Last Updated May 26, 2010 12:11 PM EDT
In other news, BP wants to save the whales. In defense of the Gray Lady, it's easy to get confused when the forces of light and darkness are mixing it up over financial reform, throwing a pall high over the Potomac.
Because of course (and sorry to point out the obvious) anyone favoring a strong derivatives rule would embrace Sen. Blanche Lincoln's recent proposal. The amendment, which is part of the Senate's reform measure, would make banks separate swaps-trading from their traditional banking activities. This buffer is, as Robert Reich says, "critical":
For years the big banks have relied on taxpayer-funded deposit insurance to backstop their lucrative derivative businesses. Obviously they want the subsidy to continue. [Ben] Bernanke argues that "depository institutions use derivatives to help mitigate the risks of their normal banking activities." True, but irrelevant. Lincoln's measure would allow banks to continue to use derivatives. They just could not rely on their government-insured deposits for the capital.Unfortunately, Lincoln's plan appears to have earned a death sentence yesterday when Frank, the Massachusetts Democrat leading the effort to reconcile the House and Senate reform bills, said her amendment "goes too far."
Other Democrats are piling on, including two lawmakers from New York, which happens to be where Wall Street is located. Rep. Michael McMahon said Tuesday that he would work to kill the swaps provision. Rep. Gary Ackerman went a step further. He sent a letter to Frank, House Speaker Nancy Pelosi and other key legislators urging them to strike Lincoln's proposal. Wrote Ackerman:
We are deeply concerned by the very real possibility that, as a result of the Senate derivatives provision, America's largest financial institutions will move their $600 trillion derivatives businesses overseas, at the expense of both New York's and the United States' economy.Because Wall Street and Main Street are one, you see. And it's in taxpayers' interest to subsidize big banks by guaranteeing their losses at the poker table. Maestro, music please!
Can anything save the derivatives ban? Probably not. Besides Frank and every last congressional Republican working to mesh the two bills, the amendment is also opposed by Bernanke at the Fed, Treasury Secretary Tim Geithner, Paul Volcker and FDIC chief Sheila Bair. On with the show.
Image from Wikimedia Commons, CC 3.0; photo from office of Rep. Gary Ackerman Related:
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