Geithner, Summers on the Same Page About CDS

On Monday morning the Washington Post features an op-ed co-authored by Timothy Geithner and Larry Summers, outlining the administration's proposal for reforming the regulation of financial institutions. A quote that I was looking for:

The plan also calls for harmonizing the regulation of futures and securities, and for more robust safeguards of payment and settlement systems and strong oversight of "over the counter" derivatives. All derivatives contracts will be subject to regulation, all derivatives dealers subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.

This alleviates my concern that Summers would continue along the path he inititated when he was instrumental in securing the passage of CFMA, the toxic legislation that exempted CDS from regulation and led to the Enron debacle.

I like the word "all." I like empowering regulators to enforce rules against manipulation and abuse. Fraud is not mentioned: regulators have always had the power to enforce rultes against fraud, whether they exercised it or not.

The primary factors in the CDS market are five large banks - Citigroup (C), JP Morgan (JPM), Morgan Stanley (MS), Goldman Sachs (GS) and Bank of America (BAC). One ongoing concern has been that they would exert their power as members of the financial oligopoly to prevent the proper regulation of CDS, motivated by a desire to maintain current valuations for derivative assets and liabilities indefinitely. Of course, hedge funds would be allies, motivated by the convenience of using CDS as weapons of mass destruction.

However, with Geithner and Summers on the same page, it is possible to envision an outcome whereby financial markets will be made safe for individual investors, and we will see an end to fraud, abuse and manipuation by means of CDS.

Comments

[KirbyJF1:]

Hi Tom

I totally agree with your thoughts on this, Also they should only allow CDS for individuals or corporations that hold the debt. If these Banksters want to gamble, let them go to a casino

Kirby

Jun 16 11:38 AM

[376602:]

-totally agree! Now let's see if the President and US Congressional representatives put the good of the American people and the world above the interests of the Bankster Oligarchs.

Jun 16 12:09 PM

[old&broke:]

To KirbyJF1;
I agree completely with your comments with the following addition, " If these Banksters want to gamble, let them go to a casino" - with their own money not mine.

On Jun 16 11:38 AM KirbyJF1 wrote:

> Hi Tom
>
> I totally agree with your thoughts on this, Also they should only
> allow CDS for individuals or corporations that hold the debt. If
> these Banksters want to gamble, let them go to a casino
>
> Kirby

Jun 16 02:47 PM