Goldman Sachs Is Right There Lobbying Away Market Protections

We have been wondering about how Gary Gensler, (formerly of Goldman Sachs and presently chairman of the CFTC), was faring in the task of creating the rules that implement and support Dodd-Frank.  Now we are getting a glimpse of what Gensler and the CFTC have to deal with:  lobbying from banks and their sponsors, slashing of budgets, imposing specific requirements--all barriers to creating the new rules.

Goldman Sachs does not like to be regulated as that puts a damper on its huge profits in the OTC markets and on its speculative impulses.

The CFTC has been charged to "prove" its limitations are legal and Goldman and the banks have challenged the authority of that body in federal court.

The battle over who will prevail, the rules or the banks, has not been settled yet.  But without vigilance (and there does not seem to be much vigilance at the highest levels of government), the rules will be too weak to make a difference in preventing another financial crisis.  What is being created is a smorgasbord of loopholes and meanderings of requests which serve to uphold the banks' purpose which is to not be subjected to regulations that limit their profit-making.

It would be easier and more effective to just re-instate Glass-Steagall.

Wall Street and Republicans team up to curb CFTC:  Kemp
By John Kemp - Reuters
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The subcommittee bill would also require the chairman of the commission to report to Congress within 30 days with "a schedule of implementation and sequencing of all rules, regulations, and orders .. including all Commission cost benefit analyses and studies relied upon in the formulation of any regulations" on selected topics.

The authors seem particularly concerned about CFTC rulemaking in three areas: swap dealers (Section 716 of Dodd-Frank), position limits (Section 737), and the registration of commodity trading advisors (Section 4m of the Commodity Exchange Act).

Position limits are already being challenged in federal court by the International Swaps and Derivatives Association (ISDA) and the Securities Industry and Financial Markets Association (SIFMA) on behalf of Goldman Sachs, JPMorgan, Barclays, Morgan Stanley and other commodity traders.

Part of the challenge centers on whether the commission must prove that limits are "necessary" to diminish, prevent or eliminate excessive speculation. The challengers argue that the commission has not conducted a proper quantitative analysis to justify its decision to impose limits under the law.

Read the full article here