Big Finance’s Derivatives Battle

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


Gary Gensler, a top government regulator of tricky financial products like swaps and futures, singled out today big Wall Street firms and their lobbyists in Washington as a leading force specifically trying to kill new reforms of derivatives, the opaque deals that helped crash the global economy. Gensler told reporters at the US Chamber of Commerce today that Big Finance was “undercutting” efforts to regulate and shed light on derivatives, which help utilities and other companies hedge risk but are also used as gambling chips. “Wall Street has been expressing great opposition on Capitol Hill,” Gensler said. “We’ve seen the emails.”

Gensler, the chairman of the Commodity Futures Trading Commission, appeared at the Chamber to deliver a speech advocating for far more rigorous and reaching oversight of the $600 trillion, “over-the-counter” derivatives market. (Over-the-counter means they’re traded in the dark, between buyers and sellers, without much transparency and information on bids and prices.) Unlike the speaker who preceded Gensler, Sen. Blanche Lincoln (D-Ark.), who vaguely hinted at the need to exempt certain users from derivatives regulation, Gensler took a strong stance by calling for complete regulation of the shadowy derivatives market. To illustrate his point, Gensler compared the derivatives markets to our streets system:

Can anyone imagine a traffic system without safety regulation? Of course not. Think about a regulation-free highway network: no traffic lights, no street lamps, no cops on the beat, not even a stop sign. Think about how we would be as a nation.

By placing a few street lights and stop signs, so to speak, in the derivative markets, it would “lower risk in this marketplace.” Gensler said that, while not ideal, he could palate a narrow exemption for those companies that use derivatives solely to hedge risk and control for fluctuations in prices. But he insisted several times—and challenged the Chamber’s top brass in attendance at the conference to back him—on the need for moving nearly all derivatives trades onto clearinghouses, where the prices and participants in trades are made public, and to make dealers register publicly as well. “I would think the Chamber would want to embrace this,” Gensler said in his remarks. “This is not red meat.”

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate