Democrats Hold The Line Against Wall Street Derivatives Lobbying

Source: www.huffingtonpost.com

Wall Street giants Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley had been pressing hard in recent days to dilute provisions of the bill that would change the rules for derivatives trading. But the Obama administration, which has made this one of its priorities for the financial-regulatory bill, has pushed back hard and appears to be succeeding. That's drawing Republican complaints that the pending rewrite of the rules of finance will put the economy at risk.

That's drawing Republican complaints that the pending rewrite of the rules of finance will put the economy at risk.




Read more: http://www.huffingtonpost.com/2010/04/14/democrats-hold-the-line-a_n_536997.html

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The party of no strikes again!!

It's not actual capitalism, it's voodoo math. It's not a real product or service, and should therefore not be legal for sale.

Seriously, though, short of bringing Glass-Steagall back, this is one of the best things we could do.

says "but won't that bring us into the light"..... and you saw what happened in TWILIGHT !!!!

History from the health care reform has made me pessimistic.

Regulate 'em like we do stocks & bonds, but it would be economic suicide (and impossible) to outlaw them.

Futures contracts are a derivative. You want to see what will happen to prices on everything from food to gasoline if they were outlawed? It would be ugly.

calling that "commerce"

Used properly, derivatives are an essential tool of risk management and fiscal stability. the basic purpose of derivatives is to serve as price insurance and in this context they make a great deal of sense.

so, in this context, no, I don't think they should be able to pass their risk off onto the taxpayer.

the majority of derivative contracts have not been thrown in the lap of taxpayers. the question was about the normal operation of derivative markets where a private counterparty, not the taxpayer, issues and makes good on an option contract, which is what happens most of the time.

I'm an old-fashioned capitalist in that regard. I believe in providing a quality product or service for a fair price. This monkey business of voodoo economics produces nothing, and lends itself to fraud, because it is, at heart, a numbers racket.

Business is about risk. If you can't handle the heat, get out of business.

the stupid ones like they pulled during the Bush Administration, should be passed on to the tax payer-EVER.

Glass Steagal should be restored then the tax payer would be under no risk from investment bank thieves.

No, the taxpayer should not have to pick up the bill for ill-considered market strategies. What I'm asking about is why another posted thinks the entire market ought to be shut down. There were derivatives before Glass-Steagall and sometimes there were problems with them too. G-S imposed a division between retail and investment banking, and in that sense it really has nothing to do with the idea of a derivatives market; restoring it might be (and probably should be) a barrier to certain kinds of securitization, not derivative trading.

a. you're a farmer. You decide that next year would be a good time to sell, say, wheat; but you're not entirely sure how many other farmers have the same idea, and how that might affect the supply (and thus the price) of wheat even though you must start making financial decisions now. So you buy a put option for a small fee, which gives you the right o sell wheat at some price - say $5/bushel. you buy your seed, plow your land, plant your crop and so on. when it comes time to sell, if wheat is over $5/bushel then your option is worthless - but that's OK because anything over $5/bushel is a pretty decent price, and the option didn't cost you too much. If your worries were well-founded, and there is too much wheat around, the market price might be only $4. but you have an option to sell it to a buyer at $5 - so you get the price you wanted, less the cost of the option (usually 5%).

b. Now say you run an airline. You need a lot of gas to fuel your planes, but the price of gas is volatile. Say you expect it to rise substantially over the next year, but if it does that will make your options very expensive and push up your ticket prices - which in turn will make your airline a bit less attractive. A competitor might be able to undercut you, or people might decide not to fly at all. So you buy a call option, which gives you the right to purchase fuel at a particular price. sure enough you guessed right and the price of gas goes sky-high (heh). But that's not a problem for you, because you have your call option and you can buy gas at the price you wanted, which in turn means you can keep a lid on the price of your tickets and sell lots of seats because your flights are the best value.

When the oil price went through the roof back in 2008, most airlines screamed in financial pain...but not Southwest airlines. They had seen it coming and wisely hedged against the price of oil the previous winter. So when others were paying record prices, SWA were able to exercise their call options and buy fuel for only a small premium on the previous year's prices. They saved a ton of money, kept their fares low, and expanded their business.

Of course there is a lot more to derivatives than can be explained in these simple examples. But this is the basic concept from both the supply and demand sides of the equation. And when used responsibly, it's a very simple and sensible way for a business to smooth out their cash flow in the face of uncertain price movements.

It's not actual capitalism, it's voodoo math. It's not a real product or service, and should therefore not be legal for sale.

It most certainly is a real service, and a useful one. What we need is to avoid excess leveraging of derivatives and their covert use by securities underwriters to offset losses foreseeable at time of issue by making OTC bets against their own financial instruments.

I appreciate that many people don't understand what derivatives are or how they work, but suggesting that they should be outlawed solely on the basis that they can be abused is foolish.

because some derivatives trading has been over-leveraged and foolishly speculative, it does not mean that derivatives en masse are a bad idea. I am strongly in favor of regulating their trade, particularly by requiring on-exchange transactions rather than OTC swaps and the like. I am not in favor of completely abandoning a good economic tool because its unregulated use got out of control.

Derivatives are betting on some outcome that you have no real connection to.

derivatives.

If these companies don't have ways to make money besides using derivatives they need to rethink their business model, or shut down.

rewriting the rules of finance will put the economy at risk? Yes..let's just go ahead and fall off the cliff. Hope this gets all the attention that health care did.

I am worried about Reid. Seems like Lowden is leading him in the race. She's another pretty woman and a former runner up in Miss America..but also a former state senator elected in a democratic district. She has suggested to "barter" with you doctor?! Calgon take me away

http://www.youtube.com/watch?v=F_1U4r8mWXY

I'll trade them all for a prostate exam!

Ain't capitalism grand?

yeah..that'll work :crazy:

a mastectomy and chemotherapy. If you don't mind my vomiting on your clothes a little from the chemo.

Yes yes yes.... you can HAVE the Lexus.... just GIVE ME THE FUCKING TOURNIQUET!

Just more hypocristy, what's new? Bush and Co. started it too. McCain endorsed it when he was running. Now the pukes cry about it to rally their Teabagger buddies, yet want nothing to do with PREVENTING it from happening again. Why not? They got rich, who cares about their constituency that suffered because of these K street pigs. Schizophrenic is the GOP agenda. Like my 18 month old, they can only say "No", even to things that are obvious yeses!

:woohoo: :patriot:

:shrug:

MAKE THESE BITCHES CRY!!!!

to see them cry, that's for sure.

Don't be trying to restrict our expressive fucking language. This is the way people talk, get used to it.

So it was "vulgar language" that caused you to abandon right-wing sites? That's what it took to drive you away... as opposed to the blazingly stupid and destructive ideology they espouse.

People here are primarily concerned about matters of substance. You won't find too many here who give a flying fuck about the delicate sensibilities of people with rule fetishes.

:eyes:

That's drawing Republican complaints that the pending rewrite of the rules of finance will put the economy at risk. Yeah, GOPers don't want to put the economy at risk...they want it to fail completely! :grr:

FUCk the Pukes on this, right here and very HARD, right now, or just in time for the November elections!!!

Over 80% of Americans are with the President! The Pukes don't know what to do with themsleves...Bitch McConnell stuck his own dagger into his own heart on this yesterday (with his Senate Floor speech opposing any move on this issue).

and then I can see him cave to the crimminals on Wall Street.

I hope and pray that Obama keeps the regulations tough on Wall Street, but I'm not going to hold my breath on it.

About time the dems figured out that it's time to take the gloves off and punch these bastards in the mouth.

but I fear they're just putting on one of their shows for the folks back home and that sooner or later they'll cave but expect us to believe that they "tried".

They are the proof of how money corrupts their politics and makes them as dumb as rocks. And dangerous to our very existence.

'Democrats Batter Mitch McConnell For Standing With Wall Street'

Sen. Chris Dodd (D-Conn.) entered a political memo written by GOP strategist Frank Luntz into the official Congressional Record on Wednesday, arguing that it belonged there because Minority Leader Mitch McConnell (R-Ky.) and other Republicans were repeating it verbatim in their effort to block Wall Street reform.

http://www.huffingtonpost.com/2010/04/14/democrats-batter-mitch-mc_n_537441.html

"...Republican complaints that the pending rewrite of the rules of finance will put the economy at risk..." It was their regulation eraser that screwed everything up.

The economy of the wall street banksters and their personal fortunes?

Hold the line Dems! Please don't sell us out again.

Show the American people the Democrats are for regulating derivatives! Republicans are for NO REGULATION on Wall Street thieves.

There's a lot of money, lobbying, horse trading and weak spines between here and the end of the road.

who believes Dems will do the right thing in the end.

Money talks and they listen.

Thank god it's not at risk now! :eyes:


Repugs have NOTHING... NOTHING to offer. They're a bad joke.

so to think leaving well-enough alone is going to solve anything is ridiculous

oh, wait.

thru & put real regualtion & taxation on these derivatives.