Barney Frank has lined up with the banks on one of the most important outstanding parts of the financial reform bills.
Can we be Frank?
Commentary: Barney Frank's opposition to derivatives rule puzzling
NEW YORK (MarketWatch) -- Barney Frank can't be serious.
On Tuesday, Frank, the House Financial Services Committee chairman, told an audience that the proposal to spin off bank derivative arms "goes too far." Read related story on Barney Frank's comments on the proposal at WSJ.com.
Perhaps Frank has a short memory.
Derivatives fueled the financial crisis by creating economic incentives for failures. Those who issued derivatives, including American International Group Inc. (AIG), didn't have enough reserves to pay off credit default swaps to banks including France's Societe Generale and, famously, Goldman Sachs Group Inc.
http://www.marketwatch.com/...
Damn straight. Moreover, the provision is just a ban on taxpayer guarantees (effectively subsidies) to entities trading derivatives. It doesn't say that banks can't do business with other entities that handle derivatives: it just says that banks, which get federal assistance from deposit insurance and Fed loans, may not handle them themselves.
Perhaps Frank is trying to make a concession to those that oppose financial reform. Maybe it's a concession to banks. Perhaps he truly believes derivatives are necessary to insure bank balance sheets.
Or, possibly a better idea would be for banks to insure their assets by making certain the underlying borrowers are credit-worthy.
Gee, wouldn't that be a wonder? Maybe if they had sought to sell mortgages to customers who could afford them instead of packaging them up in financial "products" involving derivatives, which then received high ratings from credit agencies and so were accepted by gullible investors, this crisis would not have happened. The ancient alchemists tried to transmute dirt into gold, and it didn't work. Modern financial alchemists have met with similar levels of success.
Chalk up another vote against Blanche Lincoln's crackdown on the financial weapons of mass destruction.
Rep. Barney Frank, D-Mass., said in a speech in Washington Tuesday that the regulatory reform bill passed by the Senate last week "goes too far" in proposing to bar the biggest banks from dealing in derivatives.
http://wallstreet.blogs.fortune.cnn....
The Kaufman-Brown amendment was killed in the Senate that would have simply broken up the biggest banks. There would have been no ambiguity: they would have been forced to shrink. Now Frank is opposing even this less drastic provision as going "too far." What is going too far, Congressman Frank? Is any reform that seriously impacts the financial industry going too far?
For now, it appears Frank (above) sees the derivatives bill as a belt-and-suspenders measure that duplicates the Volcker restrictions on risky trading without adding much to them.
"I don't see the need for a separate rule regarding derivatives because the restriction on banks engaging in proprietary activities would apply to derivatives as well as everything else," he said, according to the Wall Street Journal.
Flatly wrong. The Volcker measure, Section 619 of the Senate bill, would bar proprietary trading by banks. (A somewhat stronger version of the measure, the Merkley-Levin amendment, was killed last week in the Senate.) But proprietary trading is a completely different concept from derivatives trading. It includes some derivatives trading that is made with the money of banks themselves, but other forms of derivatives trading made on behalf of customers it does not include.
But Frank is not the only Congressman acting like a banker's best friend on this issue. Senator Jack Reed has now come out against the derivatives provision, which is ominous because he will be in the financial reform conference committee. Given the extreme Democratic leanings of his state (he won 73-26% in the last election), his opposition is all the more disgraceful. Two House members are also publicly gathering support for killing the measure. Michael McMahon, a representative from none other than New York who is no doubt putting the interests of New York banksters ahead of America's, is now publicly working against it. Representative Gary Ackerman, another New York Democrat sitting on the House Financial Services Committee, is circulating a letter against the provision.
We need to stop them from gutting reform of "financial weapons of mass destruction," as Warren Buffett famously called derivatives. Call Barney Frank at this number tomorrow:
Chairman Barney Frank (202) 225-5931
Call Gary Ackerman and tell him to withdraw his outrageous letter:
Rep. Gary L. Ackerman, NY (202) 225-2601
Tell Michael McMahon to shut up:
(202) 225-3371
And now that the names of the conferees merging the House and Senate bills have been released, call them too:
Senate Democrats
Christopher J. Dodd Chairman (D-CT) (202) 224-2823
Tim Johnson (D-SD) (202) 224-5842
Charles E. Schumer (D-NY) (202) 224-6542
Jack Reed (D-RI) (202) 224-4642
Blanche Lincoln, Chairman (202) 224-4843
Tom Harkin, Iowa (202) 224-3254
Patrick J. Leahy, Vermont (202) 224-4242
Senate Republicans
Richard C. Shelby Ranking Member (R-AL) (202) 224-5744
–Judd Gregg of New Hampshire (202) 224-3324
Bob Corker (R-TN) (202) 224-3344
–Mike Crapo of Idaho (202) 224-6142
–Saxby Chambliss of Georgia 202-224-3521
House Democrats (besides Barney Frank)
Rep. Paul E. Kanjorski, PA (202) 225-6511
Rep. Luis V. Gutierrez, IL (202) 225-8203
Rep. Maxine Waters, CA (202) 225-2201
Rep. Melvin L. Watt, NC (202) 225-1510
Rep. Gregory W. Meeks, NY 202/225-3461
Rep. Dennis Moore, KS (202) 225-2865
Rep. Carolyn B. Maloney, NY 202.225.7944
Tell them to stop allowing taxpayer insured banks to engage in risky derivatives trading and therefore to shut off the effective government subsidy for these pork barrel gluttons. Tell them to support Blanche Lincoln's Section 716 of the Senate bill. Even conservative Democrats ought to support stopping an effective handout for banks if they are really conservative and not simply shills.
It is time to show them that we will not be trod upon, we will not be taken for fools, and we will not be abused by banksters.