Friday, October 16, 2009
Senator Cantwell said this today about the new derivatives legislation passed by the Financial Services Committee:
The shenanigans just began here in Washington.
What is moving through on the House side is a bill that supposedly has a new rule, but has so many loopholes that the loophole eats the rule. We want to say we have transparency and regulation, but it will continue to have loopholesCurrent law with its loopholes would actually be better than these loopholes, which are just going to continue to promulgate the problem.
The Treasury Department should be ashamed of themselves. They have blessed this deal. [The whole idea that the proposed legislation would ameliorate the problem is] a mirage. It's an act of commission, that's very, very dangerous for the future of our financial system.
An "act of commission" is a legal term for an unlawful action (as opposed to "an act of omission" which means breaking the law by unlawfully failing to act). If Cantwell understands the term, then she is saying that Congress is acting unlawfully by intentionally weakening derivatives regulations.
In any event, leading derivatives experts agree with Cantwell that the proposed legislation will do more harm than good.
As Robert Borosage writes:
The best experts in the field -- like Michael Greenberger of the University of Maryland -- warn that the legislation might end up WEAKENING current law. That is no small achievement, because, as we saw in the collapse of AIG, current law is toothless...
Satyajit Das says that the new credit default swap regulations not only won't help to stabilize the economy, they might actually help to destabilize it.
And as Huffington Post notes :
Rob Johnson, former managing director at Soros Fund Management and chief economist of the US Senate Banking Committee, called it a "form of Wall Street protectionism" that would not "address the fault lines that OTC derivatives represent."