‘Dark markets’ need transparency

Opinion: April 14, 2010 at 12:00a.m.

By Bart Chilton

McClatchy-Tribune

Of the economic fiasco lessons learned, most important should be that financial road rules need major adjustments. Banking and financial market trading laws were weakened a decade ago, and the results were disastrous. We witnessed exotic high-wire mortgages that led to a tsunami of foreclosures and bank failures, and freewheeling speculative trading arcades with virtually no oversight by federal regulators. By the time we realized what was happening, it was too late.

We watched Wall Street behemoths topple — Bear Stearns, Lehman Brothers, AIG — and we chafed at taxpayer money being used to bail out firms everyone had always considered “too big to fail.” Nobody wants — nor can we tolerate — a repeat of that sorry performance, either on the part of the markets or the regulators. Congress needs to get with it and pass financial market regulatory reform legislation — and quickly.

Proactive

We need legislative changes so government regulators aren’t performing like fire departments — arriving only after the damage has been done. Financial authorities need to be more like police departments: detecting, deterring, and preventing fraud, abuse and manipulation in critically important markets. When the next Bernie Madoff scandal happens — and it will — we shouldn’t be coming in with fire hoses to water down charred remains; we should be there on the front end with sophisticated law enforcement tools at our disposal, and stop the damage beforehand.

Last year, the House of Representatives passed a financial regulatory reform bill that would move quickly in that direction. That bill would bring transparency to currently “dark markets” — the huge over-the-counter markets that now trade virtually free of federal oversight — and would provide governmental regulators with essential tools to effectively police financial markets. These are critical changes that can safeguard us from future economic chaos.

Unfortunately the United States Senate — the world’s most deliberative body — hasn’t even deliberated the issue. So, what’s the hold up?

Registered lobbyists

The simple answer is stopping something in Washington is much easier than getting something done. This is compounded by the fact there are over 22,000 registered lobbyists who have access to Members of Congress. Many of these lobbyists represent various financial sector concerns who have found reasons to oppose or slow down one or more sections of the financial regulatory reform bill. As it’s cynically and succinctly put in Washington: If you aren’t part of the solution, there’s plenty of money to be made being part of the problem.

Let’s hope the powerful interests don’t win on this one. Failing to pass financial market regulatory reform would leave in place a financial system that pushed us to the edge of the cliff — something the financial system, consumers and our country can’t afford.

Bart Chilton is a Democratic commissioner on the Commodity Futures Trade Commission, Washington, D.C. Distributed by McClatchy-Tribune.