House-Senate Conference Passes Financial Reform Bill After Marathon Session

Financial Reform Bill Passes: Banks Keep Derivatives Units, Volcker Rules Softened; House-Senate Conference Passes Financial Reform Bill After Marathon Session

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.

The proposals were launched after perceived political vulnerabilities -- the Obama administration announced the "Volcker Rules" after Massachusetts Republican Scott Brown won Ted Kennedy's old Senate seat, while Lincoln announced her proposal under threat by a liberal challenger in Arkansas for her Senate seat. Both came to become litmus tests used to gauge whether policymakers were for Main Street or for Wall Street.

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.

The so-called Volcker Rules originally banned banks from using their own taxpayer-backed cash to speculate in the financial markets. The federal government stands behind bank deposits, and banks have access to cheap funds from the Federal Reserve. Volcker argued that banks shouldn't use that subsidy to speculate.


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


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ALSO ON THIS SUBJECT . . .

Time to Give Wall Street the Axe, Say Progressive Groups
By Bankole Thompson

The USSF host city of Detroit has become a metaphor for the excesses of American capitalism.

Credit:Courtesy of Sasha Y. Kimel

DETROIT, Jun 25, 2010 (IPS) - As heads of state from the Group of 20 (G20) most developed and economically powerful emerging nations meet in Toronto, Canada this weekend, some activists at the U.S. Social Forum in Detroit are urging a more realistic look at the roots of the global economic crisis - and an end to the free-wheeling capitalist model embodied by Wall Street.

While U.S. President Barack Obama travels to Canada Friday to press the G20 to not to scale back on their economic stimulus commitments, activists complain that the bloc excludes the majority of the world's nations from its ranks and decision-making process. Tanya Dawkins, who co-chairs the Social Watch Working Group on Global Finance, Economy and Development, stopped in Canada before heading to Detroit.

"The G20 has advanced the idea that its agenda is narrow and relates exclusively to economics and finance. Yet our experience with the World Trade Organisation (WTO), the IMF and World Bank has taught us that finance and economics touches every aspect of human and community endeavor and therefore determines who in the world will eat, beg, work and have access to life itself, including water, food and shelter," Dawkins said.

"The G20 has a major democracy deficit and legitimacy crisis to overcome. Until it specifically declares and demonstrates that its intent is to advance the work of the United Nations (the G192), it, by definition, undermines the global framework of multilateralism that they have each pledged to uphold," she said.


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