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Financial Failure By Obama Part II

June 22, 2010

“Stronger oversight of derivatives” is also on the president’s international agenda but this cannot be taken seriously, given how little Treasury and the White House have pushed for tighter control of derivatives in the US legislation.  If Senator Lincoln has made any progress at all – and we shall see where her initiative ends up – it has been without the full cooperation of the administration.  (The WSJ today has a more positive interpretation, but even in this narrative you have to ask – where was the administration on this issue in the nine months of intense debate and hard work prior to April?  Have they really woken up so recently to the dangers here?)

“More transparency and disclosure” sounds fine but this is just empty rhetoric.  Where is the application – or strengthening if necessary – of anti-trust tools so that concentrated market share in over-the-counter derivatives can be confronted.  The White House is making something of a show from Jamie Dimon falling out of favor, but all the points of substance that matter, Dimon’s JP Morgan Chase has won.  The Securities and Exchange Commission is beginning to push in the right direction, but the reconciliation conference looks likely to deny them the self-funding – CFTC and FDIC, for example, collect fees from the industry – that could help build as a regulator.  At the same time, the conference legislation would send a large number of important questions to the SEC “for further study”.  None of this makes any sense – unless the goal is to block real reform.

By Simon Johnson

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