Good News

by Larry Levin

Like the recent so-called Greek bailout when I said "I'll believe it when I see it," the following piece is "good news" but I'll truly believe it when I see it become law. This is from Karl Denninger's site:

http://market-ticker.denninger.net/archives/2199-FLASH-Derivative-Reform.html

which is about of piece of legislation that I don't believe the banksters will like very much - so it must be good news.


April 15 (Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and their biggest rivals would be forced to wall off derivatives trading operations from their commercial banks under a measure to be introduced by Senate Agriculture Committee Chairman Blanche Lincoln, a congressional aide said.

Lincoln, an Arkansas Democrat, will propose a "no-bailout provision" as part of an overhaul of derivatives regulation she plans to unveil today, according to the aide, who declined to be identified because the plan isn't public. The measure aims to ensure banks don't endanger depositors' money with risky trading of over-the-counter derivatives, the aide said.

It gets better, although I can't find a bill - yet.

Along with forcing commercial banks to spin off their swaps dealers to a different corporate entity, Lincoln's derivatives legislation would bar dealers, exchanges, clearinghouses and other swaps-market participants from being able to take advantage of emergency lending from the Fed, according to the aide.

Good! Trade with your own money - not with backstopped loans or "liquidity" that is really your depositor's.

It would also increase protections for clients by requiring swaps dealers to treat them as a fiduciary -- obligating them to put customers' interests ahead of the company's, the aide said.

Oh they won't like that.

You mean the Goldman CDOs they created for hedge funds to short subprime couldn't be sold off to dupes, er, "investors" without disclosing to them that the entire instrument exists only because a very high-qualified entity at least as smart as you (and they might even have to name them!) wants to bet that you will lose every penny you put up?

No, the banks won't like that at all!

The measure requires most over-the-counter derivatives to be traded on exchanges or through clearinghouses.

There is a God.

Companies that use swaps to hedge the cost of materials or other non-investment purposes would be exempted from the requirements, the aide said. Like the Volcker rule, which would ban commercial banks from proprietary trading, the wall-off provision would separate derivatives trading from traditional banking activities such as taking deposits and making loans.

Ok, there is a God and I will go to Church.

Treasury Secretary Timothy F. Geithner, speaking at the White House yesterday, said Lincoln's plan was promising.

"Based on what she has laid out in public, it looks like a very strong bill, very close to where we are," Geithner said.

And I'll go to confession Saturday.

Wow.



Previous Day's Trading Room Results:

Trade Date: 4/15/10

E-Mini S&P Trades*
(before fees and commissions):

1) VA buy @ 8:32am at 1205.00 = +.75 & b/e (2 lots)

2) Engf buy @ 9:30am at 1207.25 = +.50 & +.25 (2 lots)

3) OTF buy @ 10:27am at 1205.00 = +.25 (1 lot)

4) Algorithm positions (3)

5) "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...-1.00



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