New York, NY, June 17, 2010 --(PR.com
)-- U.S. Senator Blanche Lincoln's proposal to require banks to spin off their derivatives units is key to reducing risk in the $450 trillion, privately traded derivatives markets, Nobel Prize winning economist Joseph Stiglitz said on Wednesday to journalists from Reuters. The proposal by Lincoln, an Arkansas Democrat, that banks that have access to the Federal Reserve's emergency lending window be blocked from dealing derivatives, is one of the most controversial elements of a financial regulation reform bill that will be negotiated in Congress this week.
Reuters reported: "Opposition to the proposal from industry players and some lawmakers has led Democrats to instead discuss toughening a proposal from economist Paul Volcker to limit proprietary trading by banks as a means of also reducing the risk of derivatives. However, the Volcker rule, though important, addresses different issues and risks to Lincoln's proposal, and will not remove risks banks dealing derivatives pose to taxpayers, Stiglitz said in a call with reporters. 'Both are needed and that is even true if the Volcker rule is strengthened.' Privately traded derivatives were blamed for exacerbating the credit crisis due to the web of connections the contracts create between systemically important banks. Derivatives are based on assets such as commodities, bonds or equities or are used to hedge against or bet on changes in foreign exchange or interest rates. Removing the federal backstop from banks dealing opaque derivatives is key to imposing fiscal discipline on actors in the market, Stiglitz said. 'Because these risky products are effectively being underwritten by the U.S. government they are being provided at a lower price,' he said. 'And that makes absolutely no sense.'"
Derivatives Leaders Forum 2010, "Strategies for Increasing Profits under an Evolving Regulatory Framework" (http://www.DerivativesLeadersForum.com), July 22nd, 2010, New York City, is produced by Golden Networking (http://www.goldennetworking.net), the premier networking community for financial services and real estate business executives, entrepreneurs, investors and diplomats, founded by former McKinsey consultant and Columbia Business School MBA Edgar Perez.
Panelists, speakers and sponsors are invited to contact Golden Networking by sending an email to firstname.lastname@example.org. Golden Networking has been frequently featured in the press, including recent articles in The New York Times, "Golden Networking Helps Job Seekers Make Overseas Connections" (http://www.nytimes.com/2009/11/07/nyregion/07network.html), Los Angeles Times, "Speed-addicted traders dominate today's stock market" (http://articles.latimes.com/2010/may/16/business/la-fi-new-exchanges-20100516), Reuters, "Revamp looms as trading experts huddle at SEC" (http://www.reuters.com/article/idUSTRE6504U820100601) and Columbia Business School's Hermes Alumni Magazine, "10 Under 10" (http://www7.gsb.columbia.edu/alumni/news/ten-under-ten).