Bachmann defends derivatives at subcommittee hearing

June 9th, 2009 – 3:53 PM by Eric Roper

untitled.JPGAt a House Finance Subcommittee hearing today, Rep. Michele Bachmann, R-Minn., warned fellow lawmakers that they should avoid overregulating over-the-counter derivatives at the risk of disrupting large U.S. companies.

Over-the-counter derivatives refer to a variety of Wall Street agreements which are largely unregulated and usually intended to offset risk. Specific types of OTC derivatives, like credit default swaps, have been credited with contributing to the recent financial meltown.

“As our Committee considers the future of over-the-counter derivatives, we must remember that many U.S. companies responsibly utilize these financial products to manage their risks and limit damage to their balance sheets,” Bachmann said, according to a statement released by her office. “These are America’s job-creators and Congress should be careful not to over-reach and infringe on their ability to hedge risks responsibly.”

Bachmann also introduced Timothy Murphy, the foreign currency risk manager for the Maplewood-based company 3M, who testified that 3M opposes “a mandate to move all derivatives into a clearing or exchange environment.” “Clearing” refers to a proposed process of approving OTC contracts. Murphy’s full comments can be read here.

House Agriculture Committee Chair Rep. Collin Peterson, D-Minn., introduced legislation this winter which would require clearing OTC transactions. Peterson has also publicly debated with House Finance Committee Chair Rep. Barney Frank, D-Mass., over whose committee should regulate OTC derivatives.

28 Responses to "Bachmann defends derivatives at subcommittee hearing"

dare2sayit.com says:

June 9th, 2009 at 4:23 pm

We need more Representives like Michele Bachmann in Washington. Her and John Kline are by far the best ones Minnesota has.

parthian says:

June 9th, 2009 at 4:49 pm

Nice slogan, 2Dim.

You don’t have the slightest idea what your Darlin’ Crazy Michele is even talking about, but of course you support it and her, just like the ignorant medieval serf you are. Bow down to your aristocratic masters, the “job creators”. Jeebus, what a simpleton.

Creating a clearing house approach for financial derivative “products” (so we know what the h*ll is being “traded”) is basically the most minimal reform that can be proposed. So of couse a Do-Nothing “conservative” extremist like Bachmann opposes even that.

Financial deregulation and letting the Wizrds of the Universe ™ sell and trade whatever they wanted caused the greatest financial crisis since the Great Depresssion.

And conservative nitwits like Bachmann can’t see any problem with that, and are certain that even the most minimal financial regulation will destroy the Holy Free Market and crucify the sacred “job creators”, as though preserving a completely unregulated financial derivatives market is some huge job engine.

But as a “conservative”, Darlin Michele will say anything. Who cares if it’s nonsense?

DJ says:

June 9th, 2009 at 5:40 pm

At least they used a better picture this time. She looks a real live person in this picture!

Not as fun for the caption contest… but whatever.

Cash N. Carey says:

June 9th, 2009 at 5:48 pm

Poor parth – Here is a segment taken directly from wikipedia:

“After his successful election in November 1928, Hoover entered office with a plan for reform of the nation’s regulatory system. A dedicated Progressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking. As Commerce Secretary he had taken an active pro-regulation stance. As President, he helped push tariff and farm subsidy bills through Congress.

Hoover expanded civil service coverage of Federal positions, canceled private oil leases on government lands….”.

Seems like there are some real similarities to this financial crisis too. What regulators warned us about this financial crisis? Which economists? We can see how these critics of the free enterprise system are wrong with the effect of their current policies. Unemployment is higher than the Obama administration stated it would be without the stimulus bill. Where are all of those jobs that are saved/created? The real reason we have the financial crisis currently is our own government action to encourage home ownership for people that shouldn’t own homes. When the bubble burst, they can always claim there isn’t enough regulation. The regulations are one of the reason for the bubble in the first place. We need to get rid of the quasi-government entities called Freddie Mae and Mac. Then let the markets rule on the value of derivatives.

dare2sayit.com says:

June 9th, 2009 at 6:12 pm

Partisan,

When will you finally admit that Obama’s soci@list policies are an economic disaster, when unemployment reaches 15%? He is making the exact WRONG decision on virtually every issue, and things will only get worse.

dare2sayit.com says:

June 9th, 2009 at 6:43 pm

“At least they used a better picture this time”

Great point D.J.! When Eric Black ran this liberal blog, he constantly cut down Michele Bachmann and used the most unflattering picture he could dig up over and over again, despite the fact the she’s a very beautiful woman.

Why are conservative women so much better looking that liberal women anyway? That would be a great topic for the Big Question.

parthian says:

June 9th, 2009 at 6:59 pm

Congratulations Cash, that’s one of your most incoherent, internally inconsistent posts ever! A real hash of gibberish and ignorance.

While there’s frequent use of the word “regulation” in your nonsense, I’m certain you couldn’t identify a single “regulation” you’re “talking” about.

Yeah, the housing bubble was caused by excessive gub’mint “regulation” of the mortgage market—and up is down, black is white. Typical conservative barf, served up to conserva-cretins gorging at their favorite wingnut internet cesspools.

I can see why you keep your posts short—when you go over a couple of lines, it gets pretty hopeless.

dare2sayit.com says:

June 9th, 2009 at 7:33 pm

Comrade Partisan,

Please explain to us why liberal democrat Barney Frank didn’t play a major role in the mortgage crisis which led to the recession.

6th district Jim says:

June 9th, 2009 at 9:21 pm

There is too much looney/funny crap ongoing, no doubt!

First,our beloved President “2 trillion deficit rocks” Obama proposes pay-as-you-go budgeting. HUH? Really, you cant make this sh*t up! So, who gets the media derision?

Well, Palin is on a tour to media “accolades”:
Letterman/CBS–slutty airline attendant look
Cafferty/CNN–would rather stick a needle in his eye than listen to Palin
Guest on NBC today show–palin is very much like herpes

Really, you cant make this up!
And in about one year, when obamnomics is at full shine, ie 11% unemployment, still trillion dollar deficits as far as the eye can see, etc
People will be crabby, and I wonder how ugly the banter will become. Parth will fit in well, I see.

Jay says:

June 10th, 2009 at 6:55 am

parth: “Financial deregulation and letting the Wizrds of the Universe â„¢ sell and trade whatever they wanted caused the greatest financial crisis since the Great Depresssion”

Letting people trade whatever they wanted didn’t cause the crisis…..allowing them to do it with OTC tools did. Allowing people/companies to trade whatever they want is free enterprize. It has been going on for hundreds of years. The problem was created by allowing derivative instruments to be traded without going through a trading pit. This eliminated 1) any regulatory presence or oversight, and 2) no price discovery.

Very bad idea. Derivatives in and of themselves are not “bad” or ‘evil” tools of some mysterious backroom Wall Street conspiracy. LIBOR is a derivative tool. Corn futures are a derivative tool. Derivatives have been used successfully by banks, farmers, airlines, meat lockers, paper plants, and plumbing supply companies for decades. But it was not until recently that entities opted to trade these derivatives over-the-counter with one another, avoiding regualtion and fees paid to clearing houses. In my opinion, their biggest motivation was lack of price discovery. Two individuals with separate agendas could just arrive at a price for product x and ‘trade’ it at some level that they agreed upon- for whatever reason. In the functional world, all trades must go through a clearing house and the price is transparent to anyone watching around the globe, establishing a “market price” for whatever it is being traded between parties.

Many companies made huge dollars on OTC products over the years. Parthian isn’t going to liek this, but Democrats were just as involved as Republicans…..that’s why nothing was ever done to stop it until it was too late (ie Barney Frank, et al).

Jay says:

June 10th, 2009 at 7:04 am

I don’t understand Bachmann’s warning about “overregulating” these either. You make them flow through a clearing house like everything else, allowing for the market to see any/all trades and participate at a transparent market price established by that marketplace. That’s it. That certainly wouldn’t constitute “overregulation” and I’m unclear what else could possibly be done to regulate these products any further (????). The only conclusion that I am left to draw is that Bachmann doesn’t have any understanding about what she is talking about, which certainly doesn’t come as a shock to me.

Jay says:

June 10th, 2009 at 7:53 am

After reading the 3M guys comments via the link provided, I realized there was an obvious third reason for companies to utilize OTC products: they avoid having to pay out-of-the-money margin maintenance on their positions. That’s a very real issue, and an expense that sucks to have to pay, but the rest of us do it and survive just fine. All part of the cost of doing business. That risk exposure can be mitigated as well via other tools out there, if risk management is truely your objective.

להקיא says:

June 10th, 2009 at 8:58 am

So, who gets the media derision?

Even the Huffington Post is commenting negatively on the couldn’t get a better one in Bangkok stroke job that substitutes for press coverage of Obama the President.

Short of having Katie Couric fellate Obama on camera (although that would at least be honest), I know of no way their journalistic integrity could get any lower.

http://www.huffingtonpost.com/phil-bronstein/love-or-lust-obama-and-th_b_212875.html

When Barack Obama decided that questions from the German press about his trip agenda in that country were too pesky, he told the reporters, “So, stop it all of you!” He just wanted them to ask things he wanted to talk about. Well, what politico wouldn’t want that?

OK, dad. We’ll behave.

And according to a new Pew Research Center poll, we are behaving…like fans. On domestic press, it showed that “President Barack Obama has enjoyed substantially more positive media coverage than either Bill Clinton or George W. Bush during their first months in the White House” with “roughly twice as much” Obama coverage about his “personal or leadership qualities” than was the case for either previous president.

Back in the US, NBC’s Brian Williams’ two-part “Living Large With the Top Dog” feature on Mr. Obama’s life included a plug for Conan O’Brien’s new show and mention of cable talkies where Mr. Obama only cited MSNBC personalities. Accident? I don’t think so. There were a few probing moments in there, but they were overshadowed by the flash of hanging out in the back of the Auto One limo and having burgers. A little navel-gazing among journalism standards hall monitors about whether the thing had been too soft came and went.

Then, this Sunday in the NY Times, there was full-on chick-flick swooning over Barack and Michelle Obama’s heavily scented “date night” in NY City and its high bar standard effect on our relationship culture, with just a hint of controversy over the taxpayer costs to add some spice. I swear I’ve seen this movie, only Michael Douglas was the president. Or Harrison Ford. Or one of those cool and languid characters you’d want to like you. George Bush needed to be beer-bar likable to get elected. His successor has managed to get a lot of people to want to be liked by him

Dora says:

June 10th, 2009 at 9:08 am

So did you click on the link to actually read what he was talking about when he said, “so stop it all of you”? Nothing at all to do with not answering questions about his trip agenda.

להקיא says:

June 10th, 2009 at 9:55 am

You can relax, Dora, I’m not attacking Obama, just the media.

Breathe in, breathe out….

Jay says:

June 10th, 2009 at 10:14 am

fwiw…..I seem to recall the media granting Reagan similar rockstar status as well. Media fascination with a charasmatic, well-spoken, high-profile politician is certainly nothing new. Given the amountg of camera time he is getting, I just wish he had something of value to say. Replace hope/change with patience/resolve and that’s about it so far.

monty says:

June 10th, 2009 at 10:16 am

“Wh are conservative women so much better looking that liberal women anyway?”

Beauty is in the eye of the beholder, D2. And physical beauty is Bachmann’s best asset. An unattractive woman spouting the neocon line would not get the time of day from the Republican party or the media. Same with Palin.
As has been proved in the advertising business, sex sells.

Dora says:

June 10th, 2009 at 10:45 am

“I’m not attacking Obama, just the media”

Your criticism of the media is apparently about them fawning over him. So you post something from someone who frames that meme by misrepresting what Obama said?

“And physical beauty is Bachmann’s best asset.”

Beauty? I don’t see it. She’s okay looking but who doesn’t look good in an official, airbushed photo? There are plenty of women who are beautiful. I wouldn’t call Bachmann one of them.

להקיא says:

June 10th, 2009 at 11:04 am

So you post something from someone who frames that meme by misrepresting what Obama said?

It didn’t misrepresent anything, it provided an example of the media’s treatment of the president.

She’s okay looking but who doesn’t look good in an official, airbushed photo?

With apologies to the horn-neo-cons, her official picture makes the following statement.

“I’m so uptight, that only dogs can hear me fart”

Jay says:

June 10th, 2009 at 11:30 am

“She’s okay looking but who doesn’t look good in an official, airbushed photo?”

Janet Reno.

monty says:

June 10th, 2009 at 11:36 am

“She’s okay looking but who doesn’t look good in an official, airbushed photo?”

Hilary Clinton.

“the horn-neo-cons”

Wow. Great use of the language, vomit.

Dora says:

June 10th, 2009 at 12:32 pm

“It didn’t misrepresent anything”

I repeat: So did you click on the link to actually read what he was talking about when he said, “so stop it all of you”? Nothing at all to do with not answering questions about his trip agenda.

His point in saying that was that the press just rolls over for whatever Obama says but in order to try to make that point he misrepresented what Obama was talking about.

“She’s okay looking but who doesn’t look good in an official, airbushed photo?”

Janet Reno.”

That was coffee out of the nose funny.

להקיא says:

June 10th, 2009 at 1:48 pm

“I repeat: So did you click on the link to actually read what he was talking about when he said, “so stop it all of you”?”

Yes, I’ve read it, and I’m not sure you did, because “not answering questions about his trip agenda” has nothing to do with the point of the H-Post article.

Deacon Blues says:

June 10th, 2009 at 2:55 pm

“Many companies made huge dollars on OTC products over the years. Parthian isn’t going to liek this, but Democrats were just as involved as Republicans…..that’s why nothing was ever done to stop it until it was too late (ie Barney Frank, et al).”

AHAHAHAHAHAHAHAHA!!!!!! AAAAAAAAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!

Finally some one else said it.

adlib says:

June 10th, 2009 at 5:07 pm

“After reading the 3M guys comments via the link provided, I realized there was an obvious third reason for companies to utilize OTC products: they avoid having to pay out-of-the-money margin maintenance on their positions”

I know her thinking is derivative but who’s selling derivatives now besides MB? AIG again? Does 3-M want sales limited to American investors this time so at least the taxpayer doesn’t have to be guarantor of these bets all over the world ? Credit default swaps are marketed as securities instead of as insurance thus evading the regulation that surely comes with that category of purchase.

adlib says:

June 10th, 2009 at 6:57 pm

“Why are conservative women so much better looking that liberal women anyway? That would be a great topic for the Big Question.”

Because they aren’t so “liberal” with their favors, save them up, and bring them all home to Daddy ? Beauty is as beauty does. This becomes more apparent as time goes on. Some men are attracted to these “guapas;” others run from them. Count me in the second group. In time this visage will also become a novelty Halloween mask, the ironic reward for notoriety.

adlib says:

June 10th, 2009 at 7:50 pm

CNC says “let the markets rule on the value of derivatives.” That’s what his valid points about Hoover being a progressive, decent president all lead up to.

I agree with the wiki resume and think that Hoover was largely framed for the Great Depression. Yet he certainly didn’t personify the decadent values that led to the delusional market bubble caused by, among other things, buying on margin with other people’s money. Much like the collapse of the “derivative” house of cards of Y2 aught eight.

Jay says:

June 11th, 2009 at 7:14 am

I wouldn’t say Hoover was “framed” but he does tend to get assigned most of the blame because the crash happened on his watch. Goes with the job. The real fault goes to his party and the ultra-conservative, hands-off, philosophy embraced at that time. Taken in its most literal and strict sense, that ideology doesn’t work. The markets cannot always “work through” the problem without causing unacceptable levels of tributary problems. Generally speaking, I believe the “allow the markets to work” philosophy works rather well the vast majority of the time, but there are extreme cases in which we need intervention to stay between the rails. Hoover’s administration/Congress failed to recognize that, just as a large % of the population failed to recognize at the time. Today we (should) know better.

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