U.S. financial reform: We, like sheep, have been led astray

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While the White House, Congress and the shouters, doubters and pouters tie themselves in knots over health insurance reform, our good friends at the banks aren’t even breaking a sweat in their effort to buy a non-reform banking bill.

And here’s the sweet part of this non-reform reform purchase: They’re using our money to do it.

Remember bailout?

In 2009, the year after the biggest global bank meltdown since the 1930s and the $700 billion bank bailout, America’s finance, insurance and real estate sectors spent $463.8 million on 2,653 lobbyists to buy favors from Congress, according to the non-partisan Web site opensecrets.org.

Of that grease, Wall Street supplied $93.3 million, while commercial banks tossed in $50.8 million.

What they got for their — our — money was nothing, which is exactly what they wanted.

Nada. Zip

Not one new rule, not one new regulation and not one new knuckle-rapping regulator was created in 2009 to rein in the knuckle-draggers that traded an estimated $592 trillion, or 12 times the world’s total economic output, in over-the-counter, in-the-dark derivatives last year.

That’s right. The same unregulated, opaque derivatives, swaps and futures trading that all but busted the big banks, drained the U.S. Treasury and now is sawing into your state, county, and local school district budgets continues to thrive despite the havoc all caused since 2000.

Complacency

Why? Because, as one observant blogger noted after a recent call by Sen. Ted Kaufman, D-Del., for financial reform again fell on Capitol Hill ears too-stuffed with banker cash to hear, most Americans are “just sheep with money.”

The jab is, well, true.

You and I and most of the bleating public go where we’re herded, counting on regulators to guard us from wolves.

The “too-big-to-fail” bunch know this so they push banking boundaries wider and wider — forcing regulators to guard more ground — because, literally, they have nothing to lose.

We do. In 2008, 25 U.S. banks failed. In 2009, failures ballooned to 140 and, so far this year, the total is 30.

Not one was on Wall Street; most were on Main Street and many were on the very quiet main streets of rural America.

Reform needed

One regulator, Gary Gensler, chairman of the Commodity Futures Trading Commission, knows that derivative reform is critical if banks are to be saved from themselves.

As a former rainmaker at Goldman Sachs and a Clinton administration market deregulator, Gensler both created and profited from market loopholes. Now he wants them closed because they have grown big enough to pull whole nations — Greece comes to mind — through them.

“Wall Street’s interest is not always the same as the public’s interest,” Gensler explained to the New York Times March 10. “Wall Street thrives and makes money in inefficient markets, and I am creating efficiencies in the market.”

Not yet, although Gensler is pushing hard for tough new rules that would force the banks and global business to do their derivative dealing and swap swapping in daylight — in open markets — and “clear” them through third party clearinghouses like futures traders must at the Chicago Mercantile Exchange and Board of Trade.

Gensler’s message only got partly through to House rule writers who, in December, passed a financial services reform bill that keeps nearly half of all derivative trades in the dark.

That effort, says Steve Suppan, a policy analyst with the Institute of Agriculture and Trade Policy in Minneapolis, isn’t good enough.

“Both agriculture and energy markets,” he explains, “are highly vulnerable to the actions of Wall Street speculators. The CFTC needs to set a strong regulatory standard for all to follow.”

Gensler must have ag’s support to succeed. The farm groups must step up before we sheep get fleeced again.

About the Author

Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com More Stories by Alan Guebert

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