Let’s Get the Job Done, Help Us Whip the Conferees!
The House-Senate banking conference committee is underway in Washington, D.C. If you are a nut like me, you will want to watch on C-Span. But even if you are not, you can still have boatloads of Bankster fun by helping us whip the conferees! We are making progress, Fed Presidents across the land are supporting Lincoln, along with top economists, the New York Times editorial board and even Paul Volcker, who apparently changed his mind. With your help we can win this!
Reckless swaps and derivatives trading played a critical role in the financial crisis, inflating the domestic housing bubble and turning it into a global economic catastrophe. As the House and Senate conference committee begins final work on the financial services reform bill it is critically important to preserve the strong language cracking down on those “financial weapons of mass destruction” contained in the Senate bill. Nobel prize-winning economist Joseph Stiglitz makes the case for Senate derivatives chapter plainly” “If [Congress] fails to pass strict oversight of dangerous over-the-counter derivatives and swaps the U.S. economy will continue to be vulnerable to significant financial risk.”
Currently the five largest banks in the United States have an anti-competitive strangle-hold on 90 percent of the U.S. swaps and derivatives market worth some $300 trillion. The five banks are Goldman Sachs, Morgan Stanley, JP Morgan Chase (see our Chase Debit Card writeup), Citigroup (see CitiCards.com Login) and Bank of America. 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.
Play with Your Own Money, Not Ours
Sec. 716 of the Senate bill contains a ban on federal government assistance to any swap entity. In effect, Sec. 716 will require the five largest banks/swaps dealers to spin off their swaps desks into a separately capitalized affiliate – in other words to Wall off the casino from old fashioned banking. The measure is geared entirely towards preventing a situation in which taxpayers would once again be liable for the bad bets of big banks. Sec. 716 would ensure that private sector institutions alone are responsible for these risky trades.
Don’t Believe Bank Spin
This fight is winnable! Politico reports that the banks are downright “queasy” as the final reform deal nears. It is also important to note that contrary to big bank spin, the banks would be able to serve their customers as they always have. Their affiliated swaps desks would be able to sell a full range of financial products and they would be able to hedge their own risk. But they would no longer be gambling with taxpayer money.
Proposal Under Threat
While the Senate derivatives chapter is supported by leading economists and reform advocates including Jospeh Stigliz, Nouriel Roubini, Simon Johnson, Robert Johnson, Dean Baker, advocates like Americans for Financial Reform, small American banks and even a large number of international bank analysts, it is not supported by the Obama administration or Congressional leaders. It is also the top target of the 2,500 bank lobbyists swarming Capitol Hill. Since these powerful provisions are already in the bill, thanks to the efforts of Senate Agriculture Committee chair Blanche Lincoln (D-Ark.), they will have to be stripped out with a public vote. Democratic leaders like Senator Chris Dodd (D-Conn.) and Barney Frank (D-Mass.) are in the awkward position of needing to gut the reform package that they are touting as the strongest since the New Deal era. They are hoping to do this gracefully and are working on a bad compromise to buy off critics.
Disgraceful not Graceful, Whip the Conferees!
It’s time to tell Dodd and Frank that we need to preserve Sec. 716. Tell them it is disgraceful that they are talking about weakening the financial reform package behind the scenes, while touting the bill as a powerful crack down on Wall Street in front of the cameras. Below you will find the whip list of Senate conferees. See if any of them are in your state and call them first, then put in a jingle to Dodd and Frank. Tell them we have their number and we are demanding real reform.
1) The Congressional switchboard can link you up to any member of Congress (202)224-3121
2) Script: “Can you tell me what conferee X’s position is on Senator Lincoln’s derivatives language? As a taxpayer, I am calling to tell Senator X that I do not want to pay for Wall Street’s reckless gambling. Keep Senator Lincoln’s strong language that will crack down on financial weapons of mass destruction in the final reform bill. We also need Senator Cantwell’s amendment to make sure that these rules are properly enforced. Congress’ focus should be the stability of the financial system not the profitability of big banks.”
3) Tell us what they said! You can post comments to this blog or you can email Tiffiniy at firstname.lastname@example.org.