Posted on 11/01/2009 4:11:44 AM PST by TigerLikesRooster
An Object Lesson in Governmental Failure: Derivatives reform
By Ken Silverstein
If you want to understand why Congress seems completely incapable of checking the power of Wall Street, look back to a hearing on the Hill last October 7, and the subsequent events surrounding it. On that day, the House Financial Services Committee hosted a panel on reform of the market for derivatives, the financial instrument which played such a notable role in the country’s economic meltdown.
Everyone rational knows that there is an enormous need to seriously reform the derivatives market, but the committee, headed by Congressman Barney Frank (D-Wall Street), invited a panel of eight guests who were distinguished by their uniformly pro-industry positions. They included Jon Hixson of Cargill, James Hill of Morgan Stanley (on behalf of the Securities Industry and Financial Markets Association), Stuart Kaswell of the Managed Funds Association (which, through one of its lobbyists, has delivered significant “bundled” donations to Frank) and Christopher Ferreri of the Wholesale Markets Brokers Association.
(Excerpt) Read more at harpers.org ...
Ping!
Talk of reforming any instrument or market is useless without first fixing the root of all these problems: the boom-bust cycle created by the easy-credit policies of the Federal Reserve.
AUDIT THE FED.
END THE FED.
It will work great if just the right people are in charge.
The libtard mantra. It’s just that there are no “right people” to be in charge of something that will never work. Not even zero. Especially zero.
Two reforms would solve the issue.
One, total transparency on each derivative position reported each day.
Two, Mark-To-Market total liability and price value on each position reported each day.
If the positions are highly customized, illiquid, and cannot be truly valued in the derivative markets, as allegedly happened during the meltdown, then the position should be valued as a 100% liability.
Don't want 100% derivative liabilities on your books?
Fine, then don't create ultra complex derivative positions that cannot be truly valued in the market.
As to derivative insurance policies, like AIG went bankrupt on, the same rules can apply.
If the derivative cannot be truly valued, then the derivative insurance policy can't be truly valued, and the policies should be carried on their books as 100% liabilities.
Don't want the liabilities?
Then, don't write the insurance policies.
I trade derivatives very profitably. I want the government to stay out of my business.
Transparency???
Why don’t you tell me everything you do in your business every day? The derivatives I trade are the business of me, my company, the applicable exchange, and my counterparty - AND THAT IS IT.
It's a classic Libertarian argument.
When your business does damage to my business, then your business is definitely MY business.
I'll bet you don't say that at cocktail parties. Everyone thinks derivatives are shit and have ruined the word financial system. As for you...... learn a trade like plumbing or cabinet making
And please...Don't go off by "educating" me how commodities futures are also derivatives
As far as they go I would limit participation in futures markets so that they could not be warped by participants who aren't even in any commodity production business
Obviously Wall Street has been bribing Barney and the other Democrats with campaign donations. More evidence why Wall Street is a cesspool
Why is it people who do work with their hands exhibit the highest degree of arrogance when it comes to derivatives?
I am PROUD of what I do. What you fail to appreciate is that we take the place of the central planner. Why else do you think the government wants to demonize us?
Don’t fall for the age-old government scheme of dividing people - remember the Road to Serfdom. Government is not the answer. As a freeper you probably oppose government power except when it comes to the military and policing. Why do you trust them when it comes to derivative regulation?
You are about to get an EDUCATION.
Derivatives allow speculators to provide for the hedging needs of commodity producers and consumers so that their risk is MINIMIZED and they can focus on their core business. There would be no hedging markets so that producers can have a stable income if it was not for the speculator.
I knew that shit bozo...years ago.
I like free markets, just not markets I am forced to bailout as a taxpayer. So take that and stick it up your fake libertarian crevice
And GS and other Wall Street players will always have the Washington DC juice to get bailed out with my money. How libertarian is that! Even some hedge funds got taxpayer funded bailouts. You and your smelly derivatives
You can get plenty of non-industry participants in the futures markets without letting Goldman Sachs, hedge funds and sovereign wealth funds distort those markets. GS could place bets but not mega bets
Derivatives are the same as steroids in the media. The reporters are far too lazy too figure out what they are talking about.
That was the financial markets de-regulator manifesto as well. Worked out real well.
GS did NOT get a bailout and neither did my company. The villain is the government and NOT those who trade derivatives. When companies ask for bailouts the answer should be NO.
After they start regulating my industry more they will come for YOU and your industry. We are in this together, yet you want to through me under the bus.
I am no libertarian - I am a conservative.
Exactly - derivatives are good.
Over-the-counter derivatives have created a monster: a Wall Street hell-bent on destroying America for profit. They bribe the politicians to keep their private rights to plunder America’s wealth, and Democrats gleefully go along because it gives them the campaign contributions they need to stay in power. Wall Street has become the new trial lawyers, a group that rigged the rules to make themselves wealthy at the expense of all Americans through higher prices on everything and wasteful spending on health care reform.
I trade OTC derivatives for an investment bank. You are ignorant of the benefit they bring to those who require hedging - real producers and real consumers.
Why don’t you take your fantasy of Soviet-style central planning to the DU or DailyKos?
It sounds like “your business” desires to hurt “my business”.
Why don’t we stay out of each other’s business, and why don’t we ask the government to stay out of BOTH of our businesses?
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