Thought For The Day: H.R. 2779 and American Capitalism

Here they go again.  H.R. 3606 was NOT a jobs bill, it was for all intents and purposes a bill allowing financial interests to establish corporate entities and engage in public trading with less oversight from the Securities and Exchange Commission, and now H.R. 2779 (pdf) will be brought to the House floor next week to further erode oversight of corporations in the United States.   The bill exempts some inter-affiliate swaps from federal regulations.

Here’s the Business Roundtable’s version of the bill’s intent:

“We are writing to express support for H.R. 2779, introduced in August by Representatives Stivers and Fudge. The bill would prevent internal swaps transactions from being subject to a significant regulatory burden, consistent with the objectives of Title VII of the Dodd-Frank Act – to mitigate systemic risk and increase transparency in the derivatives market. Without this bill, companies could be forced to alter business structures that reduce risk and lower costs, and corporate business judgment would be sidelined in favor of government micromanagement.”  (emphasis added)

Gee, now why would anyone want to regulate those pesky little swaps that caused so much grief in 2008, and those  in which trades were “entered into by a party that is controlling, controlled by, or under common control with its counterparty?” [GT] The investment bankers have decided such oversight constitutes a “significant regulatory burden,” and bless their little hearts the Traders Who Brought Us The Debacle of 2008 don’t wish for any “government micromanagement.”

The Roundtable continues:

“As we understand it, regulators are considering whether to subject inter-affiliate swaps to the same set of requirements that apply to swaps with external dealer counterparties – possibly including margin, clearing, real-time reporting, and other requirements. This would be a mistake, imposing substantial costs on the economy and on consumers.”

Translation: We don’t want the government regulating our leverage, what we sell to whom, and whether we have to report what we are doing when we are doing it.  Those who find their eyes rolling at this point are excused, because if memory serves the swaps traders did such a bang up job of self-regulating their trading during the Housing Bubble and Mortgage Meltdown that the economy sustained “substantial costs.”   And, who paid? The consumers.  What Americans paid for in the aftermath of the Mortgage Meltdown was the price for unregulated traders who weren’t much concerned about the potential effects on their shenanigans during the Bubble.   Now, are intrepid traders are “afraid regulation will increase costs.”  Whatever the ‘cost’ it’s bound to be less than the $7.38 trillion lost in the wake of the collapse of an unregulated market. [MktWtch]

H.R. 2779 will come to the House floor next week, and if Representatives Amodei (R-NV2), Heck (R-NV3), and Berkley (D-NV1) truly want to support free-market Capitalism and prevent more consumer, shareholder, and investor disasters like the one perpetrated by the investment house traders during the Housing Bubble they’ll vote against this ill-conceived measure.  Those who vote in favor of H.R. 2779 can be properly categorized as the supporters of Financialism, NOT good old fashioned American Capitalism.

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Filed under Amodei, Berkley, financial regulation, Heck

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