The next step in FinReg?

Mr Bachus told the FT that he would go “page by page†‰ [through Dodd-Frank].†‰.†‰.†‰to identify job-killing provisions or lending-killing provisions”. He highlighted new rules pushing over-the-counter derivatives trading through clearing houses and on to exchanges as a problem for non-financial corporate users.

“The derivatives provisions in Dodd-Frank alone… as they stand now they’re going to take a trillion dollars out of our economy. Think how many jobs that’s going to kill,” he said.

It is difficult to fathom how that last pararaph (article here) can make any sense, other than as fabrication.  What is the public choice factor here?  Ag producers who trade customized swaps and who wish to keep doing so?  Or is it financial institutions, including the trading branches of commodities firms, which earn money trading the spread?  How about traders which don't want to deal with the potentially onerous margin requirements at a newly established clearinghouse?  All of the above?

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“The derivatives provisions in Dodd-Frank alone... as they stand now they’re going to take a trillion dollars out of our economy. Think how many jobs that’s going to kill,” he said.

If those are finance jobs, they should be killed.

Gotta laugh...glanced at the feed, and thought this was a Big Picture post. One day after the Tea Party victory, and Tyler Cohen sounds like Barry Ritholtz. Maybe there is hope.

You don't get ruled by the Tea Partiers you want, you get ruled by the Tea Partiers you have....
did you seriously believe these fools were libertarians and not illiterate right-wing Christianists? Why do you think they deny global warming, for example?

"My understanding is that ISDA is the source of the $1 trillion figure."

Indeed
http://www.isda.org/media/press/2010/press062910....

One thing to note is that I don't think anybody really knows the scale of the new regulatory burden. The legislation is in place, but its interpretation by regulators is many times more important than the legislation itself. Also, regulatory arbitrage will mitigate, to some unknown extent, the most onerous pieces of the derivatives legislation.

dp, there is already cost benefit analysis taking place by those who do care, the Financial firms who's benefit these regulations will cost. And that will be that, Limits to serving free alcohol at the casino will be repealed.

"did you seriously believe these fools were libertarians and not illiterate right-wing Christianists? Why do you think they deny global warming, for example?"

So you're telling us Democrats are left-wing illiterates a few notches dumber than the people who just kicked their asses? Or that you just don't notice or care when your own politicians make idiotic assertions? Why is that, I've always wondered. It's as though people devote most of their attention to the people they hate (and, obviously, you hate conservatives), and have none left to notice that the people in their own camp are little different. "It's okay when we do it."

Bailout insurance, why not?

"Bachus is a Republican, as the first page of the FT article makes clear. BPO, why do you think he's a Democrat?"

Never said anything of the sort. I'm addressing you and your comment. Really not sure how you get anything close to that from what I wrote. My troll alert is suddenly going off.

From the folks I have spoken to, the margin requirements are something that are not too onerous. It will reduce margins, but it's hardly world-changing.

It's the rule-making authority granted to the SEC that has some trading groups concerned (re: uncertain) about what direction the SEC is headed with respect to exemptions for operational purposes versus speculative purposes, etc.

It's worth noting Dodd-Frank authorized a blizzard of studies, reports, and directives to promulgate rules with vague guidance.

Diana, I believe you are reading too much into this.

You wrote about something stupid a Republican politician said.

He responded basicly, "Well no matter how dumb you think we are, we won the election! So that proves your kind is even dumber!"

Then his troll alert went off.

Tyler: "It is difficult to fathom how that last pararaph (article here) can make any sense, other than as fabrication. "

And now (a) the GOP demonstrates that it's there to serve the interests of the rich, with some tidbits thrown to the social right to keep them mollified, and (b) it'll slowly become clear to thinking people that the Tea Party was nothing but a rebranding move by Republicans who were trying to pretend that they hadn't happily ridden Air Bush/Cheney all the way in to the ground.

If Demobamacrats didn't suck so so hard, there would be no demand for the Tea Party.

The TEA party activism reminds me of Ross Perot who was far more logical and fact based in his movement. Perot attacked HW for hiking taxes and for the big deficit. The TEA party has attacked Obama for his tax cuts and deficits, but the tax cuts have been call big government spending.

After all, other than FICA, every tax is lower under Obama than for every other president since 1980, and it was Reagan who hiked FICA in 1983.

And to the TEA party, Obama has given the bankers and Wall Street a sweet deal to make them rich with the bailouts and with FinReg because Obama is in their pocket.

The $1T figure represents margin that corporations will be required to post for their hedging activity. Maybe it is overstated, but it's pretty clear the figure is at least many hundreds of billions.

Berkshire Hathaway's derivatives alone would have required posting double-digit billions, except that they got a legacy exemption.

All around the world, companies that hedge their future mine production and won't have cash until it comes out of the ground and is sold will now have to borrow funds to pay initial margin and then borrow more if their commodities appreciate while still in the ground unsold. Farmers too. And airlines and other transportation companies that hedge will have to budget more money for those activities and less for paying their workers and for capital investment.

The costs are really high, and it is kind if surprising to see a thoughtful economist dismiss them as fabrications.

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