© Copyright Agri-Pulse Communications, Inc.
Washington,
April 29 – Thursday afternoon’s opening round of a likely week-long debate on
the Wall Street reform bill showed how very far apart the bill’s supporters and
critics are. That’s despite the virtual certainty that the final bill will be
passed with strong Republican support as well as perhaps unanimous support from
Democrats.
Calling
for a debate that is “as factual as it is fierce,” Senate Banking Committee
Chris Dodd (D-CT) opened the financial reform debate by saying that “I think it
is incumbent that we at least try to understand each other’s motives, not
question them. . . When I said that I want members to be able to offer their
amendments, to be able to debate those amendments, and have votes on those
amendments, I mean it.”
What
followed showed little evidence of the understanding Dodd called for. In a
lengthy opening statement, Senate Banking Committee Ranking Member Richard
Shelby (R-AL) said that he and Dodd share the goal of crafting a final bill
which “ends bailouts, protects consumers without jeopardizing our small
community banks, and brings transparency to the world of derivatives without
sacrificing economic growth and job creation.” Then Shelby went into the many ways that he and
Dodd differ on how to achieve their shared objectives.
Shelby promised to “seek
to remove dozens of provisions that unnecessarily expand the reach of the
federal government into the private affairs of Americans and potentially
endanger our civil liberties.” As an example of problems with the Dodd bill, Shelby said that “If an orthodontist from Mobile fears regulatory burdens because she
offers installment payments, I listen.” That one-liner highlighted a sharp
disagreement with Dodd who’d answered the orthodontist issue yesterday,
rejecting “the Wall Street lobbyist claim that somehow the new consumer
financial protection bureau would bring new regulation to orthodontists and
others who simply allow customers to pay over time.” Citing Section 1027 of his
Wall Street reform bill, Dodd explained that “the bill specifically excludes
merchants, retailers, or others ‘not engaged significantly in offering or
providing consumer financial products or services.’”
Next, Shelby said that firms like Goldman Sachs and
Citigroup support the bill because “they know that the bill will bring them and
Wall Street firms like them under the federal safety-net where they will get
preferential treatment just like Goldman Sachs got in the AIG bailout. . .
the bill as written will guarantee that Goldman Sachs could again be paid 100
cents on the dollar if its bets go bad. That is a huge benefit for Wall
Street firms at the expense of others. . . this bill will help the big banks
get bigger, and further tilt the competitive playing field against small and
less politically connected firms.”
Shelby warned further that
“this bill also threatens our economy by its treatment of derivatives. . . it
raises costs of risk management and threatens the abilities of companies to
manage risk using derivatives.” He said that while he supports greater
transparency for derivatives trading, “this bill, under the guise of promoting
transparency, threatens Main
Street companies and their customers for no good
reason. The end-user exemptions put Main Street companies through almost
endless and unworkable hoops that will ensure higher costs, lower growth, fewer
jobs, and diminished economic opportunity.” He added that “this bill will shift
derivative trades offshore to places where we have no oversight or regulatory
abilities to act.”
As
Chair of the Senate Agriculture Committee which has jurisdiction over
derivatives trading, Sen. Blanche Lincoln (D-AR) responded directly to Shelby’s concerns over
derivatives. She pointed out that the derivatives provisions in the Wall Street
reform bill passed her committee with support from Sen. Chuck Grassley (R-IA).
Lincoln said she looks forward to incorporating amendments
to improve the bill but insisted that “America’s consumers and businesses
deserve strong reform.” She said the bill’s derivatives provisions as currently
drafted “will lower system-wide risk through clearing, exchange trading and
real-time price transparency. It will close loopholes and make sure that the
regulators have the full authority to go after those entities that would evade
or abuse the law. It protects jobs on Main
Street by giving true commercial end users the
ability to hedge and manage their risks. It protects municipalities, pensions,
and any governmental agency from gouging and gross profiteering. And, most
importantly, it will bring 100% transparency to what is currently a completely
unregulated, dark market.”
To read specific
warnings from Sen. Saxby Chambliss (R-GA) about the bill’s derivatives
provisions, go to: www.agri-pulse.com/20100429H4.asp
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