Posted on 07/10/2009 5:43:45 AM PDT by Red in Blue PA
U.S. Treasury Secretary Timothy Geithner will tell Congress Friday that the "enormous scale and the critical role" of over-the-counter derivatives in the financial markets as well as their their "substantial challenges and risks" require greater government regulation.
Geithner will also recommend that the Securities and Exchange Commission and the Commodities Future Exchange Commission share the new oversight powers, according to the testimony, a copy of which was obtained by CNBC.com.
"Establishing a comprehensive framework of oversight for the OTC derivative markets is crucial to laying the foundation for a safer, more stable financial system,” the testimony reads.
(Excerpt) Read more at cnbc.com ...
And we have already seen that Wall Street is full of incompetents......
Timmy still works for Goldman Sachs
I agree as well, because it is clear that overly large positions are laying off systemic insurance to the public.
This should only affect the most novel and poorly modeled products, or those for which the position is effectively “naked.” If the rules that comeback are different in intent, well, that would be a different matter. But, with all of the money Goldman has given the government, I doubt that will be a problem!
The irony here is two-fold: Mr. G was head of the NY Fed for several years during which all of this derivative stuff was going on. He failed to stop it, question it, investigate it, or do anything at all about it; and, of course, Mr. G does not believe in paying taxes, which in turn helps pay for regulating the finance industry.
Regulation is only as good as the regulators. Now, looking over the past ten years, or so, how well did the government regulate anything?
There is only one way to answer that question.
Touche!
(but it would still be better if the criminals on Wall Street had to look over their shoulders for the Criminals of Congress)
Not to mention the ones in the White House.
I guess that means that the foxes have done enough with the henhouse that the only thing left is some feathers.
How about policing the stimulus money that’s flowing to hacks, crooks, pols, and those connected to O and his regime.
Is anyone classifying the trades in “cap and trade” as derivatives? It seems to me this will become the derivative of all derivatives, if stupidity passes the senate.
I also agree but won’t the market just move offshore?
I agree with you as well. Although I don’t particularly trust this administration to come up with regulations, the Credit Default Swap markets do need regulating. I would very much like to see CDS purchases limited to insurance for those those who will suffer actual financial harm if a bond issuer defaults. Currently, the CDS swap market is a gambling casino where speculators with no direct financial interest in a company can destroy that company by betting against it with Credit Default Swaps.
We never really had a derivatives market in the 1950’s, and yet somehow we prospered.
The notion that we “need” this derivatives market is a spurious one.
Ala old man Kennedy when FDR made him head of the SEC?
Ala old man Kennedy when FDR made him head of the SEC?
“Touche!”
I have to agree with RB. I also think it was more than incompetence - some of these folks were plain ol’ crooks. I am surely going to get hell for this, but I would rather have a decent, honest democrat in office than a conservative crook. At the risk of being simplistic, until we get people in office who want to serve instead of being served, the dishonest will always find a way around the rules.—JM
I’m not knowledgeable about the terms used on the stock market, but does this article by CNBC say that Geithner wants to re-instate the law that said an investor cannot sell low if he doesn’t own stock in the company involved? If I’m guessing right, then I would agree with Geithner because there was such a law but Congress did away with it years ago which allowed investors to bankrupt a company. But, most importantly, I suspect Timmy has found another way to bring this country down. The devil’s in the details of this proposed law.
How about policing of Dem tax payments, TurboTimmy?
My Grandma had a henhouse. There’s more left on the floor than feathers. :-)
And, if I had my way, I'd reform the formation of all collateralized loan bonds (or any other form of laon packaging) by requiring that each individual bond be composed of a set of specific whole loans, be at least $10,000,000.00 in face value, and not allowed to be further divided up, tranched, or derivatized.
This is a simple reform that introduces total transparency into what the bonds consist of, would pressure the original lenders to perform due diligence and proper documentation since all buyers would now know exactly what they were buying, would still allow marketing of CBOs so that new money would continue to flow into new loans, and would prevent these essential instruments from being turned into toxic gambling tools.
In addition, by making these instruments simple, transparent and standardized, fair and efficient marketplace trading could be established, and they could be effectively and efficiently valued by those institutions that invest in them, thereby making the balance sheets of those institutions transparent.
By itself, this one simple reform, if it had been implemented 4 years ago, would have prevented the excesses that have lead to the current financial meltdown.
What other area of life allows one to chop up pieces of anything and sell them so that the buyer basically has no idea of what he is buying?
The so called “smart money” isn’t very smart if they do not know what they are buying as they have been doing for the past decade.
Throw the bums out.....both on Capitol Hill and on Wall Street.
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