of billions of dollars because they'd have to spin off their derivatives-dealing operations into separately-capitalized affiliates within the bank holding company, pushed by Senate Agriculture Committee Chairman Blanche Lincoln. As currently practiced both activities are highly lucrative, annually generating billions for the nation's megabanks. <snip>

<snip> Ultimately, despite widespread approval among those pushing for fundamental reform in the wake of the worst financial crisis since the Great Depression, yet perhaps aided by near-unanimous revulsion among those on Wall Street, both were watered down in front of C-SPAN cameras beginning around 11 p.m. ET. Democratic lawmakers had been rushing to complete the bill by Friday morning under a self-imposed deadline. The final vote was recorded at 5:40 a.m. The conference began their final day just before 10 a.m. on Thursday.


http://www.huffingtonpost.com/2010/06/25/financial-reform-bill-pas_n_625191.html

:(

[Scarsdale Vibe]

1. Banks lose riskiest derivatives, Volcker rule barely touched.

The author of the article is just feeding the niche market for people outraged that Democrats are only getting 95% of what they want.

[laughingliberal]

2. I would be more impressed if we got 95% of what the people want as well as 95% of what

several Fed Chairs want. The bill went to conference with no provision to break up TBTF. The Volcker rule and Lincoln's provision on derivatives were saving graces. The attempt to strengthen the Volcker rule was defeated before conference. Now, both the Volcker rule and the new rules on derivatives were weakened.

At one point, in the Senate, a compromise was offered to provide an exemption to some new regulations for car dealerships in exchange for the stronger version of the Volcker rule. That was cast aside and in conference the car dealerships got their exemption and we got a further weakened Volcker rule.

[truedelphi]

17. Thanks for straightening out that person's thinking.

if they are listening and paying attention.

but they may well be too busy palying on the derivatives to care.

[truedelphi]

18. When the Franken amendment was trashed, I knew this

Was just another piece of window dressing.

[phasma ex machina]

22. Banksters got 95% of what they wanted.

Banksters hired 1,000 lobbyists to get exactly what they wanted. Spent a few million to get a few trillion. Some members of congress actually prostituted themselves for a few tens of thousands.

[Scarsdale Vibe]

31. Yes, they wanted derivative clearinghouses and exchanges and limits on prop trading.

They also wanted more oversight of executive compensation by shareholders, higher FDIC fees, a bank tax for unwinding failed institutions, creditors able to sue ratings agencies, restrictions on payday lenders and predatory mortgages, being forced to spin-off the highest-risk derivative desks into subsidiaries, and a new Consumer Protection Agency with broad authority to regulate the financial sector.

It's time to put the reflexive fact-free and hyperbolic moaning of internet "progressives" out to pasture.

[phasma ex machina]

34. CDS remains unregulated. CDS is everything to banksters. nt

[girl gone mad]

42. That's where it really cuts..

It's not so much that they're sell outs, it's that they always sell out so damn cheaply.

[Greyhound]

3. K&R, I honest to God, saw someone here claim this was a return of Glass–Steagall.

:rofl:
:kick: & R #5 (for now)

[Scarsdale Vibe]

14. Nouriel Roubini thinks it is. He's only quoted by outrage junkies when pessimistic though.

[girl gone mad]

43. Give him a week, he'll change his mind.

[Zorra]

4. So, does this bill actually do anything genuinely constructive? nt

[TheKentuckian]

32. Helpful??? Maybe, even plausibly but it won't stop a 2008 style debacle

and it leaves a suicidal system in place, even from a capitalist viewpoint.

We still have too big to fail and a system so broken and perverted that investment is the new work and work is the new welfare. Speculation is king and we're still screwed.

[asdjrocky]

5. Hey, Banksters work hard, they deserve their money.

After all, without the money of the Banksters, who will pay for the campaigns and the great parties?

[marmar]

6. This financial "reform" will do nothing to avert another crisis.....

..... but that's what happens when your government is owned by Big Finance.

[City Lights]

8. And the ReBPublicans can all say they voted against it for that very reason!

x(

[Better Believe It]

11. Exactly! When the shit hits the fan down the road guess who will be blamed

[kiapolo]

7. Big power grab...

This is nothing more than another power grab for the Executive Branch. If a Republican President were in the White House, this place would erupt with anger.

Another watered down bill in this Congress that is nothing more than ceding power from Congress to the Executive.

[saracat]

9. Another "victory" ! Translation"caved again"

I am beginning to hate incrementalism. I won't live long enough for real reform of anything. Sigh.

[truedelphi]

19. And the people following in our footsteps won't know how things are really supposed to work

Already the fact that twenty somethings spent eight years under Bush and think having a gentle speaking personlike obama in office means that so much horridness is accepted, as it is being done in a more gentle manner than it would be done under Bush..

[Raineyb]

10. Surprise! Surprise! Another "reform" that does nothing to fix the underlying problems

that cause the problems in the first place.

No doubt we'll be told what a victory this is.

[Nikki Stone1]

12. +1000

.

[ProSense]

13. "Volcker Rules Softened"

How was the Volcker rule softened when Merkley Levin was added into the bill during conference?

Financial Reform Bill Looks Like Game-Changer

But, overall, the Restoring American Financial Stability Act of 2010 is much harder on big banks than anyone had suspected at the start.

<...>

Among the more surprising wins for the anti-Wall Street crowd was passage of the Volcker rule. Named after former Fed chief Paul Volcker, the provision will effectively reinstate the Glass-Steagall Act enacted after the Great Depression -- something that seemed unthinkable just a few months ago.

The provision will disallow big banks from proprietary trading, or making bets with deposits and other liquid assets for their own profit. As a concession, banks will be allowed to own small stakes in hedge funds and private equity shops, since they can't make such investments on their own.

Another controversial measure regarding derivatives went through as well. The new rule, authored by Sen. Blanche Lincoln, will force banks to house riskier derivatives trading in new, freshly capitalized entities, or simply spin them off.

As a result, there will be no more trading of commodity derivatives or the highly complex vehicles that nearly brought down the financial system at any of the top Wall Street firms. This should have a huge impact on the five big banks that handle 97% of derivatives trading in the United States: JPMorgan Chase(JPM), Citigroup(C), Bank of America(BAC), Goldman Sachs(GS) and Morgan Stanley(MS).

[cornermouse]

24. would that be this Jim Cramer, co-founder of The Street with New Republic?

http://en.wikipedia.org/wiki/Jim_Cramer

"In 1996, Cramer co-founded TheStreet.com with The New Republic editor Martin Peretz, one of his hedge fund's original clients. Cramer is currently a market commentator and adviser to the TheStreet.com, as well as its second largest shareholder. Cramer also manages a charitable trust stock portfolio which is tied to TheStreet.com through a subscription service called the Action Alerts PLUS Portfolio. Cramer currently works on a new project, MainStreet.com. An earlier similar project, TheRoad.com, did not yield the success Cramer had anticipated, although even Thestreet.com stock has declined over 90% since its first day of trading after its IPO in 1999. In 2009, Cramer earned $461,276 from The Street.com according to the company's Proxy statement.<14> He is the company's second largest shareholder and largest individual shareholder.<15>"

And this Jim Cramer of The Street?

http://mediamatters.org/blog/201004200051

Daily Show's Stewart vs. CNBC's Cramer Round 2?

Just over a year ago, CNBC's Jim Cramer found himself in hot water with Jon Stewart. The host of Comedy Central's Daily Show was relentless, running segments targeting the high-strung CNBC host, the most notable of which was titled "In Cramer We Trust" and addressed Cramer's pushing of Bear Stearns just days and weeks before it collapsed:

Is that The Street and Jim Cramer that you're using as a source for your quote?
http://www.thestreet.com/
----------------------------------------------

You know, you really ought to look up the sources of these things before you post them because this is getting too easy to debunk.

[ProSense]

27. Jim Cramer?

The piece isn't by Cramer. Also, do you thing that he'd lie to make the President look good? LOL!

Furthermore, the provisions are in the bill.

[cornermouse]

29. Your link is "The Street"

Let me illustrate it for you since you insist.

Your link. Notice that its part of "The Street"
http://www.thestreet.com/story/10792276/1/financial-reform-bill-looks-like-game-changer.html?cm_ven=GOOGLEFI

Home page of your link. Notice the large picture of Jim Cramer right at the top.
http://www.thestreet.com/

Scroll down to the bottom and click on "About Us"
http://www.thestreet.com/static/about/index.html

"The expertise and passion of the company's seasoned Editorial staff is evident in every article and video produced. Among the most popular columns — viewed by millions of readers weekly at TheStreet — are Top 10 Stocks; You Ask, Cramer Answers; Jim Cramer's Portfolios of the Week; The Five Dumbest Things on Wall Street This Week; Wednesday's Analysts' Upgrades and Downgrades, and Readers' Picks: The Street.com's Top 10."

Look up Jim Cramer on Wikipedia. ...Oh look. There he is.
http://en.wikipedia.org/wiki/Jim_Cramer

"In 1996, Cramer co-founded TheStreet.com with The New Republic editor Martin Peretz, one of his hedge fund's original clients. Cramer is currently a market commentator and adviser to the TheStreet.com, as well as its second largest shareholder. Cramer also manages a charitable trust stock portfolio which is tied to TheStreet.com through a subscription service called the Action Alerts PLUS Portfolio. Cramer currently works on a new project, MainStreet.com. An earlier similar project, TheRoad.com, did not yield the success Cramer had anticipated, although even Thestreet.com stock has declined over 90% since its first day of trading after its IPO in 1999. In 2009, Cramer earned $461,276 from The Street.com according to the company's Proxy statement.<14> He is the company's second largest shareholder and largest individual shareholder."

..."In February 2006, an investigation by the U.S. Securities and Exchange Commission (SEC) into allegations of collusion between short-sellers and a stock research firm led to the serving of subpoenas to TheStreet.com and Cramer, as well as journalists for Dow Jones and Marketwatch.com. The SEC then began to back away from the subpoenas, indicating it had no intention of enforcing them after lawyers for Dow Jones said they would not comply. SEC Chairman Christopher Cox took the unusual step of rebuking the SEC's staff attorneys for filing subpoenas on two Dow Jones reporters without first consulting him or the other top commissioners. Cox issued a statement saying neither he nor any of the SEC's four other commissioners were aware of the subpoenas, which he called "highly unusual."

..."On March 12, 2009, Cramer appeared on The Daily Show with Jon Stewart.<65> Stewart reiterated earlier claims regarding the CNBC host's "silly and/or embarrassing and/or stupid financial observations."<66> Moreover, he claimed CNBC shirked its journalistic duty by believing corporate lies, rather than being an investigative "powerful tool of illumination."<67> For his part, Cramer disagreed with Stewart on a few points, but acknowledged that he could have done a better job foreseeing the economic collapse: "We all should have seen it more." <68>

Stewart also discussed how short-selling was detrimental to the markets and investors. Cramer admitted to Stewart that short-selling was detrimental, stated his opposition to it, and claimed that he had never engaged in it, which is interesting considering someone needs to point out bubbles like in our housing market in 2007 or in the NASDAQ in 2000. He said, "I will say this: I am trying to expose this stuff, exactly what you guys do, and I've been trying to get the regulators to look at it."<69> However, Stewart played several video clips from 2006 where Cramer discussed the spreading of false rumors to drive down stock prices and encouraged short-selling by hedge funds as a means to generate returns.<70> At one point in a clip from December 22, 2006 he said, "I would encourage anyone in a hedge fund to do it." He called it a very quick way to make money and very satisfying. He continued, "By the way, no one else in the world would ever admit that, but I don't care, and again, I'm not gonna say it on TV." <68> Stewart responded, "I want the Jim Cramer on CNBC to protect me from that Jim Cramer."<68> Cramer again admitted that he can do better, and that he should try to change. The interview ended when Stewart pointedly suggested: “Maybe we can remove the ‘financial expert’ and the ‘In Cramer We Trust’ and start getting back to fundamentals on the reporting, as well, and I can go back to making fart noises and funny faces.” Cramer responded: “I think we make that deal right here.”
--------------------------------------
You might as well give up. Your basic thesis is flawed.

[ProSense]

30. What does any of this have to do with the point?

Are the provisions in the bill?

[cornermouse]

33. Like I said. Too easy to debunk.

:rofl:

[jp11]

15. this is earth shattering history making reform here

no longer will we have anything to fear from wall street

tack up another for the 'done' list in november

[ProSense]

16. Here's Merkley's statement

Merkley, Levin: Ban on High Risk Trades Victory for Workers and Businesses

WASHINGTON, DC – Early this morning, a House-Senate conference committee completed work on legislation to reform the practices of Wall Street. The conference report contains provisions similar to those laid out earlier this year by Oregon Senator Jeff Merkley and Michigan Senator Carl Levin. Senators Merkley and Levin issued the following joint statement on the conference report:

“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.

“We are also pleased that the conference report includes strong language to prevent the obscene conflicts of interest revealed in the Permanent Subcommittee on Investigations hearing with Goldman Sachs. This is an important victory for fairness for investors such as pension funds and for the integrity of the financial system. As the Goldman Sachs investigation showed, business as usual on Wall Street has for too long allowed banks to create instruments which are based on junky assets, then sell them to clients, and bet against their own clients by betting on their failure. The measure approved by the conferees ends that type of conflict which Wall Street has engaged in.

“Over the last year, there has been a great deal of movement in the direction of ending the practices that caused our current economic crisis. The risky trades of Wall Street directly contributed to the high unemployment, record foreclosures and sluggish lending we see today. The limits imposed by the conference report will help rein in this practice and establish a stronger financial foundation for our working families.”

[cornermouse]

20. Nice puff piece.

And directly from the Senator's website, no less. How ...unusual...

[ProSense]

23. Wait,

there's more and more

[cornermouse]

26. First link doesn't work. Second link is basically an unknown

blogger without a lot of history to back him. Typical.

[saracat]

40. Great job. Thoroughly debunked on all counts!

:applause: Hilarious that someone would sneer at the source for thir own links! :rofl: :rofl:

[Nikki Stone1]

21. "Too Big to fail" needs to go the way of the Datsun.

It's like a friend says: these TBTF types are like the guy strapped with explosives ready to kill everyone unless he gets what he wants. That's the game Paulson played with Congress to get TARP after Wall Street crashed the system to transfer public wealth into private hands: you cover our destructive debt or we will bring you all down.

The bill doesn't even begin to address that, and all the spin in the world can't begin to answer the American people.

[amborin]

25. K&R the wall st "reform" bill is a joke

[jmowreader]

28. "Perception" is the objective in this bill? Oy!

The objective should have been to rectify the abuses that led to the disaster in the first place.

I'm going to assume writing a law requiring Arthur Laffer to commit seppuku on Ronald Reagan's grave is a bill of attainder, but I'd support violating that part of the Constitution just this once.

[HughMoran]

35. 'This is an FDR level accomplishment"

Comment on NPR by EJ Dionne.

You would be kicking FDR to the curb if he was reincarnated - don't deny it.

[Nikki Stone1]

36. Keeping this kicked

The whole read should be interesting.

[laughingliberal]

37. Indeed nt

[Nikki Stone1]

44. Where's my cake?

:D

[Nikki Stone1]

45. I'm waiting....

I want chocolate. :)

[amborin]

38. Obama began coddling the banksters in Nov 2008:

Here he talks about the Citi bailout

“Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It’s fucking amazing. Amazing! And nobody said a thing about it."

Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama’s election.

That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama’s chief advisers during the campaign, didn’t make the cut. Neither did Karen Kornbluh, who had served as Obama’s policy director and was instrumental in crafting the Democratic Party’s platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."

But come November 5th, both were banished from Obama’s inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president’s new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama’s biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).

Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama’s economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin’s son. At the time, Jamie’s dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.

Now here’s where it gets really interesting. It’s three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O’Doul’s portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama’s economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama’s transition team that same month.

So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin’s messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that’s just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It’s the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin’s fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."

It is bad enough that one of Bob Rubin’s former protégés from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama’s Treasury secretary!

Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.


snip

http://www.nakedcapitalism.com/2009/12/matt-taibbi-obamas-big-sellout.html

[Nikki Stone1]

39. I think that part of the problem is that people don't know who all the players are

The few names I knew were economic ones: Summers, Geithner, and Robert Reich and his proteges. As soon as I saw this bunch, I knew what the (awful) economic policy was going to look like and that we would be robbed blind as taxpayers. But Austin Goolsbie just wasn't on my radar and I didn't find out who he was until way after the fact.

[saracat]

41. Kick Important read!

[ProSense]

46. Here's proof Nasiripour has no clue what's actually in the bill

The bill summary

[Odin2005]

47. If we had REAL Dems in Congress we would not be bending over backwards for the Banksters.

:grr: