393
edits
Changes
SW: →Bank Reform Bill Derivatives Amendment: - add ref
==Record and controversies==
===Bank Reform Bill Derivatives AmendmentS.3217 Restoring American Financial Stability Act of 2010===
As the Senate began the debating the financial reform bill, [[Bank Reform Bill 2010]] in May, Senator Lincoln decided to take an tough stance against banks regarding derivatives trading.<ref>Edward Wyatt, [http://www.nytimes.com/2010/05/16/us/politics/16derivatives.html "Blanche Lincoln Finds Few Allies on Derivatives Ban,"],"New York Times," May 15, 2010.</ref> Lincoln's amendment calls a separation between banks business serving the general public and their activities in credit derivative swaps. The amendment, which was voted on by the Senate and rolled into the larger Senate financial reform bill, "will force the biggest banks to spin off their swaps (or derivatives) desks into a separate entity. That entity will be regulated and can remain part of the bank holding company, but it no longer has access to the Federal Reserve's flow of funds, FDIC insurance and the taxpayer guarantee. Supporters include legendary economists and public policy experts such as Robert Reich, Joseph Stiglitz, Nouriel Roubini, and Michael Greenberger." <ref>Mary Bottari, [http://www.banksterusa.org/content/midnight-massacre-pending-lets-whip-our-senators "Midnight Massacre Pending, Let's Whip Our Senators,"], "BanksterUSA," May 13, 2010.</ref> The derivatives measure in the bill will target the five largest banks that account for 90% of the these derivative measures. <ref>Id.</ref> " Lincoln's amendment will go right after the deals that Goldman Sachs is now being officially investigated for and Lincoln's language is #1 on their hit list." <ref>Id.</ref> "These five bank-dealers can fund their swaps trading units with FDIC-insured deposits. They have access to the Federal Reserve's discount window, which allows them to borrow money for gambling in swaps at near-zero percent interest rates. But these government supports were created to reassure the public that their deposits are safe, and to protect banks from runs on their deposits –- not to help banks finance their own casinos." <ref>Mary Bottari, [http://banksterusa.org/content/no-more-gambling-taxpayer-money "No More Gambling with Taxpayer Money,"], "BanksterUSA," June 9, 2010.</ref>
"The swaps business, which accounts for billions in bank profits, is so desirable that the banks have all but given up fighting other restraints on their derivatives business." <ref>Edward Wyatt, [http://www.nytimes.com/2010/05/16/us/politics/16derivatives.html "Blanche Lincoln Finds Few Allies on Derivatives Ban,"], "New York Times," May 15, 2010. </ref> Lincoln's provision in the financial reform bill faces opposition from some big name officials. The chairman of the Federal Reserve, and the Secretary of Treasury, and Paul Volcker all oppose the derivative measure, arguing that it goes too far. <ref>Id.</ref> Initially critical of the derivative provision, Paul Volcker has changed his stance on the amendment. <ref>Tom Braithwaite, [http://www.ft.com/cms/s/0/a7ba2476-774b-11df-ba79-00144feabdc0.html "Wall Street Faces Defeat in Push to Retain Swaps Desks,"], "Financial Times," June 14, 2010.</ref> However, many of Lincoln's supporters argue that the derivative measure in the bill correctly affirms bank's separate role in serving the public. If a bank is simply serving a public acting within its traditional role as a public lenderto consumers, it deserves is entitled to be bailed outpublic protection such as backing from the FDIC. <ref>L. Randall Wray, [http://www.huffingtonpost.com/l-randall-wray/senator-blanche-lincolns_b_547752.html "Senator Blanche Lincoln's Derivatives Reform Bill Must Pass,"], "Huffington Post, April 22, 2010. </ref> Wray continues to frame Lincoln's bill in this manner: "Here is the choice she offers: you can continue with your derivatives, acting against the public interest, or you can be a bank. You cannot be both. Take your choice: blood-sucking vampire squid? Or, serve the public interest. If you go for squid, you lose all public protection. In that case, you go "free market" with all that entails-higher costs of borrowing, 100% downside risk, and prosecution when you lie and deceive." <ref>Id.</ref>
Lincoln's toughest challenge regarding the derivatives provision is that it is only included in the Senate Finance Regulation bill, not the House version. <ref>John Carney, [http://www.cnbc.com/id/37598933/ "Blanche Lincoln's Victory May Kill Derivatives Limit in Financial Regulation Bill,"], "CNBC," June 9, 2010. </ref> "The banks have several strong allies on Capitol Hill when it comes to diluting the Lincoln provision. House Financial Services Committee chair Barney Frank is not in favor of the provision. Nor is Senate Banking Committee chair Chris Dodd. FDIC head Shelia Bair and Fed chief Ben Bernanke are also reportedly opposed." <ref>Id.</ref> In contrast, Senate Majority Whip Richard Durbin (D., Ill.) said Ms. Lincoln is now in a stronger position. "She returns as the chairman of the Agriculture Committee, running for re-election in November, which I think gives her a strong bargaining position." <ref>Michael R. Crittenden and Victoria McGrane,[http://online.wsj.com/article/SB10001424052748704575304575296700673194736.html?mod=WSJ_Markets_MIDDLETopNews "Win By Lincoln Rejuvenates Overhaul Effort,"], "Wall Street Journal," June 10, 2010.</ref>