Regulating big money – and skewing the news

The House of Representatives passed “reform” legislation that fails to adequately regulate the derivatives market (though it does provide some consumer protections vis a vis credit card companies.) Why should you care? Derivatives trading is used as a way to get around regulation of the stock market, and includes the risky repackaging of debts and mortgages that led directly to the current economic mess.

According to Wall Street Journal writers Randall Smith and Sarah N. Lynch:

In November 2008, the chairman of the Senate Agriculture Committee [MN’s Collin Peterson] proposed forcing all derivatives trading onto exchanges, where their prices could be publicly disclosed and margin requirements imposed to insure that participants could make good on their market bets.But a financial-overhaul bill passed by the House of Representatives on Dec. 11 watered down or eliminated these requirements. The measure still allows for voice brokering and allows dealers to use alternatives to public exchanges.

And how did this happen? Smith and Lynch report heavy lobbying by Wall Street:

A lawyer for one big Wall Street dealer said in an interview that the rollback from the first proposals in Congress was the result of an “educational” process by dealers and customers that resulted in “a grudging recognition” that many uses of derivatives didn’t fit such a strict approach. At one point, House agriculture chairman Collin Peterson (D., Minn.) said he suspected dealers had dispatched their customers to lobby Capital Hill.

In the Seattle Times on Sunday, columnist David Sirota pointed out that the news media is subject to similar “educational” processes. He reviews the media’s uncritical use of ex-military analysts currently on the payrolls of defense contractors:

In 2008, The New York Times’ David Barstow reported that 75 retired military officers regularly appearing on television “have ties to military contractors vested in the very war policies they are asked to assess on air.” …

Had networks reacted to Barstow’s blockbuster with better disclosure, we could have rested easy. Instead, the deceptions persist.

The Huffington Post recently showed how “major television networks continue to host retired generals as military analysts without alerting viewers to their extensive ties to defense contractors.”

and the Federal Reserve Bank’s payrolling of economists:

Huffington Post ace reporter Ryan Grim found that the Fed today doles out roughly $400 million a year for “research” — much of it to outside economists who then advocate for the Fed’s agenda without disclosing their Fed ties. For instance, seven of the eight economists on a recent anti-oversight letter to Congress failed to note they are or were on the Fed’s payroll.


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