Saturday, May 8, 2010

How Wall Street Chaos May Lift Wall Street Reform

So, the chaos on Wall Street trading, Thursday, May 6th, 2010 may elevate the chances that the ‘new’ financial regulatory reform will help to easily pass through Congress and the Senate.  What part of this doesn’t pass the smell test for you?  Is there any investigation into what brought on the 1000 pt. drop and 700 pt rise; all within 4 minutes?  Yours in Truth  ;-)  Shelly
Updated: 1 day 13 hours ago
Joseph Schuman
Joseph Schuman Senior Correspondent
(May 6) -- Will today's wild ride on Wall Street bolster efforts in Washington to tighten government harnesses on the finance industry?
For anyone watching the stock market, the sudden swing of more than 1,000 points in the Dow Jones industrial average must have opened the door to worries that investors were seeing a return of the volatility of recent years and the financial crises that cascaded from market to market, wiping out retirement funds and household wealth and millions of jobs across the world.
The stock index reached a high of 10,879.76 today before plummeting to 9,869.62, only to end the trading session at 10,520.32. The net damage was a drop of 347.80 points, or 3.2 percent.
The immediate suspect was renewed fears that Greece's financial problems and those of Portugal, Spain and other ailing economies could affect the rest of Europe and then the world. It wasn't clear if technically mishandled trades on one or more stock exchanges triggered or exacerbated the sell-off, but the computer-controlled trading now endemic to the markets took over, contributing to a dive that left traders scrambling and gave reports on business-news cable channel CNBC the feel of an action-adventure film.
Even as officials at the New York Stock Exchange, the Nasdaq and elsewhere work into the night to figure out what happened, and an inquiry was opened at the Securities and Exchange Commission, debate continued in the Senate over the proposed overhaul of financial regulation.
And that's where today's vertiginous movement in stock prices could have the most lasting effect.
Senators were debating and voting on amendments to the 1,400-plus-page legislation that would put new restraints and oversight on Wall Street with the aim of avoiding future financial crises. The White House and congressional Democrats have been gathering momentum on the issue over the past month, thanks to persistent public anger over mistakes made by the banking and finance industries and the SEC charges filed against Goldman Sachs.
The Democrats' latest victory came today, when two Republicans joined them to defeat 61-38 a Republican bid to weaken a consumer protection agency that would be created by the bill. That came after President Barack Obama issued a statement accusing Republicans of siding with Wall Street lobbyists to undermine true reform, one of his most partisan comments on the issue.
"I want to continue to work with Democrats and Republicans because protecting the American people should not be a partisan issue," he said. "But we must work together in good faith."
Another important shift came when key Senate Democrats agreed to change a measure that would give Congress -- through the Government Accountability Office -- more oversight into how the Federal Reserve sets interest rates. The White House and the Fed had aggressively campaigned against such a change, saying it could politicize rate setting and thus risk fanning inflation. The measure's main sponsor, independent Bernie Sanders, had backing from the Democratic leadership, but agreed to a compromise that stops short of ending the 32-year-old shielding of Fed monetary policy from Congress.
Senate Majority Leader Harry Reid has been pushing the debate into the night with an eye toward a vote as early as Friday.
The administration, meanwhile, was already tying the regulatory reform to the financial crisis in another forum.
Testifying before the congressionally created Financial Crisis Inquiry Commission, Treasury Secretary Timothy Geithner said the crisis would have been "less severe" if the government had had better tools and more authority to handle it. The government must help itself protect against the "unknowable," he said.
"Against the uncertain, against the likelihood, the possibility that the next shock could be beyond our imagination, beyond our experience and could be very damaging," Geithner added. "I think that's the central lesson we try to take -- I try to take -- from the crisis."
Democrats can now point to yet another shock -- even if there is little and perhaps no tangible link between today's market tumult and problems targeted by the legislation at play in the Senate, other than the economic uncertainty lawmakers hope to reduce through new rules and watchdogs.
Obama is scheduled to speak Friday morning to address the monthly employment report, due out at 8:30 a.m. He has already said stronger financial regulation and a stronger financial system are key to improving the jobs market and the economy as a whole.
He is now almost certain to include stock market volatility in his remarks, as today's plunge and what happens next threaten to overshadow even employment as the biggest economic story of the week.

No comments:

Post a Comment

Your feedback and comments are welcome!