In June, Obama laid out his plan for financial regulation reform, and Congress is moving his agenda

[ProSense]

Obama Proposes a First Overhaul of Finance Rules

Obama's derivatives plan could hurt corporate users

Obama's Plan: Financial Regulatory Reform: A New Foundation (PDF)

• Requiring Strong Supervision And Appropriate Regulation Of All Financial Firms (pdf)
  
  
• Strengthening Regulation Of Core Markets And Market Infrastructure (pdf)
  
  
• Strengthening Consumer Protection (pdf)
  
  
• Providing The Government With Tools To Effectively Manage Failing Institutions (pdf)
  
  
• Improving International Regulatory Standards And Cooperation (pdf)

Edward Harrison of Credit Writedowns: My initial reactions to President Obama’s financial regulation proposal


Recent developments:

House Panel Moves Derivatives Toward Obama’s Proposal

FACTBOX: Major U.S. financial regulation reform proposals

Obama says Senate bill on tax havens would stop abuses

Statement by President Barack Obama on House and Senate Introducing Legislation to Crack Down on Overseas Tax Havens

[ProSense]

1. This needs more exposure. n/t

[firedupdem]

2. Rec'd! Thanks ProSense, you really do a great job of putting

this information together. I appreciate it!

[ProSense]

3. Thanks. n/t

[Cha]

4. Yes, she's

spoiling us like Jackeens with all the photo history.

I feel really fortunate to have this available for our perusal.

THanks, PS~

[jgraz]

5. Don't be fooled. This Summers/Geithner shell game is fake reform at its worst.

Obama's plan is pathetically weak. It's not even a plan, but more of a plan to have a plan. It does nothing about too-big-to-fail banks, does not even hint at restoring Glass-Steagall and leaves the most dangerous derivatives completely unregulated.

All you need to know about the seriousness of this proposal is contained in one provision:

Under the President’s plan, banking regulators will issue regulations that require the originator of a securitized loan, or the sponsor of a securitization to retain 5 percent of the credit risk of securitized exposures.

Five percent?? Seriously? That's less than the banks held before the crash. This is effectively a reboot of the secondary loan market responsible for last year's crash. A five percent reserve is not only total bullshit, it's not even an attempt to hide the fact that it's total bullshit. Geithner and Summers are laughing at you.


Again, from the links you provided:

There is a way for companies to avoid recording derivatives at their market value, though: they can qualify for something known as "hedge accounting" if they can demonstrate that the derivatives they are using are designed to reduce risk rather than take risk. But qualifying for hedge accounting means the derivative must match the original exposure very closely, which typically requires custom-tailored instruments.

Custom tailored instruments can't really trade on an exchange, which is why QIA's Rosenfeld sees the Obama administration as unlikely to move the interest-rate, currency, and commodity derivatives that companies use to exchanges.

To summarize: the largest and most risky hedging instruments are left completely unregulated. Combine this with the ridiculously weak requirements for capital reserves and we're no better off than we were under Bush.


Supporting Obama is one thing, but we can't afford to be conned on this. Obama's proposal is a band-aid guaranteed to keep the gravy train running on Wall Street. We need to demand real reform or we risk another huge bubble (and collapse) within a few years.