Bloomberg News reports the Wall Street stealth lobby defends the $35 billion haul in derivatives. Five U.S. commercial banks (JPMorgan Chase, Goldman Sachs, Bank of America, Morgan Stanley, and Citigroup) “are on track to earn more than $35 billion this year trading unregulated derivatives contracts.”
The $592 trillion over-the-counter derivative market is one of Wall Street’s “richest fiefdoms”.
The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives…
In recent months, Wall Street firms have embarked on a lobbying campaign to influence the media and legislators.
Goldman Sachs held an off-the-record seminar for reporters in April to explain how credit-default swaps work…
JPMorgan has mobilized some corporate clients, advising them that the proposed changes could hurt their ability to hedge against losses, according to a person familiar with the matter…
Health-care reform may make it unlikely any derivatives legislation will be enacted in the near future… For Wall Street, the longer it takes to get legislation passed the better. As stock market values and the economy improve, anger at banks is likely to subside.
Outside of Wall Street, The Hill reports the AFL-CIO and some Democrats push for new tax on Wall Street transactions. They propose assessing “a small tax – about a tenth of a percent – on every stock transaction. Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits.”
“It would have two benefits, raise a lot of revenue and discourage speculative financial activity,” said Thea Lee, policy director at the AFL-CIO.
A tenth of a percent transaction tax “could raise between $50 billion and $100 billion per year”.
Four at Four continues with an update from Afghanistan, Blackwater hired foreigners for CIA death squad contract, and India says ignore population during climate talks.