Mitch and the Republicans are Shilling for the Banks

An editorial in today's NYT lays out the main issue:

Of all the regulatory changes under consideration, the outcome of derivatives reform is arguably the single most important issue for the banks. Why? Because derivatives are where the money is.

An overarching aim of reform must be to ensure that all derivatives deals — many of which currently trade as one-on-one private contracts — are moved onto transparent, fully regulated exchanges. If that happens, banks stand to lose potentially billions of dollars in earnings. In addition to reducing systemwide risk, transparent trading would lead to more competitive pricing.

Hmm ... let's see -- we can make the system safer for all Americans, or we can help the mega-greedy bankers make ever MORE money? Wonder which side Mitch is on?

Make the jump for why this all matters.

::

Let's be blunt. Derivatives should have made the system LESS risky, because they are designed to spread the risk across many investors. They have instead become one of the riskiest parts of our entire financial system, because (a) they are completely unregulated, (b) they do not generate capital requirements, and (c) they are so complex that they are impossible to rate.

The banks (and "banks" in this context means "all financial institutions doing derivatives") are continually creating new types of derivatives, often built on other derivatives. They then use credit default swaps to cover their risk, and use the capital raised to create still more derivatives. It is a house of cards built on sand, but it's also a system where billions can be made. And there's the rub.

When you combine the recent Citizens United decision with Mitch's trip to Wall Street, you can see where this is going. The Republicans will be able to raise MILLIONS for their campaigns from these bankers. What is half-a-million to a Republican PAC, when your BONUS last year was bigger than that?

The financial reform bill threatens to turn off the faucet and drain the river of money running down Wall Street. It would put both limits and transparency on derivatives, and keep these modern-day Gordon Gekkos from again taking down the system. And whose side is Mitch on? I'll give you three guesses, but I bet you only need one.

It's really quite clear -- either we get a safer system, or the banks and the Republicans are allowed to once again deregulate us into disaster. From the Times:

The White House and Democratic leaders need to push back hard against Republican posturing, making it clear to Americans that robust reform is the only way to protect the system — and taxpayers — from a repeat catastrophe. When Republicans try to block reform, they are doing nothing more than shilling for the banks.

Yep, that's our boy Mitch and his Republican buddies -- shilling for the banks.

http://www.dailykos.com/story/2010/4/18/858486/-NYT-Editorial:-Republicans-are-shilling-for-the-banks.

Comments

[Bruce]

Hat tip to Turkana at Daily Kos, who posted this story there earlier today -- http://www.dailykos.com/story/2010/4/18/858486/-NYT-Editorial:-Republicans-are-shilling-for-the-banks.