Looks like some Republicans are beginning to line up behind the Dodd legislation. So, lo and behold, compromises can be reached!
Key Senate Republicans on Tuesday began to back away from their sharp criticism of proposed new financial regulations and expressed optimism that a bipartisan deal on a bill that would drastically change the way Wall Street operates could emerge in the coming days.
After a week of attacking the proposals as paving the way for new taxpayer “bailouts,” Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor that he was “heartened to hear that bipartisan talks have resumed in earnest.” Later, after a meeting with fellow Republicans, he told reporters that while he believes that there are still serious flaws in the legislation, “I’m convinced now there is a new element of seriousness attached to this, rather than just trying to score political points. . . . I think that’s a good sign.”
The change in tone came as the Security and Exchange Commission’s lawsuit against Goldman Sachs for allegedly defrauding investors continued to dominate headlines, underscoring public anger at Wall Street and reminding lawmakers of the potential consequences of inaction. In the corridors of the Capitol, members of both parties, as well as a sea of lobbyists from across the financial spectrum, jockeyed to shape key provisions of the wide-ranging legislation before it hits the Senate floor.
Note that last paragraph…Republicans started hearing that being obstructionists on this legislation wouldn’t be a good idea…and so the tone changed. Which is understandable. This is politics after all.
But it’s interesting…Gallup found that when Wall Street is used in polls…support goes up for reform. When it’s not, it drops. So the Goldman Sachs story came at just the right time.
Also, let’s not forget the debate about those pesky derivatives…the financial vehicles that ran us into the ditch in the first place…
Derivatives are contracts that allow financial traders to bet on the direction of the prices of stocks, commodities and other assets. They can also be used by companies to lock in prices for goods, such as oil, cotton and aluminum, that often fluctuate in value. Derivatives account for hundreds of trillions of dollars in deals and were a significant contributor to the financial panic that swept the world in 2008, in part because of a lack of transparency in the market.
The bill advocated by Sen. Blanche Lincoln (D-Ark.), chairman of the agriculture panel, calls for banning big Wall Street firms from acting as brokers for commercial companies and financial speculators who want to trade derivatives. Nearly all derivative contracts would be traded in public on exchanges and approved by a separate clearinghouse. Those dealing in derivatives would have to raise money to cover unexpected losses, in case one party to the contract defaults. Lincoln provides some exceptions for agricultural and other commercial companies but still requires them to raise money for trades.
Again, hard to argue with bringing transparency to what was a completely opaque market before. Trillions of dollars can’t be changing hands inside a black box without oversight anymore. The market had its chance to self regulate and it failed…miserably.
More as it develops…