Last week, the Senate agriculture committee, led by Blanche Lambert Lincoln, sent to the floor a bill that would significantly alter derivatives trading. Should it become law—here are the highlights—the bill would require regulated banks with derivatives-trading units to spin them off. It would also require that derivatives, many of which are traded over-the-counter (i.e., not on an exchange), be traded through a central clearinghouse, with pricing and volume data made available to the public.Go read the original to get more details of Wall Street fighting change that ended up being quite good for it. Plus get the links.
Predictably, the industry is opposed to the mandates for greater transparency. As Reuters reported, "Exchange trading has nothing to do with reducing credit risk," said Conrad Voldstad, chief executive officer of the International Swaps and Derivatives Association. "In fact, mandating that all swaps be exchange-traded will increase costs and risks for the manufacturers, technology firms, retailers, energy producers, utilities, service companies and others who use over-the-counter derivatives."
My general rule of thumb is that we should generally ignore what Wall Street has to say about financial regulation. Investment banks lack the common sense to know what's good for them. The financial sector opposed all the regulations that were good for it in the 1930s—i.e. the advent of the Securities and Exchange Commission and the creation of the Federal Deposit Insurance Corp. And the regulatory changes it requested and received in the past decade—eroding Glass-Steagall, getting the SEC to permit investment banks to increase their use of leverage—set the stage for the debacle of 2008.
For the past several decades, Wall Street has continually told Washington that if the Street can't do things the way it always has, and if the government changes the rules to mandate greater transparency and customer protection, that the geniuses in Lower Manhattan won't be able to make money, and it would stunt the industry. They've been wrong every time.
You would think that an industry that is so bad at knowing what is good for it (and the economy as a whole) would learn to shut up and take the fixes offered. But no, they haven't learned their lesson. Worse, they keep using their money to buy politicians to "fix" the system the way they think is best for them. This only makes it worse for them and us. When will they learn to cut this out?
This reminds me of the billionaire right wing nuts. Their peculiar politics ends up distorting the country. They keep making life worse for themselves and everybody else as they pursue their oddball fanatical political beliefs. It creates grief for us and them. But they don't seem to learn any lessons from history. Tragic.