Lincoln introduces Wall Street reform bill, sets mark-up for Wednesday

By Agri-Pulse Staff

© Copyright Agri-Pulse Communications, Inc.

Washington, April 16 – Senate Agriculture Committee Chairman Blanche Lincoln (D-AR) introduced her “Wall Street Transparency and Accountability Act” Friday to expose the opaque world of derivatives to full sunlight for the first time. She also announced that her committee will meet Wednesday, April 21 to begin mark-up work on the bill.

“The days of backroom Wall Street deals are over,” Lincoln said in outlining her bill. “This is the strongest Wall Street reform bill to date and represents an historic opportunity for real reform. America’s consumers and businesses will finally see a financial market that operates in an open and transparent manner.”

Lincoln’s legislation includes mandatory clearing and trading requirements, real-time reporting of derivatives trades, and promises to close “all loopholes.”

“The clearing and trading of financial transactions lowers risks and makes the entire financial system safer,” Lincoln explained. “My bill will bring 100 percent transparency to an unregulated $600 trillion market, expose these markets to the light of day, and keep this money back on

Main Street
where it belongs,”

Lincoln’s proposal also prohibits the Federal Reserve and FDIC from providing any federal funds to bail out Wall Street firms which engage in risky derivative deals. Banks engaging in high-risk swaps transactions will be forced to spin off their swap dealer desks or be barred from receiving any federal assistance.

“My proposal puts an end to ‘too big to fail’ and prevents future Wall Street bailouts. Financial institutions will have to decide if they want to be banks or if they want to engage in the risky financial trading that caused the collapse of firms such as AIG,” Lincoln said. “My bill also requires Wall Street to put the interests of

Main Street
, such as municipalities and retiree pension funds, above their own bottom line and puts an end to Wall Street’s ability to knowingly enter into deals that allow their clients to defraud third parties or the public.”

As Chairman of the Senate Agriculture Committee, Lincoln has jurisdiction over the Commodity Futures Trading Commission (CFTC) which oversees the derivatives market. Since becoming Chairman last fall, Lincoln has worked closely with Senate Democrats and Republicans, as well as the administration to craft a bipartisan reform bill.

The Senate Agriculture Committee will hold a mark-up next week on the legislation. To read or download the full legislative text of the 336 page bill, go to: http://ag.senate.gov/site/legislation.html

The Agriculture Committee’s summary of The Wall Street Transparency and Accountability Act is below.

The Wall Street Transparency and Accountability Act of 2010

Senate Committee on Agriculture, Nutrition, and Forestry, Chairman Blanche Lincoln

This is landmark reform legislation that will bring 100 percent transparency to an unregulated $600 trillion market, close all loopholes and keep jobs on

Main Street
. This will protect taxpayers, jobs, consumers and the global economy, and will go further than any other proposal to prevent future bailouts.

Historic Reform of the Derivatives Market

Brings 100 Percent Transparency to Market with Real-Time Price Reporting:

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Wall Street will no longer be able to make excessive profits by operating in the dark. Exposing these markets to the light of day will put this money where it belongs – on

Main Street
. The public will see what is being traded, who is doing the trading and, most importantly, regulators can go after fraud, manipulation and excessive speculation.

Lowers Systemic Risk by Requiring Mandatory Trading and Clearing:

Trading and clearing of swaps lower risks and make the entire financial system safer. Transactions, determined by the regulator, will be required to clear through a clearinghouse. In addition, these transactions must be traded on a regulated exchange, which will provide further market transparency.

Prevents Future Bailouts and Addresses “Too Big to Fail”:

Banks need to be kept in the business of banking. The taxpayer funds used to bail out AIG and other Wall Street firms will never be used for this purpose again. The Federal Reserve and FDIC will be prohibited from providing any federal funds to bail out Wall Street firms who engage in risky derivative deals.

Closes Loopholes:

Loopholes have allowed far too many to avoid the law of the land or set up shell companies to claim exemptions. This bill gives regulators the authority to close any loophole they find, protecting the markets, taxpayers and the economy.

Protects Jobs on

Main Street
:

The interests of

Main Street
will be protected. Commercial businesses and manufacturers who use these markets and customized contracts to manage risk will still be permitted to do so without imposing additional margin costs. This will protect American jobs and keep consumer costs low.

Protects Municipalities and Pensions:

Swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of

Main Street
and taxpayers.

Regulates Foreign Exchange Transactions:

Foreign exchange swaps will be regulated like all other Wall Street contracts. At $60 trillion, this is the second largest component of the swaps market and must be regulated.

Increases Enforcement Authority to Punish Bad Behavior:

Regulators will be given broad enforcement authority to punish bad actors that knowingly help clients defraud third parties or the public such as when Wall Street helped Greece use swaps to hide the true state of the country’s finances.

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