WASHINGTON, DC—U.S. Senator Bob Casey (D-PA), a member of the Senate Agriculture, Nutrition and Forestry Committee, today applauded the vote by the Agriculture Committee to send the Wall Street Transparency and Accountability Act to the Senate floor. The bill would bring more scrutiny and safeguards to the largely unregulated $600 trillion derivatives market.
“After Wall Street gambles caused a near financial collapse that led to a recession and massive job loss, multi-billion dollar big bank profits are back,” said Senator Casey. “The choice is simple: to allow Wall Street to continue to make the rules or to put in place commonsense safeguards to protect consumers and the economy.”
The Wall Street Transparency and Accountability Act will be merged with the larger Wall Street Reform effort on the Senate floor.
The Wall Street Transparency and Accountability Act of 2010 will add transparency and accountability to the derivatives market by requiring most derivative transactions to be cleared through a central clearinghouse and mandating real-time reporting, similar to a stock exchange, of the transactions that parties are entering.
Senator Casey continued, “In 1978, commercial banks held $1.2 trillion in assets, equivalent to 53 percent of GDP. By the end of 2007, it had grown to $11.8 trillion in assets, or 84 percent of GDP. Unlike the proceeding period, this growth was not spread across the real economy to households and businesses. Instead, it was shifted away from Main Street, and concentrated on Wall Street.”
The bill also includes safeguards to prevent unintended consequences while implementing new curbs on irresponsible risk taking by the big banks.
Commercial businesses and manufacturers who use these markets and customized contracts to manage risk will still be permitted to do so without imposing additional margin costs. This will protect American jobs and keep consumer costs low. Additionally, swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of Main Street and taxpayers.
Regulators will also be given new enforcement authority to punish those who intentionally commit fraud or other offenses.
In the past week, big banks reported large profits. Citigroup posted a $4.4 billion profit in the first quarter. JP Morgan-Chase and Goldman Sachs both reported profits of $3.3 billion. Bank of America had a profit of $3.2 billion.