Obama Administration Plans New Regulations for Derivatives

[UpInArms]

Source: Washington Post

The Obama administration will detail this afternoon its plan to regulate the exotic financial contracts that helped fuel the global crisis and crippled some of the biggest names on Wall Street, such as American International Group, sources familiar with the matter said.

The proposal, which will require congressional action, imposes a number of restrictions on the so-called dark markets that trade a broad range of these instruments, known as derivatives, without government oversight.

An announcement is scheduled for 4 p.m. The heads of the Treasury Department, Securities and Exchange Commission and Commodity Futures Trading Commission are likely to jointly unveil the proposal.

The administration is seeking to amend securities law so that most derivatives would have to be traded through central clearinghouses regulated by the SEC and the CFTC.

In turn, the clearinghouses would require traders to maintain enough money in reserve so they could cover losses in any investments gone bad. These so-called margin requirements have been a hotly debated issue between the government and private traders because it curbs their profits.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051302393.html?hpid=topnews

[DURHAM D]

1. So the loopholes have already been spotted. Great, just great.

I can't believe they managed to write that entire article without mentioning Greenspan.

Oh wait, yes I can believe it.

[Robbien]

2. Whatever the proposed regs are, one can bet they are just window dressing

The WH financial team will never put limits on their Wall Street buddies.

[mbperrin]

3. Simply outlaw them. Or legalize heroin. It's waaayy less damaging to the

economy....

No, I'm not kidding.

[Zenlitened]

4. It sounds like a good plan...

... one that should have been implemented long ago -- but couldn't, because REGULATION is a terrible, horrible, civilization-destroying thing, right?

Details here:
http://www.marketwatch.com/story/treasury-to-unveil-plan-for-derivatives-oversight-2009513143600

Good to see Pres. Obama is dragging the Treasury Dept, SEC, etc. out of the Free(fall) Market cultists' dark ages.

But the believers aren't leaving without a fight. From the MarketWatch article linked above:

"However, some customized derivatives will not be required to trade through clearinghouses. Nevertheless, Geithner recommended that clearinghouses must take steps to make sure that specialized derivatives are not being created solely for the purpose of avoiding the clearinghouse. Even though some customized derivatives may not need to trade through clearinghouses, all of these exotic financial products must maintain higher capital requirements."

Note to Congress: Might want to tighten that loophole just a bit. :crazy:

[DCKit]

6. "Tightening Loopholes" is a great way to strangle the money supply.

I don't see our current crop of pols doing that, since it's their campaigns that benefit greatly from the current lack of any meaningful regulation.

One question: Is this proposed legislation the product of a group of career industry regulators, or industry insiders? I'd feel a lot surer of my opinion if I knew who was invited to the table. I have a sneaking (though, for some reason I want to say "stinking") suspicion that this is yet another industry crafted POS that they intend to abuse heavily and often.

Yet another instance where the industry, Congress and the new Administration have misjudged the anger of the people.

[No Elephants]

5. Regulation with a loophole big as a barn door. Joke. I'm with Reply #3. Outllaw them.

[w4rma]

7. Didn't they use to be outlawed? If so, outlaw them again. (nt)