FacebookTwitterGoogle+RedditEmail

Wall Street Snaps Its Fingers

Washington DC

For months now, Congress has been stumbling through an exercise billed as “financial regulatory reform,” purportedly  dedicated to bringing law enforcement to the Wall Street Casino.  One activity notably popular among the gamesters has been the “dark markets” in the $600 trillion derivatives trading markets, not least because trades are executed on a bilateral basis between dealer and customer, with no public price disclosure, at least not until well after the fact.  An analogous situation would be for someone buying stock in, for example, the Apple Corporation, to take the price offered by a broker with no opportunity to see what everyone else is paying that day, or that minute.

This state of affairs is immensely profitable to the banks, who can levy huge spreads between buy and sell prices without anyone being any the wiser, as well and extracting collateral from customers that can be put to profitable use elsewhere.

It has therefore been the hope and aspiration of reformers, and even, professedly, of the Obama Administration, to enforce trading in such derivatives as the infamous Credit Default Swaps onto exchanges where trading activity, pricing, would be visible for all to see.  That’s what Congressman Barney Frank heralded for the bill gestating in his Financial Services Committee; that’s what Congressman Colin Peterson claimed for the amendment to Frank’s bill that emerged from his House Agriculture Committee.

A month ago, I reported to CounterPunchers that in fact the Peterson amendment contained a poisoned loophole that would in effect render totally emasculate the bill’s efforts to enjoin clean-living exchange trading.   Hidden deep in a thicket of incomprehensible legalese that only a lobbyist could draft or love was a paragraph that defined a permissible exchange (alternative swap execution facility) as, among other things “any voice brokerage facility,” i.e. two people talking on the telephone, exactly as they do business now.  Furthermore, a “confirmation facility” could also count as an exchange, even though such a facility would only report details of a trade well after the fact — not to mention the fact that the main such facility is owned by the major banks.

My CounterPunch report circulated on Capitol Hill.  For a brief shining moment things began to swing the other way.  In particular, the language of the loophole paragraph cited above underwent a subtle change.  “Voice brokerage” and “confirmation facility” disappeared.

However, last weekend, days before it was to come before the full house for debate, the House Rules Committee posted the final version.  A friendly veteran of such dealings quickly passed on the somber news:

“…It appears the forces of darkness never rest; the House Rules Committee has posted what is likely to be the new derivatives section of the House financial reform bill.  The new definition of [an Alternative Swap Execution Facility] (minus the “A”) appears below:

(49) SWAP EXECUTIONFACILITY.—The term‘swap execution facility’ means a person or entity that facilitates the execution or trading of swaps between two persons through any means of interstate commerce, but which is not a designated contract market, including any electronic trade execution or voice brokerage facility.”

My  veteran informant explained the dark significance of these seemingly innocuous changes:

“This language obviously creates a rather significant loophole for voice brokers, as we discussed earlier.  It is also very odd that it now says “or trading” after “execution.”  This seems to open up the same loophole that the “confirmation facility” language did, as the language now reads that an ASEF is a person or thing that “facilitates the execution” of swaps– which means a telephone, a person on the other end of a telephone, or any thing else that helps a swap get traded (as opposed to actually trades it).  In fact it is broader, since now an individual can qualify as an ASEF!  Doesn’t seem to meet the spirit of transparency and exchange-like trading that was supposedly being advanced earlier.”

Readers who might query the relevance of such arcane issues to the world at large should reflect that such trading practices are key to the gargantuan profits of the relevant banks, in particular JP Morgan, ($3 billion from derivatives in the last quarter alone) and that without them they might not survive in their present inflated form.

ANDREW COCKBURN is the co-producer of American Casino, the widely acclaimed  documentary that chronicles and explains the ongoing financial disaster. He can be reached at: amcockburn@gmail.com

More articles by:

Andrew Cockburn is the Washington editor of Harper’s Magazine.  An Irishman, he has covered national security topics in this country for many years.  In addition to publishing numerous books, he co-produced the 1997 feature film The Peacemaker and the 2009 documentary on the financial crisis American Casino.  His latest book is Kill Chain: The Rise of the High-Tech Assassins (Henry Holt).

Weekend Edition
December 14, 2018
Friday - Sunday
Andrew Levine
A Tale of Two Cities
Peter Linebaugh
The Significance of The Common Wind
Bruce E. Levine
The Ketamine Chorus: NYT Trumpets New Anti-Suicide Drug
Jeffrey St. Clair
Roaming Charges: Fathers and Sons, Bushes and Bin Ladens
Kathy Deacon
Coffee, Social Stratification and the Retail Sector in a Small Maritime Village
Nick Pemberton
Praise For America’s Second Leading Intellectual
Robert Hunziker
The Yellow Vest Insurgency – What’s Next?
Patrick Cockburn
The Yemeni Dead: Six Times Higher Than Previously Reported
Nick Alexandrov
George H. W. Bush: Another Eulogy
Brian Cloughley
Principles and Morality Versus Cash and Profit? No Contest
Michael F. Duggan
Climate Change and the Limits of Reason
Victor Grossman
Sighs of Relief in Germany
Ron Jacobs
A Propagandist of Privatization
Robert Fantina
What Does Beto Have Against the Palestinians?
Richard Falk – Daniel Falcone
Sartre, Said, Chomsky and the Meaning of the Public Intellectual
Andrew Glikson
Crimes Against the Earth
Robert Fisk
The Parasitic Relationship Between Power and the American Media
Stephen Cooper
When Will Journalism Grapple With the Ethics of Interviewing Mentally Ill Arrestees?
Jill Richardson
A War on Science, Morals and Law
Ron Jacobs
A Propagandist of Privatization
Evaggelos Vallianatos
It’s Not Easy Being Greek
Nomi Prins 
The Inequality Gap on a Planet Growing More Extreme
John W. Whitehead
Know Your Rights or You Will Lose Them
David Swanson
The Abolition of War Requires New Thoughts, Words, and Actions
J.P. Linstroth
Primates Are Us
Bill Willers
The War Against Cash
Jonah Raskin
Doris Lessing: What’s There to Celebrate?
Ralph Nader
Are the New Congressional Progressives Real? Use These Yardsticks to Find Out
Binoy Kampmark
William Blum: Anti-Imperial Advocate
Medea Benjamin – Alice Slater
Green New Deal Advocates Should Address Militarism
John Feffer
Review: Season 2 of Trump Presidency
Rich Whitney
General Motors’ Factories Should Not Be Closed. They Should Be Turned Over to the Workers
Christopher Brauchli
Deported for Christmas
Kerri Kennedy
This Holiday Season, I’m Standing With Migrants
Mel Gurtov
Weaponizing Humanitarian Aid
Thomas Knapp
Lame Duck Shutdown Theater Time: Pride Goeth Before a Wall?
George Wuerthner
The Thrill Bike Threat to the Elkhorn Mountains
Nyla Ali Khan
A Woman’s Selfhood and Her Ability to Act in the Public Domain: Resilience of Nadia Murad
Kollibri terre Sonnenblume
On the Killing of an Ash Tree
Graham Peebles
Britain’s Homeless Crisis
Louis Proyect
America: a Breeding Ground for Maladjustment
Steve Carlson
A Hell of a Time
Dan Corjescu
America and The Last Ship
Jeffrey St. Clair
Booked Up: the 25 Best Books of 2018
David Yearsley
Bikini by Rita, Voice by Anita
FacebookTwitterGoogle+RedditEmail