A must read column from Bloomberg’s Dawn Kopecki, Matthew Leising and Shannon D. Harrington last week looks at yet another wayn the financial services industry is blunting attempted reforms: the so called “New Democrats.”
While anti-regulation bankers have long had friendly relations with the GOP (i.e., as in Bought and Paid For), Bloomberg argues that New Democrats have made changes to regulatory bills at the behest of banks:
“The battle over derivatives legislation is a test for the Obama administration’s efforts to tighten financial regulation to prevent a repeat of the financial crisis that shook the global economy — a crisis exacerbated by derivatives trading.
Frank, a Massachusetts Democrat who rose through the ranks in Congress fighting homelessness and advocating for gay and consumer rights, found his handiwork panned by administration officials after he released draft legislation last week that they criticized as too friendly to business. Frank’s bill allows for no change in how standardized over-the-counter derivatives are traded as long as they are reported to regulators.
Commodity Futures Trading Commission Chairman Gary Gensler and Henry T.C. Hu of the Securities and Exchange Commission said Frank’s “discussion draft” created too many loopholes and had the potential to exclude all hedge funds and corporate end-users from oversight . . .
With 68 of the Democrats’ 256 votes in the House, the New Democrats have become a growing force within their party. Democrats hold a 38-member voting majority over Republicans and cannot pass financial legislation without coalition support.
While the concerns were raised through both Republicans and Democrats, “the New Democrats have played a central role here both in terms of interacting with the end-users but also being able to take that concern to Chairman Frank,” Pickel said. A half dozen New Democrats pressed Treasury Secretary Timothy Geithner to expand the administration’s exemption for end-users in an Oct. 1 meeting.”
Its ironic that the one thing there is bipartisan support for involves acquiesing to those who oppose Derivatives reform.
Derivatives Lobby Links With New Democrats to Blunt Obama Plan
Dawn Kopecki, Matthew Leising and Shannon D. Harrington
Bloomberg, Oct. 9 2009