A Public Option for Finance Reform? FINANCE REFORM BILL HELPS 5 BIG BANKS PT3

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* Part 1 and 2 at links below.



Bio
Jane D'Arista is a research associate with the Political Economy Research Institute (PERI), University of Massachusetts, Amherst where she also co-founded an Economists’ Committee for Financial Reform called SAFER, i.e. stable, accountable, efficient & fair reform (http://www.peri.umass.edu/safer/). She is also a research associate at the Economic Policy Institute. Jane served as a staff economist for the Banking and Commerce Committees of the U.S. House of Representatives, as a principal analyst in the international division of the Congressional Budget Office. Representing Americans for Financial Reform, Jane has currently given Congressional testimony at financial services hearings. Jane has lectured at the Boston University School of Law, the University of Massachusetts at Amherst, the University of Utah and the New School University and writes and lectures internationally. Her publications include The Evolution of U.S. Finance a two-volume history of U.S. monetary policy and financial regulation.



Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I'm Paul Jay. And joining us again from Hadlyme, Connecticut, is Jane D'Arista. She's a member of the SAFER group, which is a group of economists that have been lobbying for a long time for financial reform. And she's also a research associate with the PERI institute in Amherst, Massachusetts. Thanks for joining us again, Jane.



JANE D'ARISTA, RESEARCH ASSOCIATE, PERI: Thank you very much for having me.


JAY: So if this finance reform bill really isn't going to deal with too-big-to-fail, and if most of what the finance sector was doing that got us into this crisis they can still do, even though the legislation seems to have some brakes on it, but not enough structural brakes, and perhaps too dependent on regulators that can be leaned on, and a Congress can be leaned on about who gets to be regulators—. As we know right now there's a big fight the Consumer Protection Agency, whether Elizabeth Warren is going to be appointed the head of it, because people think she's got some backbone. But even if she gets appointed now, who comes next? So given all of that, to people watching this, what should they be demanding as a real solution, more structural solution? And let me ask just one possible route and see what you think of it. When we were talking about health-care reform, President Obama made the argument quite strongly early on in the health-care debate that it needed a public option to be able to regulate the private sector. Unless people had a public option to go to, you couldn't really enforce regulation in the private sector. Why isn't that true for the finance sector as well?


D'ARISTA: We lost the public option in health care, and we lost the public option, if you will, also in financial reform. The public option, I would say, by analogy, would have been really forcing derivatives into separate institutions, smaller institutions, and totally getting them out of the banks themselves, so that there is no possibility that that federal guarantee that we give to banks through deposit insurance and access to the Federal Reserve could ever be used in the derivatives markets. We didn't do that. What in the end, unfortunately, the legislation, which was so strong as introduced by Senator Lincoln, chairman of the Agriculture Committee, she would have pushed them out of the banks. And the compromise, disastrously, was to say, oh, no, the banks get to keep the business of dealing in interest-rate and foreign-exchange swaps. Unfortunately, some of us have the memory of an almost collapse of the financial system in the '70s from foreign exchange swaps, and also perhaps an almost collapse in interest rate swaps in the late 1990s with long-term capital management. So—and besides, these are the two biggest parts of the derivatives business. So the banks do not have to have separate subsidiaries.**

in full: http://www.therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5449







Part 1, July 29, 2010

http://www.therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5434

Part 2, August 1, 2010

http://www.therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5447

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