Five or Six Players … Own the Regulatory Apparatus. Everybody Is Afraid to Regulate Them”

Harold Bradley – who oversees almost $2 billion in assets as chief investment officer at the Kauffman Foundation - told the Reuters Global Exchanges and Trading Summit in New York that a cabal is preventing swap derivatives from being forced onto clearing exchanges:


There is no incentive from the moneyed interests in either Washington or New York to change it…

I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus. Everybody is afraid to regulate them.

Indeed, as I wrote last May:

In at least one area – one of the most important causes of the financial crisis – reform has already been defeated.

By way of background, the derivatives industry has volunteered (once again) to regulate itself.

As Newsweek noted April 10th, the big boys were using bailout money to aggressively lobby against the regulation of credit default swaps:

Major Wall Street players are digging in against fundamental changes. And while it clearly wants to install serious supervision, the Obama administration—along with other key authorities like the New York Fed—appears willing to stand back while Wall Street resurrects much of the ultracomplex global trading system that helped lead to the worst financial collapse since the Depression.At issue is whether trading in credit default swaps and other derivatives—and the giant, too-big-to-fail firms that traded them—will be allowed to dominate the financial landscape again once the crisis passes. As things look now, that is likely to happen. And the firms may soon be recapitalized and have a lot more sway in Washington—all of it courtesy of their supporters in the Obama administration…

The financial industry isn’t leaving anything to chance, however. One sign of a newly assertive Wall Street emerged recently when a bevy of bailed-out firms, including Citigroup, JPMorgan and Goldman Sachs, formed a new lobby calling itself the Coalition for Business Finance Reform. Its goal: to stand against heavy regulation of “over-the-counter” derivatives, in other words customized contracts that are traded off an exchange…

Geithner’s new rules would allow the over-the-counter market to boom again, orchestrated by global giants that will continue to be “too big to fail” (they may have to be rescued again someday, in other words). And most of it will still occur largely out of sight of regulated exchanges…

The old culture is reasserting itself with a vengeance. All of which runs up against the advice now being dispensed by many of the experts who were most prescient about the crash and its causes—the outsiders, in other words, as opposed to the insiders who are still running the show.

And today, Treasury gave the financial giants exactly what they wanted. As Bloomberg writes in an article entitled “Wall Street Derivatives Proposals Adopted in Treasury Overhaul “:
http://www.nakedcapitalism.com/2010/04/guest-post-%e2%80%9cwe-are-in-a-cabal-five-or-six-players-own-the-regulatory-apparatus-everybody-is-afraid-to-regulate-them.html

this is a national security issue. They ought to send the Marines to Wall Street to round up these terrorists and put an end to the massive threat they pose to the continued existence of our nation.

I'm sure Team Obama is on that.
:sarcasm:

Kool Aid, nom nom nom:beer:

eom

THEM!!!!:nuke: :kick: :patriot:

and how much of the winner will be controlled by foreigners?

http://www.ny.frb.org/newsevents/speeches/2006/gei060914.html

In view of the critical role that efficient credit provision plays in economic growth and development, the benefits to the global economy of getting the underpinnings of a stable, efficient financial system in place are substantial. At the same time, we also know that these important markets are susceptible to certain “market failures,” such as information asymmetries, incentive conflicts, moral hazard and agency problems. By at times distorting incentives to manage risk, these market imperfections can alter credit decisions and lead to a higher overall level of risk-taking than may be optimal for the economy as a whole. This provides the classic rationale for supervision and regulation. Supervision and regulation have the potential to help mitigate these sources of market failure. The recognition of a market failure does not mean, of course, that policymakers have the capacity to design solutions that can effectively mitigate those failures without raising others problems.


I'm still wading through the whole speech. It's long, but seems to have some interesting bits in there.

"The benefits to the global economy of getting the underpinnings of a stable, efficient financial system in place are substantial."