Last week the Senate did something it hates to do. Something few people thought it ever would do. It included something in a financial reform bill that has the potential to really, really, cut into big Wall Street bank profits and really, really make our financial system safe from another 2008-style system-wide collapse. Disrespecting big bank lobbyists and ignoring pleas from big bank straw men at the Treasury, it allowed to remain in its version of a financial reform measure a provision that would effectively separate gambling derivative trading from government insured depository banking.
How could something like this happen, you say? How could a group of elected officials so dependent on Wall Street for campaign contributions to get themselves elected and reelected, so perpetually rendered dumb by the self-serving and flagrantly foolish arguments used by Wall Street shills to justify using dirt cheap money from the Fed to fund their own stock market gaming, actually stumble into doing the right thing for a change?
The answer, of course, is that the public is so ticked off with The Street just now that enough senators, frightened for their jobs, were temporarily scared into the sort of action that they loathe —real reform rather than showpiece blather.
But wait! There’s still time for this strange aberration to be undone. And friends, you can bet your BPs (forgive the dirty language here) that it will be undone. It will likely be undone in conference with the House version of this reform bill. Or, if parliamentary shenanigans don’t do the job, through the way a new reform law containing the measure will be administered by (you guessed it) the friends of The Street at The Fed.
By way of background for the coming selling out of the public to appease Wall Street, here’s the laughable arguments that will be used to justify the genuflection:
Justification one. Depository banking and derivative peddling are so intertwined that it would wreck the entire financial system to separate them now. Truth one. They were separated under Glass Steagull for more than 60 years until 1999. To portray this recent change as a long-time necessity is beyond silly.
Justification two. Separating derivatives peddling from regulated banking means this peddling will be done outside well regulated banking. Truth two. This is my favorite argument because it goes beyond silly and into the realms of outright stupid. Though now joined at the hip to depository banking, derivative peddling has nonetheless been totally unregulated. And if it becomes partially regulated under terms of a new reform law as written (which it would), there’s absolutely no reason why it can’t be regulated after derivative peddling is no longer in any way conflated with banking.
Argument Three. Separating derivative peddling from regulated depository banks would drive the peddling trade to foreign banks. Truth three. Duh. How anyone would seriously suggest American banking business of any kind would willingly go to the U.K. (where taxes on banker bonuses are about to be increased again) or Germany (where Angela Merkel’s government is now coming down on derivative trading like a ton of bricks) is utterly preposterous. And even if this business did, in fact, go overseas, so what? This ain’t the auto industry. It generates few jobs and the money it does generate goes into the pockets of a few Wall Streeters.
O.K. But why bother knocking down such pathetic arguments? Who cares about truth? Campaign money for congressional time servers is the real issue here, right?
So watch for Congress, with the backing of a Wall Street-friendly Obama Administration and an ever supine group of Republicans, to do away with one of the truly worthwhile elements of the new financial reform law. You’ll have to watch closely to see this happen, though, because it will be done with as little fanfare as possible so as not to upset simple folk like this writer who just refuse to understand the importance of preserving a bedrock element of the present corrupt Wall Street status quo.
For more financial commentary from this writer: http://www.wallstreetpoet.co