Wall Street, Obama administration block financial regulation

In the guise of enhanced regulation, the Obama administration is working with major Wall Street banks to sanction a continuation of the speculative practices that precipitated the financial meltdown...

Treasury Secretary Timothy Geithner has, according to a detailed exposé published May 1 by the New York Times, adopted a proposal drawn up by a group of big Wall Street firms for new regulations on the lucrative trade in derivatives such as credit default swaps...(that) would exempt most trading in credit default swaps from any serious public exposure or government regulation.

Credit default swaps are contracts agreed to between corporations in which the seller insures the buyer against the default of specific corporate bonds or securities. The transactions are “over the counter,” i.e., arrived at privately without being listed on any public exchange. Since the passage of a law in 2000 supported and signed by then-Democratic President Bill Clinton, they have been unregulated. The 2000 law sparked an explosive growth of this form of financial gambling.

...The Times reports that in November of 2008, only a month after receiving billions of dollars in government cash infusions, the nine biggest participants in the derivatives market—including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America—set up a lobbying organization, the CDS Dealers Consortium, to counter calls for serious regulation of credit default swaps and other forms of derivatives speculation.

According to the Times, Rosen (the group's hired hand) opposed proposals that derivatives be traded on open exchanges, akin to stock markets, and instead argued that they should be traded through “clearinghouses” that would be run by private firms closely affiliated with the banks. He further proposed that the derivatives trade continue to be overseen by the Federal Reserve Board, which has a long record of giving the banks free rein to engage in this form of speculation.

Moreover, he argued that a special dispensation be given to so-called “customized” derivatives, a vague term that encompasses most credit default swaps, which would shield them from public scrutiny or government regulation.

The Times article indicates that all of these suggestions were incorporated into the proposal for “increased” oversight released by Geithner....the article makes clear that the Obama administration’s plan for derivatives was basically drafted by the big Wall Street banks.

The article further reports that the big banks’ clearinghouse firm of choice is ICE US Trust, “an entity closely affiliated with banks that are also members of Mr. Rosen’s group, the CDS Consortium.” The Obama administration also favors this firm, according to the Times...

http://www.wsws.org/articles/2009/jun2009/swap-j04.shtml

which is an interpretation of the original article, not a restatement. Thus, it's perfectly fine for babylonsister to tell it to your ass.

otherwise, i see no difference in posting wsws's report of the nyt report or time magazine's.

as reported by the NYT.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5781876

Unregulated, rampant speculation led to the crash of 1929. The light of public oversight kept people square and straight as far as stocks and bonds go, but these CDSs and derivatives are largely unregulated by the SEC. This leaves open the door for reckless speculating and the temptation for outright fraud.

Obama was very mistaken in his selection of Tim Geithner to run the Treasury, and he was mistaken to have Larry Summers on his staff as well.