Lincoln Unveils Landmark Wall Street Reform Bill
Lincoln Bill will Bring Total Transparency, Accountability to Wall Street
U.S. Senator Blanche Lincoln, D-Ark., Chairman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry today introduced the “The Wall Street Transparency and Accountability Act” to bring 100 percent transparency to the nation’s financial markets, prevent future bailouts and protect jobs on Main Street.
“The days of backroom Wall Street deals are over,” Lincoln said. “This is the strongest Wall Street reform bill to date and represents an historic opportunity for real reform. America’s consumers and businesses will finally see a financial market that operates in an open and transparent manner.”
Lincoln’s legislation includes mandatory clearing and trading requirements, real-time reporting of derivatives trades and ensures that all loopholes are closed.
“The clearing and trading of financial transactions lowers risks and makes the entire financial system safer. My bill will bring 100 percent transparency to an unregulated $600 trillion market, expose these markets to the light of day and keep this money back on Main Street where it belongs,” Lincoln said.
Lincoln’s proposal also prohibits the Federal Reserve and FDIC from providing any federal funds to bail out Wall Street firms who engage in risky derivative deals. Banks engaging in risky swaps transactions will be forced to spin off their swap dealer desks or be barred from receiving any federal assistance.
“My proposal puts an end to ‘too big to fail’ and prevents future Wall Street bailouts. Financial institutions will have to decide if they want to be banks or if they want to engage in the risky financial trading that caused the collapse of firms such as AIG,” Lincoln said. “My bill also requires Wall Street to put the interests of Main Street, such as municipalities and retiree pension funds, above their own bottom line and puts an end to Wall Street’s ability to knowingly enter into deals that allow their clients to defraud third parties or the public.”
As Chairman of the U.S. Senate Agriculture Committee, Lincoln has jurisdiction of the Commodity Futures Trading Commission which oversees the derivatives market. Since becoming Chairman last fall, Lincoln has worked closely with Senate Democrats and Republicans, as well as the Administration to craft meaningful reform.
The Senate Agriculture Committee will hold a mark-up next week on this legislation. Full legislative text is available at http://ag.senate.gov/site/legislation.html.
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Reval Says Ag Derivatives Bill Best Case for Corporate End-Users
New York, April 20, 2010 –The clear definition of a corporate end-user of over-the-counter (OTC) derivatives, introduced in a new bill last Friday by U.S. Senate Agriculture Committee Chairman Blanche Lincoln (D-Ark), addresses most of the concerns previously held by companies that use derivatives to hedge commercial risk, says Reval, a derivative risk management and hedge accounting solutions provider to over 400 of the world’s largest public companies.
“Senator Lincoln’s bill does what no other bill does, which is that it defines what an end-user is and more clearly articulates what an end-user will be exempted from,” says Reval CEO and Co-founder Jiro Okochi, who testified on behalf of corporate end-users last December before the Senate Agriculture Committee hearing on OTC derivative reform.
“It is unfortunate that FX Forwards and FX Swaps are no longer exempted outright as they have been in previous proposals, but we may now be at that juncture where it is as good as it gets for end-users,” he says. Senator Lincoln’s Wall Street Transparency & Accountability Act of 2010 is the last bill to be proposed in an effort to reform the OTC derivatives market.
Clearly defining the corporate end-user was a suggestion Okochi made in his testimony in an effort to address the major concern by some lawmakers that previously proposed exemptions were too broad and could allow hedge funds and other speculators to take advantage of any exemptions.
“Two key issues that end-users were concerned about were having to bear additional costs to post cash margin—from clearing or from costs passed on by dealers who would be required to clear trades—and being forced into standardized instruments that traded on exchanges,” Okochi says. By making it a requirement that margin will not be forced on Swap Dealers for swaps sold to end users, Okochi notes, Senator Lincoln’s bill now makes it less likely that Swap Dealers would eventually require margin from end-users, even if legislation did not require it.
“Senator Lincoln’s bill simply and cleanly eliminates these two issues, and while Swap Dealers’ capital costs may go up, I think it is reasonable now to say that some price will have to be paid by everyone who uses derivatives,” he says.