Video: Filling the loopholes

  1. Closed captioning of: Filling the loopholes

    >>> "morning meeting." a new analysis in the " washington post ," finds even as the nation's biggest banks continue to take taxpayer dollars in directly by the trillion, on average, executives at the 29 biggest bailed out banks got perks more than $380 million each. and they are passing new fees on to everybody that uses a bank. and if you don't use a card at citigroup, they charge anonuse fee. other banks flat out charging inactivity fees. they will charge you if you refuse to go into debt so they can charge you interest on the debt. if you are in that situation, just cancel your credit cards .

    >>> meantime, the president set to rub elbows at some of the richest at the dnc dinner tonight. now, half a dozen or fewer from the big bailed out banks are expected. their total contribution expected to be $100,000 to the president of the united states this evening. from new york to washington all of this is happening as the house financial services committee continues to markup the reform bill , and that process set to resume in less than half an hour. the good news is, movement towards exchanges that equal democracy, markets and choice are democracy. secrets and back room deals are largely stealing, unfortunately. and joining us now, the chairman of the commodities future xhix, and a man charged with resurrecting the democracy of the markets, and has been aggressive in trying to do that. thank you for your efforts so far to close some of the loopholes.

    >> thank you, dylan . good to be with you.

    >> now, the legislation coming up today, what i am referring to, no government regulation for who must use the exchange, and that means you, in other words, your agency does not get to decide what derivatives or financial instruments have to go on the exchange, it's deciding by the clearinghouse which is owned by the bank. and if they don't put it on the exchange, why are they going to do that?

    >> well, dylan , we think it's very important to promote transparency and lower risk in the system. one of the big ways to do that is to bring as much of the product on to transparent exchanges and trading venues as possible. we think that it's important that transactions be there. we will try to work with congress to achieve that goal.

    >> why is there so much resistance right now beyond the obvious? is it just the obvious? go ahead.

    >> dylan , i think it's that. what we are trying to do is bold reform here. the financial crisis was the biggest in 80 years. we want to shift the information advantage. there is an information deficit right now. wall street 's benefiting and we want to shift the benefit over to main street .

    >> as a former employee of bloombe bloomberg, and they took information and sold it to those that want it and watching the internet and the democratization of information, and wall street , we know, bank profits go up when they do things quietly behind closed doors , and profit margins come down when there are exchanges. i don't see how lobbying against an exchange for any product, considering the merid of products and the technical capabilities have any viability?

    >> the good news is chairman frank and chairman peterson of the house agriculture committee , are establishing the principle for the exchanges. now we are working to make sure more of the product is on these exchanges. i agree with you that we need to do that.

    >> i want to go back to prior legislation, which you are involved with that as well. now, the credit default swaupz which were who are flee abused by aig and others to perpetrate the theft ultimately of america 's wealth, my opinion, but the math backs a lot of that up and i think you would agree with it. if you look at your role in that piece of legislation, because you are involved with that, and you look at larry summers and his role of treasury secretary at that time, what was secretary summers, and bob ruben, his predecessor, what was the idea you were trying to manifest when you allowed them to bring the credit swap to the world without any collateral without the exchange that you so rightly seek for it now?

    >> dylan , right then, 10 years ago, it was not regulated. there is no doubt in my mind, looking back now, 10 years later that we should have done more then to protect the american public. we are trying to do that now. i firmly believe that we have the consensus building with congress to bring these over-the-counter derivatives under reform. the dealers would be regulated. we also need the transparent exchanges.

    >> knowing that those derivatives can be used for me as a seller -- so if i am aig, i will share insurance effectively on every home payment and pension payment in america . i will not talk about it. and then i will keep very little collateral because i have a aaa rating because i have a trillion dollars in the back for my regulated business, right?

    >> we want to change that and make sure that there has to be a cushi cushion, so we lower risk , and then we want the transactions, those standard enough to all be on transparent exchanges or trading platforms.

    >> what was the philosophy in establishing the nontransparent markets that existed prior -- and the only reason i bring up the past is for the following reason, we are watching the bank profits soar. we watched the american taxpayer deliver volumes of money that we know are beyond most of our abilities to comprehend. and specifically, secretary paulson and new york chief geithner at the time and treasury secretary geithner. do you have any insight as to why and what the fphilosophy was that led to the deregulation of the market, and now we look at jp morgan has 57% of the market, and no strings were attached on behalf of the american taxpayer to deliver all the money?

    >> i think there were certain assumptions the large institutions were regulated enough, and it's a false assumption. looking back now we should have done more. we need to bring this on to transparent exchanges and on to clearing houses.

    >> do you believe america has been stolen from because of the abuse of the derivatives?

    >> i think there are many features of the crisis. and one year ago, our financial ship failed america . it was nearly sinking, and the taxpayers came to its support. now that we have brought the ship into port, we need to fix it. we cannot let it sail again without real reform.

    >> does that mean the loopholes will be closed, particularly the clearinghouse loophole and the offshore loophole?

    >> i think we will end up with a strong bill. there is still much to do and i will continue to advocate as i know others in the administration for bringing much to the clearinghouse and the other venues as possible.

    >> thank you so much. come back.

    >> i would be glad to do that.

    >> head of the commodities future and trading. he is trying to close so many of the loopholes. contessa has the

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