Blanche Lincoln's Derivatives Provision All But Dead Now

Blanche Lincoln’s famed derivatives legislation, which would basically prevent any big bank from ever trading CDS again, has already been chastised by Barney Frank. Now, a senior Treasury official has essentially delivered another blow to the Lincoln legislation.
Author:
Updated:
Original:

Blanche Lincoln’s famed derivatives legislation, which would basically prevent any big bank from ever trading CDS again, has already been chastised by Barney Frank. Now, a senior Treasury official has essentially delivered another blow to the Lincoln legislation.

In a briefing for reporters today, Assistant Treasury Secretary Michael Barr said the derivatives rules were not part of the administration’s four “core objectives” for financial reform. Translation: The Lincoln legislation can die a slow death for all we care.

"There are other provisions, like the Lincoln provision, that are not part of that core set of questions and I think those are going to get worked through," Barr told reporters.

He stopped short of explicitly disowning the Lincoln provision, however, when asked whether the administration opposes it. "I think I've laid out pretty clearly what the president's core objectives are," he said.

Both the House and Senate have approved the overall package of financial reform legislation. The two bills will be reconciled in a conference between the two chambers starting in early June. They hope to deliver a final bill to President Obama before July 4.

Related

Barney Frank Deals a Death Blow to Derivatives Reform

Barney Frank just delivered a speech at Compliance Week’s annual conference in Washington D.C. and he seems to have confirmed what Goldman Sachs analysts told us yesterday - new legislation that forces banks to spin-off their derivatives business probably won't make it into the final financial reform bill.

Blanche Lincoln Ain't Backing Down from Derivatives Overhaul

Sen. Blanche Lincoln, Arkansas Democrat, was able to push her controversial derivatives amendment into the financial regulatory reform bill yesterday, despite threats from Wall Street. And any banker that thinks Blanche is going to back off derivatives reform after she wins the Arkansas primary runoff on June 8 has no clue how hard-nosed she really is.

Brickell Continues to Defend OTC Derivatives

Mark Brickell has worked for over a decade to keep government regulators out of the over-the-counter derivatives market. He hasn't given up yet. The former JPMorgan executive and who served as chairman of the International Swaps and Derivatives Assoc., is out today with a piece in the WSJ warning against the dangers of increasing government oversight of OTC derivatives. Swaps are benign and help big companies like McDonald's hedge its currency risk at a low cost, he argues.

Derivative Of Derided Derivatives In The Works

So credit-default swaps have a pretty bad rap in the wake of that whole financial crisis. And people apparently aren't interested in trading things that some parts of the general public (otherwise known retail investors) blame for the aforementioned unpleasantness without actually understanding anything about CDS. The IntercontinentalExchange has an idea to change all of that:

Bank Lobbyists Fighting New Provision on Trust Preferred CDOs

Turns out mortgages weren’t the only toxic assets that were packaged into CDOs. Small community banks issued billions of dollars in trust preferred securities before the credit crunch as a way to prop up their capital cushions. Problem is, the only way they could sell the so-called TruPS to investors was to bundle them up into CDOs.