Federal Reserve chimes in on Wall Street

[Magox]

This is the exact text from the Federal Reserve, regarding the Senate Agriculture committee's O T C Derivatives Bill

 

It's only four pages

 

 

Some highlights

 

Senate Agriculture Committee Chairman Blanche Lincoln’s idea to prohibit banks from trading derivatives – which was reported Sunday to be in the current version of the legislation – “would impair financial stability and strong prudential regulation of derivatives,”

 

 

The Federal Reserve document also said the Lincoln proposal “would have serious consequences for the competitiveness of U.S. financial institutions, and would be highly disruptive and costly, both for banks and their customers.”

 

 

Gregg called the proposal by the Arkansas Democrat, who is in an uphill reelection fight, “rampant pandering populism.”

 

“It’s just penal. That’s the purpose of this: punitive. And in the end it’s going to cut off our nose to spite our face,” Gregg said. “Because it’s going to be our credit that contracts … This is Main Street that will be affected by this language.”

 

Even Senate Minority Whip Dick Durbin, Illinois Democrat, who could usually be counted on to castigate the GOP for obstructionism despite much evidence to the contrary, gave grudging acknowledgment that the issue is disagreement over how to reach a shared goal.

 

“I think we’re moving to the point now where even the Republicans believe we’ve got to do something,” Durbin said on CNN.

 

 

The strategy from Democratic leadership is to ONCE AGAIN, paint the GOP as obstructionists, which of course has been a failing strategy:

 

Nonetheless, late Monday Reid scheduled another vote for Wednesday that will seek again to move the bill to the floor for debate.

 

“This is going to be a very tough week to be a Republican: If they want to vote to protect Wall Street like they did last night, we’re going to make them do it again and again,” Reid spokesman Jim Manley told Politico. “We will make sure that by the end of this week there’s no question in anyone’s mind about the fact that Republicans are protecting Wall Street over the interests of hard-working Americans.”

 

 

Now of course, the only one's who buy into this argument are the sheeple from the left, like picnic table or Hedd or Conner or Pasta Joe or...... well you get the point.

 

 

I've been following this process for this "Wall Street Reform" very closely, and the one's who've been stalling in the process has come primarily from Democratic leadership. There are honest differences in the way to craft the bill, and they are not that far apart. 5 weeks ago, Corker and Dodd were getting very close to completing the bill, when Dodd started receiving flack from the Uber Left wing liberal base, the W.H instructed Dodd to cut off talks and move forward with the bill.

 

It was a miscalcuation from the W.H, they figured that they could pick off a few votes from Snowe, Collins, Brown and maybe a few others, but they were wrong. Once they knew that there was a miscalculation they resumed talks again.

 

The W.H put yet another self-imposed timeline to get the bill done. The calculation was that the GOP will have to back the bill or that the Democrats will attempt to paint the GOP as " Republicans are protecting Wall Street over the interests of hard-working Americans." Which of course, only the lemmings really believe that.

 

The reality is that the Reid, the W.H and some of the other liberal minions are politicizing this issue in attempt to score political points for the November elections, considering how badly that they are getting hammered in the polls.

 

Of course, politicizing in issue is not akin to only one party, both on this issue, you can bet your bottom dollar that the Democrats own this one.

[Magox]

NPR & New York Times, you know part of the right wing bastion of news sources have their own opinions regarding the bill:

 

http://realclearpolitics.blogs.time.com/20...r-the-ny-times/

 

Here was President Obama last Thursday talking about financial regulatory reform:

 

Now, there's a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. And that's a legitimate debate, and I encourage that debate. But what's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true. (Applause.) In fact, the system as it stands -- the system as it stands is what led to a series of massive, costly taxpayer bailouts. And it's only with reform that we can avoid a similar outcome in the future. In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts. That's the truth. End of story. And nobody should be fooled in this debate. (Applause.)

 

Adam Davidson of National Public Radio the following day:

 

"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on Thursday.

I cannot find any experts -- of any party -- who are willing to agree with Obama on this one.

"We're not seeing a very forceful step on the too-big-to-fail problem," said Carmen Reinhart, an economist at the University of Maryland. "If there's any doubt that the crisis may be systemic, we will bail out again."

So, if a major bank says, "Hey, save us or the economy will go under," the government's going to save the bank. Full stop.

 

 

And Gretchen Morgenson of the New York Times yesterday:

Unfortunately, the leading proposals would do little to cure the epidemic unleashed on American taxpayers by the lords of finance and their bailout partners. The central problem is that neither the Senate nor House bills would chop down big banks to a more manageable and less threatening size. The bills also don't eliminate the prospect of future bailouts of interconnected and powerful companies.

 

Too big to fail is alive and well, alas. Indeed, several aspects of the legislative proposals sanction and codify the special status conferred on institutions that are seen as systemically important. Instead of reducing the number of behemoth firms assigned this special status, the bills would encourage smaller companies to grow large and dangerous so that they, too, could have a seat at the bailout buffet.

 

Two points worth making. First, as a policy matter, this is no small discrepancy between the President of the United States and two news organizations. The President declared on Thursday, without nuance or caveat, that the Dodd bill ends "too big to fail." Period. On successive days NPR and the New York Times asserted the opposite.

 

Someone is clearly wrong. Why hasn't anyone from the White House press corps followed up and asked the President to address the issues raised by NPR and the NYT and to either lay out evidence supporting his claim or force him to retract it.

 

Point two: as a political matter, this is where we end up when we have a President who relies so heavily on rhetorical tricks and demagoguery to make his case- as Obama did Thursday by declaring any opposing viewpoint to his as "illegitimate." Despite his eloquence and thoughtful demeanor, Obama doesn't try to win arguments through persuasion so much as he does by demonizing and de-legitimizing those who hold a different view.

 

The President used this tactic repeatedly during the year long health care debate. And we're now learning that at least some of the criticisms of his plan, which he dismissed at the time as "illegitimate," were well grounded in reality .

 

The bottom line is that Obama's habit of declaring opposing viewpoints as outside the bounds of legitimate discourse doesn't serve the country or the President well at all. It is exceedingly divisive, poisons serious bipartisan debate and won't help the President's credibility and moral authority in the long run.

[IDBillzFan]

One of the things I find interesting as a person who now follows politics beyond the headlines is the ability to more clearly see what is really going on versus what most people see walking past the newspaper rack.

 

In this particular case, I keep hearing people from the left and right saying "Look, we're close to a bipartisan deal. It's just going to take some time," and then you have Reid calling for a vote every couple of days exclusively for the sake of portraying the right as the exclusive Wall Street guys. I watched Jim DeMint interviewed last night by Greta Van Susteren, and he was explaining how Dodd knew they were close to a bipartisan deal, but then he was called to the WH, and shortly thereafter it became clear that to the current administration, this issue is not about financial reform but rather a way to make the GOP look like idiots going into November. They're turning their long-time leaders into puppets.

 

Then I read this and it becomes all too clear. I can't help but wonder if this will bite the Dems in the ass.

 

Even Senate Minority Whip Dick Durbin, Illinois Democrat, who could usually be counted on to castigate the GOP for obstructionism despite much evidence to the contrary, gave grudging acknowledgment that the issue is disagreement over how to reach a shared goal.

 

“I think we’re moving to the point now where even the Republicans believe we’ve got to do something,” Durbin said on CNN.

 

Nonetheless, late Monday Reid scheduled another vote for Wednesday that will seek again to move the bill to the floor for debate.

 

“This is going to be a very tough week to be a Republican: If they want to vote to protect Wall Street like they did last night, we’re going to make them do it again and again,” Reid spokesman Jim Manley told Politico. “We will make sure that by the end of this week there’s no question in anyone’s mind about the fact that Republicans are protecting Wall Street over the interests of hard-working Americans.”

[GG]

... and in the end they'll come up with a craptastic bill ...

[Magox]

One of the things I find interesting as a person who now follows politics beyond the headlines is the ability to more clearly see what is really going on versus what most people see walking past the newspaper rack.

 

In this particular case, I keep hearing people from the left and right saying "Look, we're close to a bipartisan deal. It's just going to take some time," and then you have Reid calling for a vote every couple of days exclusively for the sake of portraying the right as the exclusive Wall Street guys. I watched Jim DeMint interviewed last night by Greta Van Susteren, and he was explaining how Dodd knew they were close to a bipartisan deal, but then he was called to the WH, and shortly thereafter it became clear that to the current administration, this issue is not about financial reform but rather a way to make the GOP look like idiots going into November. They're turning their long-time leaders into puppets.

 

Then I read this and it becomes all too clear. I can't help but wonder if this will bite the Dems in the ass.

Exactly!!! Even though you just quoted the same thing I did from my first post.

[KD in CA]

... and in the end they'll come up with a craptastic bill ...

 

It's always nice to keep a streak alive.

[John Adams]

... and in the end they'll come up with a craptastic bill ...

 

Poor people need more access to home loans.

[DC Tom]

Poor people need more access to home loans.

 

But only at low interest rates with absolutely no risk of foreclosure if they default.

 

 

Giving away houses would be a better plan.

[finknottle]

Giving away houses would be a better plan.

 

Do I forsee a stacked Base Closing Commission? Kill two birds with one stone?

[DC Tom]

Do I forsee a stacked Base Closing Commission? Kill two birds with one stone?

 

And then when the people who are given free houses complain that the houses aren't up to McMansion standards of luxury or quality, the government can blame the contractors and take over the construction industry so it never happens again. Brilliant!

[meazza]

Anyone else enjoying the witch hunt?

 

http://blogs.ft.com/gapperblog/2010/04/ms-...ng-latest-news/

[GG]

Anyone else enjoying the witch hunt?

 

http://blogs.ft.com/gapperblog/2010/04/ms-...ng-latest-news/

 

Doing the same on WSJ.com

[meazza]

Doing the same on WSJ.com

 

Bloomberg tv has it live.

 

1:39pm - Did Goldman do anything wrong in the process of synthetic CDO’s, Sen Jon Tester asks.

 

Mr Sparks said the bank didn’t do anything wrong but that it did make some mistakes and deals that didn’t work out. Now Mr Tester wants to know about the history of synthetic CDOs and how they actually work. Mr Sparks struggles to answer succinctly and Mr Tester calls the whole practice gambling.

 

Ok so you want to judge an entire firm based on something you don't even know how it works???

[GG]

Mr Tester calls the whole practice gambling.

 

Senators are just recognizing how a trading floor works? I'm sorry, but didn't they hold these hearings on LTCM and Enron?

[meazza]

Senators are just recognizing how a trading floor works? I'm sorry, but didn't they hold these hearings on LTCM and Enron?

 

GS are no saints, but the SEC has nothing.

 

 

A market maker need not disclose his counterparties.

[GG]

GS are no saints, but the SEC has nothing.

 

 

A market maker need not disclose his counterparties.

 

If this hearing was about whether Wall Street is populated by do gooders, then it would be a very brief one. A very weak case that hinges only on one thing - GS' name will be dragged through the mud until they settle. If they don't, SEC will look very foolish.

[DC Tom]

Anyone else enjoying the witch hunt?

 

http://blogs.ft.com/gapperblog/2010/04/ms-...ng-latest-news/

 

 

2:25pm - Mr Tourre tells the committee that he never told ACA that Paulson would be an equity investor. He said he did mention to ACA that Paulson’s expectation was that they were buying credit protection on certain tranches of that portfolio. “To me, buying protection on risks would mean being short,” Mr Tourre said.

 

!@#$ing idiot. I'm long a stock right now, and bought puts to mitigate downside risk. That's not "being short".

 

2:21 - “We’re not that stupid,” Mr Coburn said when the witnesses appeared to waffle about the nature and frequency of their changing positions from long to short on transactions.

 

Yes, you are, Mr. Coburn. Yes, you are.

[meazza]

!@#$ing idiot. I'm long a stock right now, and bought puts to mitigate downside risk. That's not "being short".

 

 

 

Yes, you are, Mr. Coburn. Yes, you are.

 

Toure's not helping by saying, "yes mr chairman."

 

Might be mitigating risk but you're still benefiting from the short position (provided you're not also long underlying)

[GG]

Why aren't they dragging the heads of the German bank to ask why a year after it became obvious to most that the housing market had peaked, it was a sound decision to buy synthetic subprime CDOs?

[DC Tom]

Why aren't they dragging the heads of the German bank to ask why a year after it became obvious to most that the housing market had peaked, it was a sound decision to buy synthetic subprime CDOs?

 

They're victims. Therefore heroes.