Representative Waters Sponsors HR 3145: Abolish All Credit Default Swaps

Along with Ron Paul and Kucinich, Maxine Waters is one of the mavericks of the House of Representatives.  She has introduced a bill this month that I support 100%.  Like the ‘audit the Fed’ bill, HR 1207, this HR 3145 goes right to the heart of the Derivatives Beast: she wishes to terminate credit default swaps.  Bravo.  Let’s give her all our support!

Press Release from Congresswoman Maxine Waters : Representing the 35th District of California : Congresswoman Waters Introduces Credit Default Swap Prohibition Act

Congresswoman Maxine Waters introduced the Credit Default Swap Prohibition Act of 2009 (H.R. 3145) last night. Citing concerns that current regulatory reform proposals would require central-counterparty clearing but provide exceptions to supervision over customized credit default swaps, Congresswoman Waters offered H.R. 3145 to put a total prohibition on these financial instruments.

“Credit default swaps are one of many contributing factors to the current economic crisis,” said Congresswoman Waters. “I applaud the sweeping reforms to the financial regulatory system that have been proposed, but I believe we must go even further. Preventing all credit default swaps is essential to bringing stability to the market and preventing a similar crisis in the future.”

Congresswoman Waters was inspired to write H.R. 3145 in part by the crisis involving American International Group (AIG), which wrote credit default swap contracts in which both parties involved had exposure to the underlying reference asset.  These swaps ended up causing the company’s downfall, costing thousands of jobs and billions in taxpayer dollars.

Congresswoman Waters is joined in her concerns by some ofAmerica’s top financial minds.  Leading financier George Soros has called credit default swaps “instruments that should be outlawed” and has compared these swaps to “buying life insurance on someone else’s life, and owning a license to kill.”  Charles Munger, Vice Chairman of Berkshire Hathaway also believes credit default swaps should be eliminated, calling their prohibition “the best solution.” Munger has also noted that “it isn’t as though the economic world didn’t function quite well without it, and it isn’t as though what has happened has been so wonderfully desirable that we should logically want more of it.”

“Unless credit default swaps are banned entirely, I am concerned that the industry will find a way to loosen standards and widen exemptions for customized contracts and then we will be right back to where we are today, with capital markets hobbled and the financial system in need of additional government intervention,” said Congresswoman Waters.  “This Act, combined with President Obama’s proposed regulatory reforms, will ensure that our financial markets are resistant to future attempts at reckless behavior.”

By the way, this press release made nearly zero news in the mainstream media.  Luckily, other news sites on the web did carry this story.  I nearly missed it, though.  This bill is a great idea, by the way.  She is correct that these things can’t be regulated.  This is due to the top 5 banking entities being very much entangled with the government, especially bribing Congress and the President to allow them free rein.

Thank goodness for maverick legislators!  The media deals with these people by going deaf whenever they talk. Yet, most of the more sensible sort of analysis and examination of both our many imperial wars as well as finances, comes from these very same mavericks.  We just slogged through a flood of Michael Jacksonalia which pretty much washed out everything else.  Including this story.  I read the quarterly Office of the Comptroller of the Currency’s derivatives reports and this is always grim reading.

So it is painfully obvious, this system set up by the bankers is not working, not even slightly.  And we may as well terminate it before it grows to over a quazillion dollars.  Below is her bill:

GovTrack: H.R. 3145: Text of Legislation, Introduced in House

HR 3145 IH

111th CONGRESS

1st Session

H. R. 3145

To amend the securities laws to prohibit credit default swaps and to provide the Securities and Exchange Commission with the authority to regulate swap agreements.

IN THE HOUSE OF REPRESENTATIVES

July 9, 2009

Ms. WATERS introduced the following bill; which was referred to the Committee on Financial Services


A BILL

To amend the securities laws to prohibit credit default swaps and to provide the Securities and Exchange Commission with the authority to regulate swap agreements.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Credit Default Swap Prohibition Act of 2009’.

SEC. 2. FINDINGS AND PURPOSE.

(a) Findings- The Congress finds the following:

(1) Credit default swaps were conceived as insurance instruments, used to diffuse risk and increase liquidity throughout our lending system.

(2) The credit default swap market has grown over the past decade to include contracts that are entered into by persons with no economic interest in the contract’s underlying reference event, also known as naked credit default swaps.

(3) Certain parties wrote credit default swap contracts without posting collateral, leaving them overexposed to certain asset classes and creating a systemic risk.

(4) Unconnected and uncollateralized speculation creates an unnecessary risk for our financial system.

(5) Credit default swaps have proved to be harmful financial instruments and have caused significant wealth destruction during our economic crisis.

(b) Purpose- The purposes of this Act are–

(1) to allow the Securities and Exchange Commission to have oversight over all security-based swap agreements; and

(2) to prevent further damage to our economy by prohibiting credit default swaps.

SEC. 3. ESTABLISHING SECURITIES AND EXCHANGE COMMISSION OVERSIGHT OF CREDIT DEFAULT SWAPS.

(a) Definition of Credit Default Swap-

(1) Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:

‘(17) CREDIT DEFAULT SWAP- The term ‘credit default swap’ means–

‘(A) a swap agreement (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) that protects a party to such agreement against the risk of a loss of value because of the occurrence or non-occurrence of an event or contingency specified in such agreement relating to a security, loan, or other reference asset; and

‘(B) such other forms of credit risk protection as the Commission may, by rule, prescribe as necessary or appropriate in the public interest or for the protection of investors.’.

(2) Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:

‘(65) CREDIT DEFAULT SWAP- The term ‘credit default swap’ means–

‘(A) a swap agreement (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) that protects a party to such agreement against the risk of a loss of value because of the occurrence or non-occurrence of an event or contingency specified in such agreement relating to a security, loan, or other reference asset; and

‘(B) such other forms of credit risk protection as the Commission may, by rule, prescribe as necessary or appropriate in the public interest or for the protection of investors.’.

(b) Securities Act Jurisdiction Over Swaps- Section 2A(b) of the Securities Act of 1933 (15 U.S.C. 77b-1(b)) is amended–

(1) in paragraph (1), by striking ‘does not’ and inserting ‘shall’;

(2) by amending paragraph (2) to read as follows:

‘(2) The Commission may require the registration of any security-based swap agreement under this title.’; and

(3) by amending paragraph (3) to read as follows:

‘(3) The Commission may promulgate rules, interpret rules, enforce rules, and issue orders of general applicability under this title in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement.’.

(c) Securities Exchange Act Jurisdiction Over Swaps- Section 3A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78c-1(b)) is amended–

(1) in paragraph (1), by striking ‘does not’ and inserting ‘shall’;

(2) by amending paragraph (2) to read as follows:

‘(2) The Commission may require registration of any security-based swap agreement under this title.’; and

(3) by amending paragraph (3) to read as follows:

‘(3) The Commission may promulgate rules, interpret rules, enforce rules, and issue orders of general applicability under this title in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement.’.

(d) Technical and Conforming Amendment-

(1) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) is amended by striking subsection (d).

(2) Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended by striking subsection (i).

(3) Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by striking subsection (i) (as added by section 303(f) of the Commodity Futures Modernization Act of 2000).

(4) Section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by striking subsection (g).

(5) Section 20 of the Securities Exchange Act of 1934 (15 U.S.C. 78t) is amended by striking subsection (f).

(6) Section 21A of the Securities Exchange Act of 1934 (15 U.S.C. 78u-1) is amended by striking subsection (g).

SEC. 4. PROHIBITION ON CREDIT DEFAULT SWAPS.

The Securities Exchange Act of 1934 is amended by inserting after section 7 (15 U.S.C. 78g) the following new section:

‘SEC. 7A. PROHIBITION ON CREDIT DEFAULT SWAPS.

‘It shall be unlawful for any person to enter into a credit default swap agreement or contract.’.

SEC. 5. EFFECTIVE DATE.

This Act and the amendments made by this Act shall take effect with respect to swap agreements (as such term is defined in section 206A of the Gramm-Leach-Bliley Act) and credit default swaps (as such term is defined in section 3(a)(65) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(65))) entered into after the end of the 180-day period beginning on the date of the enactment of this Act.

Below is a list of all the House members if anyone wishes to contact some of them.  She needs co-sponsors.  And like Ron Paul’s audit the Fed bill, people will be reluctant to support this bill unless pushed:

Representative Offices – United States House of Representatives, 111th Congress, 1st Session

Representative Offices

[A B C D E F G H I J K L M N O P Q R S T U V W Y]
List by State/MapSearch Member Sites

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46 Comments

Filed under .money matters, Politics

46 responses to “Representative Waters Sponsors HR 3145: Abolish All Credit Default Swaps

  1. About. Freakin. Time.

    Go Maxine!

  2. w c

    after all the horses have excaped .. then lock a door .. puffery .. this stuff has had coverage and strong voices ,, now the congress way latters .. come slopping to the rescue.

    on a dead bodie of political showwomen ship ..

    this will be stopped dead in its track by the other bought and paid for.

  3. trailin' pete

    this is crazy! There are two fundemental rights americans have had in the past which make us free men and women:
    1) The right to PRIVATE PROPERTY
    2) The right to CONTRACT between parties

    private property rights have been abolished bu property taxes. Now this idiot is saying that the federal government can prevent two competent parties from coming to an agreement to perform.

    that’s insane and the death of our beloved america.

    If she wants to pass a stupid law, how about that the us government is no longer going to bail out people and corporations who make stupid contracts…no matter what. let the banks and financial players do what they want. if people do stupid things, let them live with the consequences…caveat emptor covers it all well, and didn’t need an act of the senate.

  4. w c

    the political class et al.

    a clown’s smirk in the skull of a baboon


    i am a shape that can but eat and turd
    ere with the dirt death shall him vastly gird,
    a coward waiting clumsily to cease

    e.e. cummings

  5. emsnews

    ALL CONTRACTS HAVE TO BE LEGAL. Ergo: all must conform to laws of the land. And Congress gets to decide what contracts are legal or illegal. More than one very violent war has been fought over this issue.

  6. w c

    trailin’ pete

    a 10-4 on that one … smack on target

  7. trailin' pete

    well, you see how fast people jump on this as a “good idea” because they don’t understand the problem beyond the “sound bites” of arguments and “data” that is put out there to describe the “problem” and ultimately (wait for it) the “solution”.

    How about before another bill authored by who knows who becomes a law, let’s look at what the real problem is. Might be as simple as a stupid and undiscriminating electorate

  8. w c

    ems

    ex post facto laws ..

    lets pass a law that up is down .. and because the congress says it is. shades of 1984

  9. w c

    pete

    best to take the problem in the context of the whole

    data , and evidence provide proof of the breakdown.. but in a democracy .. all blond hair folks can be at the mercy of the bald ..

    so both are necessary to see the elephant in the room and not just the trunk ..

  10. trailin' pete

    wrong elaine. the law is clear the four elements of a valid contract.

    1) offer
    2) consideration
    3) performance
    4) transparency

    in other words, two people can agree on anything under common law as long as both are freely entering into the agreement with knowledge of the transaction (no coercion), there is consideration given and received, there is performance and both parties are aware of all elements of the transaction (ie no concealment of material fact). These “sophisticated” financial transactions were generally between parties with the knowlesdge and resources to enter into such agreements.

    Of course, contracts cannot be unlawful as in contracting the murder of another or go against public health and safety, but otherwise everything is fair game.

    In the case of interest rate swaps (or insurance) one party agrees to accept the risk of interest rate changes with their backing assets. If the party presents that they have assets to back the insurance, but do not, they have committed fraud which is already unlawful. If the insurer publishes a financial statement and the insured doesn’t review it (ie perform due diligence) no fraud is committed and the injured party (insured) has no claim.

    Common law operations have worked from biblical times. writing stupid laws to restrict essential freedoms are the death rattle of this country.

  11. Paul S

    About the mainstream, corporate controlled media being silent on this topic: THEY need reforming almost as badly as the banking/financial markets. If the FCC had not been captured by those they are supposed to regulate, we wouldn’t have 6-7 HUGE media empires like Rupert Murdoch’s News Corp–parent company of Fox Propaganda. An open and honest media, one that actually engaged in REAL journalism, would have raised the alarm bells on financial bubbles long before they imploded on their own. BUT: the elites realize this as well, hence the lobbying for greater and greater media concentration in fewer and fewer hands.

  12. w c

    trailin’ pete
    July 19, 2009 at 5:24 pm

    my friend lol yes ,, again right on target..

  13. Duski

    trailin’ pete, so hiring someone to assasinate someone is a legal deal?

  14. Duski

    Besides, the problem in those swap deals is that other party may manipulate the outcome of the deal without other party knowing it, ergo: NO transparency.

  15. Duski

    At least from where I come from, all deals must conform to laws. Most of the things parties are free to agree freely, but naturally, they may not break any laws in the deal.

  16. w c

    Paul S
    July 19, 2009 at 5:26 pm

    a horse head in the bed.. will stop honesty journalism dead in it s track.. in the thirtys, 5000 editors were bought and paid for , This stuff is as old as the hills .

    this is the problem. it is a rare person indeed that will risk their life and familys to print truth.

    history is what the powers “that be” want it to be in the minds of the electorate,

    we do not have to travel to far back..

    even now 9-11 .. yadda yadda .. 8 tons termite ,,some guy in a cave in a far away country planted that lol

  17. w c

    Duski
    July 19, 2009 at 5:33 pm

    you did not read ,, petes comments

    quote

    Of course, contracts cannot be unlawful as in contracting the murder of another or go against public health and safety, but otherwise everything is fair game.

    or jumped to a conclusion .. go back read again .. and take the two golden stars off your forhead .. for a stupid anal comment

  18. emsnews

    The OTC contracts are NOT visible to outsiders. Secret contracts are ultimately not enforceable. That is, if you write ANY contract, you have to have the Law on your side or the counterparty can take you to court and win.

    The whole derivatives swap business was a group conspiracy run mainly, 90%, by a tiny handful of insider dealers who set the rules privately. Then when a payout had to happen, they all ran for the hills. Because these contracts are not really legal, they are very anxious to NOT go to any court of law to find out what is legal or their investment (infestment) banks will be bankrupt!

  19. emsnews

    As for the belief that any contract is ‘fair game’, lawyers know better. Contracts are constantly disputed in courts of law. Constantly. And the judge determines the legality of it all based on precedent and interpreting laws passed by Congress.

  20. trailin' pete

    the transparency relating to contracts is between the transacting parties, not uninvolved third parties. Anything that is not unlawful or contrary to public policy (health safety or welfare) CAN be contracted and CAN be enforced in court. The issues involved in a court dispute would address what the parties agreed to, not whether or not they had the right to agree to them.

    You are probably correct elaine that the elements involved in these deals, if examined in a court of law, will demonstrate fraud on the part of one or both parties. So will the MBS debacle. My point is that there are all kinds of laws already on the books, well established, that deal with fraud. Use those. What Ms. Waters proposes is not only completely useless from the perspective that the damage is already done and the same folks are already moving on to the next fraud(s), but that her legislation starts encroaching into the usurpation of the right to contract…precedent!! very dangerous and slippery slope.

  21. trailin' pete

    BTW, secret contracts ARE enforceable of course, although by enforcing them in a court of law they are no longer secret (although sometimes the courts will seal the case and prevent access to the records). There is no visibility to unrelated third parties as a prerequisite to a valid contract.

  22. nah

    bad ass… nothing could more clearly strike out against the use of liquidity to provide a more efficient market than REALITY… any quickie that gives people a real kick be it drugs or money hollow out over time the healthy machine which sports them
    .

    .
    take a sucker from an israeli, and expect a tantrum that adults expect a healthy system

  23. nah

    http://www.reuters.com/article/newsOne/idUSTRE56I12020090719
    Netanyahu defies U.S. on East Jerusalem settlement
    .
    “I can only imagine what would happen if someone would suggest Jews could not live in certain neighborhoods of New York, London, Paris or Rome. There would certainly be a great international outcry,” he told reporters at the weekly cabinet meeting. “We cannot accept this edict in Jerusalem.”
    .
    ??? like noone is expecting in say NYC that if a dark fella’ shoots somebody, the United States Military is gunna come in and whoop some ass… and whats more the good US Jews OWN their property outright as legal citizens of the land and are just participants in the American Dream who only seek the best for every one rite down to the crazzy leftist commie who dont know no better
    .
    so yes would be a outrageous international outcry if someone started undermining the principals of freedom and ownership based on race and war in the USA
    .
    then i dont even know what edict the bearer of a hopeless US middle east policy is denouncing, he must want more fame

  24. nah

    Bill outlawing anti-Israel protest nears approval
    http://www.reuters.com/article/newsOne/idUKTRE56I1AL20090719
    .
    JERUSALEM (Reuters) – Legislation that Israel’s Arab citizens fear could limit their freedom of speech came a step closer on Sunday to becoming law.
    .
    yeah neetyanwahoo wonder what it would be like to be ostracized and looted in your own country as your views are suppressed and discarded in the media that provides for the land you love
    .
    your not a jew nartenblahoo you are a clown who i believe short changes more than just what pleases you most in its minority… im scared with guys like you having their ‘finger on the button’
    .
    indecision is the highest quality of a suppressive regime that is bent to policy of complete ideological cleansing

  25. nah

    Dunno for sure if its that big of a deal… brothers are brothers an’ all… but maybe US Jews could like pull a protestant reconstruction of the church or something… put some political pressure on for a just, honorable Israel thats history and sacrifices can echo in a open chamber of world peace and harmony
    .
    just thinking im sure with the way they have been ruinously targeted as a identity of faith it is a deep scar that binds them to the love of their history and the eternal God

  26. emsnews

    Yes, the Zionists seem bent on creating WWIII.

  27. Yeah, but there are so many who are so bent on this and that….that, they can’t see Blue from Black.

    Bending in the wind doesn’t make it so.

    DUH!

  28. Sorry if the above post doesn’t make any sense and you can trust me on this…..I will never say “trust me”. Anyone who does is suspect in my mind.

    Sad that things have become this way. Don’t you think trust is like so many things…..it must be earned? And if the earning is so easy then it is no different than a house of cards. Blown away in a heartbeat.

    Regardless, anyone who is calling attention to breaking the “double-down” derivatives game in my mind is someone worthy of support. If there is any hope for DC, it will come out of the house. If there is any chance, for the US Constitution, it will most likely manifest (or womenifest for you lady lover’s out there) in the house. We ought know by now who will resist – no need to even mention names cause it is already out there. Crystal clear.

    I support Direct Action. Look it up if you are interested in history, but per my book those who came before and did not prevail nonetheless possessed much wisdom and prevailing sometimes takes a long time….unless of course, hands are forced. Then it is a whole new situation.

    http://en.wikipedia.org/wiki/Direct_action

    sorry if I “sound” as if I’m preaching cause I will say unequivacably (spelling?) that I’m NOT. Plus, anybody named “Waters” has got a head start as far as I’m concerned – same goes for a bunch of other names.

    I don’t even know what it means to be a Zionist, but I have visited Zion Illinois, and I enjoyed my time there. They knew a thing or two regarding medicine seems to me. All the evidence suggests as such.

    Anyhow, there was once a leader from the country of Israel who said something about the wind during a historic meeting….do you remember what happened to him? I do.

  29. Paul S

    wc: True, newspapers can and have shilled at any time. The Hearst newspaper comes to mind. But there is a difference. We have ALOT more media outlets today than we had in the 1930’s. The semi-monopoly of today is more pronounced if for no other reason than it takes much more effort to gain control of meida today than in the 1930’s. There is TV, Radio, Print and the one ALL the media monopoly would like to control, the Internet. The media barons of today made a great effort to get their monopolies. Attaining high journalistic standards isn’t one of their objectives.

  30. that is why it pays sometimes to ignore…

    DYODD

  31. Daliwood

    Trailin’ Pete, You’ve raised some interesting points, and I think I understand them. In addition, I think you are rightly concerned about legislation that sometimes gets written without any attention to the law of unintended consequences.

    However, your main point is that contracts can be legally made as long as they don’t involve illegal activities or run counter to the public good. But look at the press release regarding the proposed legislation. It notes that the “swaps ended up causing the company’s downfall, costing thousands of jobs and billions in taxpayer dollars.”

    If that statement is true–and I think it is–couldn’t the swaps be banned on the basis of their detrimental effect on companies, workers, and the taxpayers? The foundations of contract law wouldn’t be damaged by legislation that reinforces the idea that contracts cannot cause financial harm to people who weren’t party to the contract.

    I think too that you’re putting too much emphasis on the “rights” of the financial gurus to enter into any contract as long as it can’t be proved to be illegal. Personally, I think you have to look at Wall St. types the same way you look at out of control children. Call me a pessimist, but I think you have to impose firm restrictions on their actions. If you have children, then you know that they look for boundaries–they explore their worlds to see how much they can get away with, how much a parent will allow before putting a stop to something. Parents who never let their children reach the boundary find themselves with delinquents sitting in jail. In addition, children don’t know it, but they actually want those boundaries imposed on them. The world doesn’t make sense to them unless someone orders it for them and teaches them, including the imposition of restrictions. (Paradoxically, it’s a human tendency to fight against restriction but crave it at the same time.)

    Wall St. types are like really smart, unruly kids. Somebody needs to play parent. OK, in addition to calling me a pessimist, you can say that I want a nanny state, but I don’t. I want a government that acts in the best interests of its citizens, not one that backs away from sensible regulation for reasons no more compelling than the ones you are offering.

    Finally, if the proposed law does affect contract law, so what? If the existing laws are allowing the kind of crap that has collapsed the economy, then maybe they need to be tampered with. Alternatively, if you maintain your current position, you should at least couple it with the loud demand that relevant laws (e.g., fraud) be vigorously enforced. “Arrest them all” is one of Elaine’s favorite phrases, and I typically agree with her. So let’s arrest some of the credit default swaps crooks, and enforce the hell out of the laws you say are sufficient to protect us.

    ΩΩΩΩΩΩΩΩΩΩΩΩΩΩ
    ELAINE: 100% correct, Daliwood.

  32. w c

    Daliwood
    July 19, 2009 at 10:40 pm

    precisely inforce the laws .. starting with the fed reserve, the big money banks.

    we seem to be able to inforce speeding tickets , parking meter violations .lol

    new laws .. just go back and enforce the old.

    i am sure we have plenty of laws broken in the scam ,,

    but a hit on the palm .. and a few million penalty payment out of court .. to settle .. does not cut it

    as elaine says arrest them all. but then who would do the arresting .

  33. Gavin

    I’ve stated from the outset of this crisis:

    The Supreme Court should rule that credit default faults should be deemed illegal because they threaten the national security of the country.

    GMG

  34. Gavin

    Note: swaps not faults from above.

  35. Noted. But the supposed “supreme” court has already shown their colors and some of the best of them have retired.

    Any chance will come out of the house……a lonely individual (such as Mr. Paul) who cries out against injustice against all of our potential future grandchildren.

    There are a few on that court who have YET to learn their lessons. And to think. I think they went to good elementary schools…regardless what they are named.

    Plus, ain’t Water from CA? That state is a liability. Nonetheless, they are still part of the current “Union” and I support any effort to shed some light on this money-loving-slimy-GS-parisitical derivatives game. All games come to an end eventually – win or lose.

  36. p.s. – I don’t really know if Mr. Paul is lonely. I don’t think he is really anymore. How bout Resolution 1207? Whats the status on that current madame speaker? Oh, forget you. You are nothing but a CA obstacle.

    And to think….those SF voters should have known better.

    What a huge liability that state is. Better if it is removed from the Union in my humble opinion. I support non-violent direct action.

    I also support baby cubs just like their momma does.

    🙂

    Its a new day.

  37. Robert Paulson

    Representative Waters Sponsors HR 3145: Abolish All Credit Default Swaps

    *yawn*

    Nothing like being reactive instead of proactive.

    This sort of thing has been bandied about before.

    Derivatives are into the quadrillions of dollars and only NOW is there a move to abolish CDS?

    Welcome, late to the party, Maxine.

  38. trailin' pete

    Dali, As Elaine inferred, the current “system” is (likely) riddled with fraud which would prevent one or both parties from asserting their claims under law. Thus, laws addressing elements of fraud already exist and no new legislation is needed.

    Look at it this way. if someone running a business needs to protect against the risk of interest rate changes and another party has the means to assume this risk in exchange for consideration (a fee), what could possibly be wrong with that? Well, what could be wrong is that the person/company that has offered to insure against the loss for a fee may not have the assets to actually cover the insured party. That is known as fraud. It’s not lawful and can be criminally or civilly punished already.

    If one passes a law that this type of contract cannot be freely entered into…one that is lawful and harms no one, precedent has been established that the government can determine what type of contracts people can execute. To see where this can lead…take a look at the “hate speech” legislation the feds are cramming thru congress and project what effect that legislaton might have on free speech in the future.

    In conclusion. Let’s say there are two sets of people who wish to engage in interest rate swaps for legitimate business purposes. One set the buyer and seller are well versed and both able to satisfy their obligations under the terms of their contract in the event the insurance “pays off”. Both parties benefit and both parties keep their respective obligations. This is an economic plus for society and allows commerce.

    A second set of parties enter into the same agreement, but the insurer lacks the capital to make good a claim. In the event of a claim, the insurer is subject to criminal or civil actions as fraud was involved.

    In the second matter, there is a fraud for which the law already provides a remedy. In the first case, both parties keep their obligations to both parties mutual benefit…WHICH IS THE NATURE OF PRIVATE CONTRACTS.
    Waters proposes to kill both transactions rather than address the defective one with laws already existing on the books.

    allow congress a foot in the door to decide what free people can agree to do among themselves (vis a vis contract law) by definition means they are no longer free.

    i do agree that vigorous enforcement of the laws is essential and that should be the hue and cry being raised. Personally, I don’t feel any need to be protected…I can do that on my own.I want the government to stay the hell out of my business and life.

  39. w c

    gavin

    deemed illegal because they threaten the national security of the country.

    as does a pat down at the airport ,, on old ladies .. wearing clothes of Assertion: or Simplification (Stereotyping):and bits of Glittering Generalities:

  40. payAttention

    ‘By the way, this press release made nearly zero news in the mainstream media. Luckily, other news sites on the web did carry this story. I nearly missed it, though. This bill is a great idea, by the way.’

    No. This bill is a horrible idea. It will be destroyed because Waters and Kucinich are sponsoring it. This is grandstanding. They knew the bill had no chance with their names on it. They could have gotten Issa on it to make it bi-partisan, and Marcy Kaptur. For some reason? you choose to ignore Representative Kaptur, who was dynamic when she grilled Paulson. She also gave the speech of the year at the House.

  41. emsnews

    Grilling Paulson isn’t enough. And I see no possible way to ‘fix’ the derivatives swap business because it was allowed to go totally out of control for too long.

  42. payAttention

    As Pete said, these are fraudulent transactions. Try to buy insurance on something where you don’t have an insurable interest and see if the Prudential man on the phone will even understand what you are talking about. The remedy is in the Justice Department, but I suppose it’s more fun to go after Martha Stewart or something.

  43. payAttention

    When was the last time you even saw or heard from Eric Holder. Does anyone even know we have a justice department?

  44. w c

    house bill

    20045 hate

    resolved to pass a law outlawing hate .

    be it resolved from hence forth hate is outlawed .

  45. Regards,
    I am happy with your blog posting
    I want to inform and business credit.
    Good Luck

  46. nah

    Hope Is Not A Strategy (CIT)
    http://market-ticker.denninger.net/archives/1234-Hope-Is-Not-A-Strategy-CIT.html
    .
    This just sticks the hose further into the pocket and vacuums out more money, all of which is going to wind up going to the “saviors”. The question is in fact quite simple: Assuming this line remains open for a year, where is CIT going to get the $300 million in interest from?
    .
    CIT stakes its future on the CNBC call the recession is officially over… or that the government isnt in the mood to gush out another 4 trillion rite now

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