Updates on the battle for financial reform
By Mike Konczal
How goes the battle for financial reform? Noam Scheiber has an update on the situation that is a must-read for the current situation. A few things:
- It looks like Republicans are weakening on opposing a strong consumer protection agency. This comes after the OCC is changing directions as well.
- Derivatives reform is looking to become a stronger piece of what people are demanding.
The progressive groups are “readying themselves to make a big battle,” says Michael Greenberger, a University of Maryland law professor and former federal regulator with strong ties to the reformers. “Derivatives will be a key part of it. … A lot of these groups are concerned that the consumer agency not suck all the oxygen out of the air.”
Then there are some idiosyncratic developments that could further bolster the hawks. Greenberger notes that Greece used derivatives to hide government debt, a factor that has exacerbated its current fiscal crisis. “The Greek situation brought home to people in the administration … that you can’t have these things being used to create financial havoc,” he says.
Or take Congressman Barney Frank, who chairs the House Financial Services Committee, making him Dodd’s counterpart in the lower chamber. Up until recently, the feeling on Wall Street was that Frank didn’t have particularly strong views on derivatives. But Frank has been outspoken on the issue of late, saying he regretted that the derivatives portion of the House bill wasn’t tougher. Last week he acknowledged that an aide had left to work for a derivatives clearinghouse only weeks after the House passed its financial reform bill in December, a possible wake-up call on the issue.
Here is Michael Greenberger's chapter on necessary derivatives reform from the Roosevelt Institute's Make Markets Be Markets conference, along with a video of his presentation. From the derivatives point of view, there are two methods of lobbyist attacks: One is to expand the "end-user exemption" so that huge amounts of the market is exempt from the rules that govern clearinghouses and exchanges. The second is to attack the notion of what an exchange is, a success for the lobbyists in the House bill that I outlined here.
So those are the two things to watch for in the upcoming weeks -- one more thing for those who didn't watch the House battle. Progressives made the most ground fighting over resolution authority. They tried to hold the line on derivatives and consumer financial protection. The Miller Moore amendment and the 15-to-1 leverage requirement were added to the original language, marking advances.
Mike Konczal is a fellow with the Roosevelt Institute and the author of the Rortybomb blog.
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