Why Cantwell Voted NoMay 19, 2010 - by Donny Shaw
As I reported yesterday, Senate Democrats lost a big procedural vote to wrap up the financial reform debate and move to passage of the bill because two of their own — Sen. Maria Cantwell [D, WA] and Sen. Russ Feingold [D, WI] — wanted to hold out and try to strengthen it. I said yesterday that the two were probably hoping to get a vote on an amendment they are co-sponsoring to reinstate the old Glass-Steagall Act firewall between commercial and investment banks. I was wrong. Cantwell’s office today released a statement explaining why she voted no, and it’s all about improving the bill’s derivatives section:
The issue, Cantwell said, is ensuring transparency and oversight of the currently unregulated derivatives market. Even seemingly small loopholes can create structural flaws in the financial system that can cause tremendous damage in the long term as they are exploited by Wall Street. She likened the issue to building a dam.
“Even something like the Hoover Dam, with all the great concrete and all the great engineering … still has a problem if somebody drills a hole in the bottom of it,” Cantwell said in a Senate floor speech just after the vote. “This issue is a fundamental one. We won’t have reform if we don’t have exchange trading and clearing, if we don’t bring derivatives onto the same kind of mechanisms we have for other products in the financial markets. And if we don’t have that, then I don’t know what we’re doing out here in the context of what brought us into this crisis.”
Cantwell is seeking derivatives reforms including: minimum requirements for capital behind trades; transparency in pricing; real-time monitoring of trading activity; transparent valuation of derivatives; limits on speculation; and public transparency. The pending reform bill contains many strong provisions that Cantwell not only supports but co-authored. But she said the derivatives language in the current version of the bill retains loopholes that could once again cause serious financial disruption.
Cantwell says she still wants a vote on her Glass-Steagall amendment, but that her primary concern now is with getting a vote on an amendment (pdf) she is co-authoring with Sen. Blanche Lincoln [D, AR] clarifying that “any swap that is required to be cleared is unlawful unless the swap is cleared.” This would close a major loophole in the bill I reported on a few days ago that would let banks dodge the new derivatives clearing requirements without any negative consequences, even if they have been told by regulators that they must conduct their trades through a clearinghouse.
Feingold released a less detailed statement on his no vote. “The test for this legislation is a simple one – whether it will prevent another financial crisis, As the bill stands, it fails that test,” he said. "Ending debate on the bill is finishing before the job is done.”