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Dave Spart

Roubini : Banks Fighting Derivatives Regulation

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For all those who don't know who Brooksley Born is just Google the name. A story of breathtaking relevance to today.


Fighting Derivatives Regulation

May 21, 2009


"Brooksley Born, the former U.S. commodities regulator who lost the fight to police over-the- counter derivatives a decade ago, said the banks that caused the financial crisis are trying to stop the overhaul of the market.

"Special interests in the financial-services industry are beginning to advocate a return to business as usual and to argue against any need for serious reform" Born said today as she accepted a Profile in Courage award from the John F. Kennedy Library. If changes aren't made "we will be haunted by our failure for years to come" she said.

As the chairwoman of the Commodity Futures Trading Commission in 1998, Born warned that the unregulated contracts posed a serious danger to the global financial system and moved to address changes in how swaps based on interest rates, commodities or currencies were traded. She was stopped by Alan Greenspan, Arthur Levitt and Robert Rubin, who all argued the market could regulate itself.

Lax oversight contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc., leading to the seizure of credit markets and causing more than $1.4 trillion in writedowns amid the worst financial crisis since the Great Depression. Treasury Secretary Timothy Geithner has promised that the U.S. will for the first time regulate over-the-counter derivatives, which are a major source of bank profits.â€

And the nation of sheeple, briefly disturbed from their somnolence, returned to watching American Idol . . .

Edited by Dave Spart

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For all those who don't know who Brooksley Born is just Google the name. A story of breathtaking relevance to today.


No one should be surprised that the banks will oppose regulation (particularly the suggestion that OTC derivatives be traded and cleared through a central exchange) of the derivatives market. It is too much of a cash cow for them and I do not see them giving up their monopolistic hold on the market without a fight.

I think the evidence so far with the bank bailouts demonstrates who really holds the reins of power so Geithner et al can make all the proclamations they like, in the end it will be the banks that ultimately decide what regulations will eventually be in place.

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