- Joined
- Nov 16, 2011
- Messages
- 3,692
- Reaction score
- 863
In Washington, we often witness politicians forgetting the lessons of a year or five years or 10 years ago. It takes some special obliviousness to forget the lessons of Friday. Five days ago, Sen. Carl Levin, D-Mich., delivered a critical report and held an explosive hearing detailing the “London Whale” trades, made by a JPMorgan Chase satellite office in London. As you may have read, these trades turned sour and led to a $6.2 billion loss for the bank in a matter of weeks. More important, JPMorgan misled regulators about the nature of the trades, altered its internal processes to take on more risk, and then hid the losses by improperly mismarking the value on its balance sheet, pretending the shortfall was inconsequential to avoid oversight and present a positive financial picture to investors.
The Whale trades, which totaled $157 billion at their peak, are known to the industry as derivatives, massive bets on bets that present outsize risk to financial institutions and the broader economy. And of course, derivatives helped fuel the financial crisis of 2008.
But less than a week after the Levin report, the House Agriculture Committee will hold a markup session today on seven bills designed to gut derivatives regulations passed in the Dodd-Frank financial reform law. If the bills pass, practically every improper and illegal action that JPMorgan Chase took in the London Whale debacle would be either made legal or allowed to foster outside of regulatory oversight. It borders on unthinkable that lawmakers on both sides of the aisle would pick this moment to undermine derivatives rules, right when we get a case study in the dangers of bank misuse of derivatives. (As Bartlett Naylor of Public Citizen told Salon, “At least the NRA isn’t proposing that all citizens should be allowed to own surface-to-air missiles in their homes.”)
You may be asking yourself why some bills on financial regulation run through the House Agriculture Committee. It turns out that the Agriculture Committees have held jurisdiction over derivatives since the mid-19th century, when farmers used derivatives to achieve stability over future prices. Traders still use derivatives for corn and other commodities, but the world of derivatives has grown far more sophisticated over the decades. Nevertheless, congressional committees zealously guard their jurisdictions, and so a bunch of lawmakers from rural states get to determine a major aspect of financial policy.
http://www.salon.com/2013/03/20/j_p_morgan_is_not_a_farmer/?source=newsletter
good grief...
The Whale trades, which totaled $157 billion at their peak, are known to the industry as derivatives, massive bets on bets that present outsize risk to financial institutions and the broader economy. And of course, derivatives helped fuel the financial crisis of 2008.
But less than a week after the Levin report, the House Agriculture Committee will hold a markup session today on seven bills designed to gut derivatives regulations passed in the Dodd-Frank financial reform law. If the bills pass, practically every improper and illegal action that JPMorgan Chase took in the London Whale debacle would be either made legal or allowed to foster outside of regulatory oversight. It borders on unthinkable that lawmakers on both sides of the aisle would pick this moment to undermine derivatives rules, right when we get a case study in the dangers of bank misuse of derivatives. (As Bartlett Naylor of Public Citizen told Salon, “At least the NRA isn’t proposing that all citizens should be allowed to own surface-to-air missiles in their homes.”)
You may be asking yourself why some bills on financial regulation run through the House Agriculture Committee. It turns out that the Agriculture Committees have held jurisdiction over derivatives since the mid-19th century, when farmers used derivatives to achieve stability over future prices. Traders still use derivatives for corn and other commodities, but the world of derivatives has grown far more sophisticated over the decades. Nevertheless, congressional committees zealously guard their jurisdictions, and so a bunch of lawmakers from rural states get to determine a major aspect of financial policy.
http://www.salon.com/2013/03/20/j_p_morgan_is_not_a_farmer/?source=newsletter
good grief...
