Sat, Apr 21, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Goldman Sachs' case may unite Democrats and Republicans in U.S. financial reforms

Tuesday, April 20, 2010
Opalesque Industry Update - The fraud allegations against investment bank Goldman Sachs by the Securities and Exchange Commission (SEC) have not only given the proposed U.S. financial reforms momentum, but may have also provided the Democrats and Republicans a reason to unite to draw up a rigid financial restructuring, various media reports said.

Three days after the fraud charges against Goldman Sachs reverberated down Wall Street (see yesterday’s story here), the White House announced that President Barack Obama had asked the Senate to “swiftly” act on the financial-regulation bill.

Obama is to fly to New York on Thursday and delivery a speech at Cooper Union, a New York school, to “remind Americans what is at stake if we do not move forward with changing the rules of the road as part of a strong Wall Street reform package. “ His speech will take place the day the Senate Democrats plan to bring the reform bill to the floor for deliberation, said Reuters. The debate on the bill is expected to commence next week.

A report by DWNews said that there was no doubt public opinion towards Wall Street and big banks plunged to its lowest, which may work to unite Republicans and Democrats to agree on a reform package. The two sides have been at odds over the proposed bill.

Democrat proposal
The Democrat Senate bill is similar to the one passed by the House last fall. Proponents of the measure pointed out that the bill would shield Americans from shady credit card fees, protect taxpayers from financial bailouts, save banks from becoming “too big to fail,” police hedge funds and safeguard the country from future economic crisis.

But the Republicans contend that the bill could lead to future government bailouts, which according to latest surveys, is not acceptable to most Americans.

Democrats to close partisan divide
Having found an opening to “rush” financial reforms, Democratic leaders wasted no time trying to peel away the Republican votes to push for the passage of the reform bill. The Democratic leaders are exploiting the Goldman Sachs controversy, said Washington Post, to paint the Republicans as out of touch with the concerns of average Americans. On the other hand, the Republicans argue that the bill is some form of “bailout” that would cost American taxpayers billions.

Last Friday, 41 Republican senators sent a letter to the Democrats to express their “opposition to the partisan legislation,” describing the financial reform bill “as allowing” for endless taxpayers bailouts of Wall Street.”

While the bill provides a consumer protection agency to monitor mortgage lending and credit card transactions, as well as regulate the complex derivatives market for the first time, it requires the creation of a $50bn fund for unwinding troubled banks.

Because of the backlash regarding that fund, Obama told the Senate Democrats to drop it from the financial reform bill so as to remove objections from the Republicans.

Geithner confident of financial overhaul, Republican support
Last Sunday, U.S. Treasury Secretary Timothy Geithner declared that the U.S. Senate was very close to forging a strong regulatory bill.

He also said he was “very confident” that the Obama administration would get sufficient support from the Republicans to pass the reform measures.

Hedge funds worry financial reform could inflict more damage
The financial reform bill will have a major impact on hedge funds, which is causing concern among industry experts. An exclusive report published in Opalesque quoted U.S. fund managers saying that the impact of the bill would be more costly that the benefits to both managers and investors (See Opalesque Exclusive: As the US expresses worry about hedge fund protectionism in Europe, domestic regulators may inflict more damage here).

Mitch Nichter, partner at international law firm Paul Hastings warned the SEC might resort to overregulation. This, as many managers have already accepted the fact that hedge fund regulation would become the rule once the reform package is passed into law.

It seems that the fears of the managers are not unfounded; Senator Blanche Lincoln proposed on Monday to raise capital requirements of hedge funds. She suggested imposing mandatory clearing requirements on hedge funds. She wants to classify some hedge funds as “major swaps participants,” a designation that would ensure increased regulatory monitoring, mandated clearing and higher capital needs.
- Precy Dumlao

See last month’s Opalesque Exclusive: Regulatory roundup: Current U.S. law, commodities, tax developments affecting hedge funds Source


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Sequoia takes Facebook stake as shares slide in data controversy, $1.4b hedge fund sees intact fundamentals for Facebook, Jim Cramer reveals some 'suggested hedge fund trades' amid the Trump tariffs[more]

    Sequoia takes Facebook stake as shares slide in data controversy From Bloomberg.com: The $4.2 billion Sequoia Fund bought a small position in Facebook Inc. as the stock slid late in the first quarter, investment manager Ruane, Cunniff & Goldfarb told clients. "The recent controversy enab

  2. Activist Investors - Blue Sky-owned Wild Breads faces uncertain future[more]

    From AFR.com: A Blue Sky private equity investment in artisan-style baker Wild Breads enjoyed multiple valuation upgrades despite losing millions and breaching its lending covenants, accounts lodged with the regulator last week show. Wild Breads lost $2.4 million in 2017, but Blue Sky ascribed a hig

  3. Opalesque Exclusive: Barnegat to close hedge fund to outside investors on weak opportunities[more]

    Komfie Manalo, Opalesque Asia: Bob Treue's Barnegat Fund Management said it is closing its $666m fixed income relative value hedge fund to outside investors. "The negative side to gains in Fixed Income Arbitrage is that unless we find new opportunit

  4. Investing - Hedge fund makes a big bet on malls, British hedge fund manager Odey short UK government bonds on QE bet[more]

    Hedge fund makes a big bet on malls From Barrons.com: The dominant narrative on American shopping malls is that they're dead. Crushed by Amazon.com, many brick-and-mortar retail stores are destined for bankruptcy. And where is the most retail, clustered all together? Malls. From a

  5. Performance - Hedge funds suffer first back-to-back loss in two years, Netflix performance burns hedge fund short sellers, Macro hedge fund up 14.5% in first quarter sees dollar falling, Renaissance Technologies rebounds across hedge funds in March[more]

    Hedge funds suffer first back-to-back loss in two years From Bloomberg.com: Hedge Fund returns sank for a second straight month in March, the first back-to-back loss since the first two months of 2016, as trade wars, tech-sector woes and a Fed rate hike dragged down the S&P 500 from its