Did you like the financial crisis of 2008?

It's possible to discuss the economics of this bill without discussing the politics. Difficult, mind you, but possible.

 

I feel guilty about going against Jeff's rules so I am going to respectfully bow out of discussion. Carry on.

 

I was in favor of the bailout, but I also was in favor of putting in jail any fraudsters and was royally pissed that bailout money went for bonuses.

 

I was in favor of the bailout, but I also was in favor of putting in jail any fraudsters .

Well, ya got half your wish. I seem to recall one lower lower level sop served some time for something or other.

Hey, I haven't looked - how's the Wall Street and financial sector done since 2008? Have they suffered with the rest of the economy?

 

They have suffered at the hands of the masses who treat them like the Jews were treated in Germany in the 1930s.

 

The notion that the elimination of this provision has made the U.S. (or global) markets more vulnerable -- and therefore more likely to come a-begging to Uncle Sam someday -- is totally silly. I don't understand derivatives markets in any great detail, but people who do (across the political spectrum) don't think this amounts to anything.

 

I am not staying that the elimination of this provision makes markets more vulnerable. In fact, Congressman Yoder gave the same kind of BS message on his statement about the passing of the bill:

The derivatives associated with this provision are not the same as the riskier Collateral Debt Obligations (CDOs) that many blame for causing the mortgage crisis. CDOs remain subject to the push out even after the adoption of this provision.
That's a classic bait and switch - He is trying to say that swaps aren't as risky as CDO's, therefore everything is hunky dory...

He takes us for fools.

I am saying when there IS a huge fuckup - and counter parties can't pay - and banks can rely on the FDIC to bail them out - when the FDIC money runs out (it is funded by fees from banks) - where on earth do you think banks are going to look to?

 

I'd love a list of the people who think this doesn't amount to anything, doctorquant.

And I don't mean to parse your words, but if the provision 'doesn't amount to anything', why include it in the Cromnibus at all?

 

OK, so let me clarify what I meant when I said "doesn't amount to anything." Surely it amounts to something, otherwise the banks wouldn't have expended the effort to make the change. What I was getting at was that it's seen as not amounting to anything (much) vis-a-vis the kind of risk to which this thread and its posters are alluding.

Here are two links (there'll be more coming down the pike) ... one from Bloomberg and one from the NYT ...

http://www.bloombergview.com/articl...-swaps-pushed-back-in-harvard-gets-in-trouble

http://dealbook.nytimes.com/2014/12/10/a-rule-with-few-friends-struggles-to-survive/?_r=0

 

Soooooo. Its not that big a deal because most derivatives are not included in this provision. Except it does include Credit Default Swaps. From your link:
I have my biases, but I have a hard time believing equity derivatives will bring down a bank. Uncleared CDS, I'll grant you, has a rough track record, though the market is slowly moving away from it in general.

Credit Default Swaps, credit default swaps.... I've heard of them before, somewhere.

Oh yeah:
http://www.reuters.com/article/2008/09/18/us-how-aig-fell-apart-idUSMAR85972720080918
They only took down AIG.

I can find people on any side of the political spectrum to argue any side to any argument. Even smart people. But I cannot for the life of me understand why banks need an FDIC guarantee to trade derivatives. Unless it was to have a backstop. 2008 was not long ago. If you give (greedy) people a chance to take risks with little downside, they will take risks. Heads I win, tails you lose. And the duplicity of tucking inside a freaking congressional spending bill.

If Kevin Yoder is in love with the merits of this bill, send it up on its own, and let the esteemed members of congress debate it. Not attach it to a spending bill.

edit - I couldn't open the NY Times link

 

dq, it would be very difficult to get behind the idea that none of this is a big deal. I mean, that's how derivatives came into being in the first place, right?

 

And before anyone says, "oh, AIG was different. They ran a one way book, where they had mostly "sold" positions."

Even if AIG's notional values were matched, if one of their counter parties defaults, they are no longer matched. Its a big frigging house of cards. When one large party fails, the house of cards comes down. It was only six years ago, folks.