Tom Usher wrote or added | This article is a fairly thorough overview of the financial-reform legislation currently being negotiated on Capitol Hill. It originated on AlterNet: http://www.alternet.org/economy/147179/%22lure_people_into_that_calm_and_then_just_totally_f—k_'em%22%3A_how_all_of_us_pay_for_the_derivatives_market?page=entire
The legislation is every bit as important as the healthcare reform legislation was but isn't getting nearly the coverage. In fact, it's more important because it not done correctly, healthcare will be out of reach even with the recent reforms (which were not nearly enough to rein in the greedy corporatists of the healthcare-insurance industry).
"As the Wall Street reform bill moves into its final stage of negotiations, the only proposal still on the table that would actually move taxpayer money out of the derivatives sinkhole comes from the unlikely source of Sen. Blanche Lincoln, D-Ark., a career corporatist who has never shown much interest in regulating anything. But it's a whopper of a proposal, one that comes free of any loopholes and goes straight to the heart of Wall Street's bubble machine.
"The plan is simple: If you want to be dealing the crazy, complex financial products that toppled AIG, Enron and Long-Term Capital Management, then you can't receive any funding from the Federal Reserve. No bank can operate without access to the Federal Reserve's money supply, so the five megabanks would have to choose — do they want to be derivatives houses or do they want to be banks? If they want to be banks, they have to move all of their derivatives operations to an independently capitalized subsidiary — a company that raises money on its own and has no access to taxpayer perks.
"While several policymakers close to the financial industry like Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner oppose the Lincoln language — known on Capitol Hill as 'Section 716"³– many top economists agree that getting taxpayers out of the derivatives business is the most important Wall Street reform still on the table for 2010.
"'To me, preserving section 716 is really the critical issue,' Nobel Laureate economist Joseph Stiglitz said on a June 9 conference call with reporters. 'It protects the taxpayer.' Top economic thinkers like Nouriel Roubini, former IMF chief economist Simon Johnson, Dean Baker and Jane D'Arista have also offered support for the measure"
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