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JPMorgan, the Volcker Rule, and the Extreme Brevity of Financial Memory

JPMorgan, the Volcker Rule, and the Extreme Brevity of Financial Memory | Coffee Party News | Scoop.it

ARIANNA HUFFINGTON, The Huffington Post

 . . . But as the banks and their lobbyists surely knew, the devil is in the details. So, as the public began to forget its outrage, the lobbyists began to get to work. First, the most meaningful proposals, like bringing back Glass-Steagall, or getting rid of too-big-to-fail banks by breaking them up, were tossed aside. What was left became the Dodd-Frank bill, passed in the summer of 2010. In the year following the bill's passage, over two-dozen pieces of legislation were put into the mix to weaken it.

According to Public Citizen, members of Congress who support a weakened version of the rule raked in 35 times more in contributions from the financial industry than those who support a strong version -- $66.7 million to $1.9 million. And as lobbying intensified this spring, lawmakers were, as Bloomberg News put it, "signaling they're receptive" to revising the rule. Sounds like something out of a nature documentary -- modern democracy's equivalent of wild animals signaling they're receptive by lifting their behinds.

And now comes the JPMorgan trading loss -- exactly the kind of thing the Volcker Rule is supposed to prevent. "JPMorgan Chase has a big hedge fund inside a commercial bank," said Boston University economics professor Mark Williams. "They should be taking in deposits and making loans, not taking large speculative bets." Or, as Felix Salmon put it, the bank was "using its Chief Investment Office to gamble with taxpayer-backstopped funds." Once again, the taxpayer is the ATM at the Wall Street casino -- exactly what all the politicians, responding to our outrage in 2008 and 2009, were never going to let happen again. [MORE]

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Don't Get Fooled Again

Don't Get Fooled Again | Coffee Party News | Scoop.it

TAYLOR LINCOLN, Huffington Post

Revisiting the lessons from deregulating derivatives is particularly important right now because Congress seems to have forgotten them. A report we just issued provides a road map of how derivatives wrecked the economy in 2008 and could do so again if Wall Street gets its way.


Nine bills that would roll back the derivatives reforms created in the wake of the financial crisis are moving in Congress. These proposals, most of which have already passed in committee, have been put forth in the name of furthering the competitiveness of U.S. companies and creating jobs for Main Street. These are quite brazen claims, since deregulating derivatives arguably did more to harm economic competitiveness and job creation than anything Congress has done for a very long time.


Here is the history, in brief: At the end of the Clinton administration, financial derivatives were relatively new and sat in a regulatory netherworld. In practice, they were not regulated. But they bore all the hallmarks of traditional futures, which by law must be traded on regulated exchanges. [MORE]

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