FDIC head: Don't ban bank derivatives business

FDIC head: Don't ban bank derivatives business


A banking regulator says Senate Democrats should let banks keep doing business in those complex and profitable investments known as derivatives.

Senators are trying to decide how to tighten oversight of the financial industry and one proposal would require banks to spin off their derivatives business.

The head of the Federal Deposit Insurance Corp. tells two Democrats deeply involved in the legislation that such a requirement could place derivatives outside regulators' reach.

Sheila Bair wants that proposal removed from the bill. She made her concerns known in a letter to Democratic Sens. Christopher Dodd of Connecticut and Blanche Lincoln of Arkansas.

Derivatives are blamed for helping plunge Wall Street into a near meltdown in 2008.

http://www.todaysthv.com/news/news.aspx?storyid=103852

No surprise there.

There simply has to be a way to "hedge" what is happening.

However, according to Robert Scheer, this is what needs to happen in terms of Wall Street:

"I think both the Democrats and the Republicans are now under enormous public pressure to at least appear to be doing something. That’s why the Republicans had to call off their stalling on the debate.

But if your question is do I trust the Dems to do the right thing, no. In particular, we have to watch for the survival of two key elements to reform. One is a truly vigorous consumer protection agency that can deal with outrageous loan packages, credit card usurious interest rates, and deception. The other key element is to restore the wall between commercial banking, which is backed by the good faith of the U.S. government, and say that anyone that is such a bank cannot engage in the sale and packaging of unregulated derivatives. And that for Goldman Sachs, for example, which was allowed to become a bank holding company, they would have to make a decision to give up their current ability to go to the Fed window and other important perks, and decide whether they are an investment bank dealing with private investors, which would mean they do not have the backing of the U.S. government."

To me, it is rather interesting that the Ron Paul suggested audit of the Federal Reserve, which has taken months and months to gather support, will probably be done in when the "Financial Reform Act" happens. Note also that this "Financial Reform Act" will probably not return us to the protections of anything as note worthy and important as Glass Steagall. And without Glass Steagall, we might as well just keep the money in our mattresses, or like our buddy Wanda Sykes says, in "marijuana. The only gold I trust." At least in the case of "Mary Jane" should the prices for the product fall,
you at least still have a useful product.

And the very last thing we need is the Congress auditing the Fed, and the next to last thing is restoring Glass-Steagall.

Didn't happen.

:(