US House panel votes to regulate derivatives

[madmom]

Source: The Associated Press

A U.S. House of Representatives' panel voted Thursday to regulate for the first time privately traded derivatives, the kind of exotic financial instruments that helped bring down Lehman Brothers and nearly toppled American International Group.

The 43-26 vote by the House Financial Services Committee, was a first major step for President Barack Obama's plans to overhaul federal regulations governing the nation's financial institutions.

The mostly party line vote showed that Democrats were prepared to band together to override objections by Republicans and the financial lobby and demand increased oversight of Wall Street.

No Democrat on the panel opposed the measure. One Republican, North Carolina Rep. Walter Jones, sided with them to approve it.

Read more: http://www.businessweek.com/ap/financialnews/D9BBKIJ80.htm

[Cass]

1. This is good. K & R

[WriteDown]

3. Not so sure about that....

"Democrats included an exemption for companies that use derivatives to protect against risk. "

[rucky]

8. does that clear credit default swaps?

[WriteDown]

9. Pretty much....

Every company or investor can say they're used to prevent risk.

[Cass]

10. The exemption is further explained here -

The exemption was intended to distinguish between AIG and other financial institutions that use derivatives to make money, and manufacturers that rely on them to protect against a spike in fuel prices or fluctuating exchange rates.

Companies could lose that exemption if regulators see a pattern of activity that places other participants in the transactions at risk. Exempt or not, companies also would have to report their trades and the prices.

It may not be perfect but it's a good first step.

[WriteDown]

13. Waaaay too much wiggle room....

Trust me, regulators will just never see a "pattern."

[rucky]

2. Do we have to do this with every single complex financial instrument?

Because they'll just keep inventing them unless we address the root of the problem.

[Klukie]

4. What is the root of the problem?

For those of us who don't get financial stuff.

[ender]

5. Traditional Banks getting involved in "Investments"

[rucky]

6. The creation of exotic instruments without any criteria for FTC approval.

Part of the problem is that few people - even in the industry - actually understand this breed of financial stuff. Not even Greenspan. Especially not the regulators.

[WriteDown]

7. That is not the problem...

The problem is having more money out there than you could ever possibly cover. For example, if you're a bank with 100K in reserves, you wouldn't want to pay 1M in loans.

[No Elephants]

16. No one has given you a correct or a complete answer. It can't be done in one or two

sentences. Besides, who are you asking? Probably people who don't really know, either, yet are so convinced they do know that they will think they can answer you. And in a single sentence, no less.

The right answer would include things like:

30 years of de-regulation and of dismantling many of the the government protections put in place after the crash of 1929, including repeal of the Glass Steagall Act and evisceration of anti-trust laws and regulations,

uncontrolled leading people to take crazy risks and other people to insure them and yet other people to rate those crazy risks AAA, etc., etc. etc.

The problems and their roots, political, social and financial, are too numerous and complex for a message board post or we wouldn't have gotten into this mess.

[Hubert Flottz]

11. "One Republican, North Carolina Rep. Walter Jones, sided with them'

The GOP sees nothing wrong with the disaster on Wall Street that almost busted the country(and still might)and ruined people all over the country. As long as the Wall Street Shysters fund the GOPer's campaigns the GOPers will protect them.

[No Elephants]

17. Did the GOP protect them? I thought Democrats controlled Congess during the bailout?

If you misdiagnose, you mistreat and if you mistreat, nothing gets better.

[high density]

12. Party line vote on regulating derivitives

When will voters realize that the Repukes have no interest in anything but supporting corporations and the wealthy?

[Overseas]

14. K&R. //nt

[The Stranger]

15. One of the most important votes made this month, and most people don't even realize it.