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Peterson derivatives compromise moves financial reform bill

WASHINGTON — A compromise on derivatives, the last remaining sticking point in the Wall Street reform bill, lubricated the bill enough that it cleared the conference committee early this morning.

For much of the 20 hours of Thursday (then Friday’s) hearing, and frankly for weeks before that, the financial reform bill was stuck without enough votes because of questions on just how tough language on derivatives should be.

On one side of that divide was Arkansas Democratic Sen. Blanche Lincoln, the chair of the Senate Agriculture Committee, who wanted banks to spin off their derivatives desks in an effort to avoid the risky credit default swaps that have been blamed in part for causing the financial crisis.

On the other was the New York delegation, which worried that such tight rules would unfairly hamstring Wall Street firms and send trading overseas.

Collin Peterson’s compromise measure: Allow banks to keep the safest futures trades (things like foreign currency, precious metals, hedges and the highest-graded credit swaps), while forcing them to spin off sub-prime swaps and many deliverable commodities (agriculture, metals, energy fuels, etc.)

The conference report was approved by a 20-11 vote of House conferees and a 7-5 vote of Senate conferees.

The House and Senate are expected to take up the final version of the bill, which is no longer amendable, next week. The goal is that it be signed into law before the July 4th recess, and it appears they have the votes in the House and Senate to do it.

Comments (3)

  1. Submitted by Glenn Mesaros on 06/26/2010 - 07:19 am.

    “Faced with effectively complete collapse of the banking system in 1933, the New Deal confronted a choice. On the one hand, it could try to nationalize the system, or perhaps create a new government bank that would threaten eventually to drive all private banks out of business. On the other hand, it could accede to the long standing requests of the major money center banks — especially those headquartered around Wall Street – to relax restrictions on branch and interstate banking, allow mergers and consolidations, and thereby facilitate the emergence of a highly concentrated private banking industry, with just a few dozen powerful institutions to carry on the nation’s banking business. That, in effect, was the pattern in most other industrialized countries. But the New Deal did neither. Instead, it left the astonishingly plural and localized American banking system in place, while inducing one important structural change and introducing one key new institution.”.

    “The structural change, mandated by the Glass-Steagall Banking Act of 1933, was to separate investment banks from commercial banks, thus securing depositors’ saving against the risks of being used for high speculative purposes.”

    Exerpted from chapter: “What the New Deal Did” 

    Freedom from Fear: The American People in Depression and War, 1929 – 1945. 928 pages, 1999, Oxford University Press, The Oxford History of the United States.

    by David M. Kennedy, Donald J. McLachlan Professor of History at Stanford University.

  2. Submitted by Glenn Mesaros on 06/26/2010 - 07:25 am.

    Obama, acting on behalf of his London/Wall Street masters, gutted the Finance bill of the Glass Steagall amendment, which had overwhelming support of Senators when Obama robots Al Franken and Amy Klobuchar voted to cut off debate and prevent the McCain/Cantwell/Feingold amendment from a vote. Senator Feingold will not vote for this Wall Street dominated Financial “reform” bill, because it does nothing to the parasites who run our Financial system. EVEN the Federal Reserve chiefs in Dallas and Kansas City, but not Wall STreet dominated Minneapolis, support Glass Steagall restitution.

  3. Submitted by Bernice Vetsch on 06/26/2010 - 05:06 pm.

    Mary Bottari of BanksterUSA says the Peterson language means “the push-out provision was gutted.” … “The vast majority of OTC derivatives (approximatly 90% were not pushed out). These include interest rates swaps, foreign exchange trades, investment grade credit default swaps, gold.

    “This means that at the end of the day, taxpayers are still on the hook for the Wall Street casino. Taxpayers will be incensed to discover this the next time these trades go bad and blow up a ‘too big to fail institution.’ ”

    No wonder the banksters had smiles on their faces. (Question: Did any Republican members of the conference committee vote Yes instead of No to move the bill forward, or was this just another sop to the Right, which always delights in the sops and then votes to kill everything.)

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