Obama Stands Tall On Derivatives

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


President Obama struck a tough stance on overhauling Wall Street today, saying he won’t accept a financial reform bill if it doesn’t include new derivatives regulations, the opaque products that allow certain users to hedge risk but others to gamble on swings in the market. Any new bill needs to bring derivatives trading “under control,” the president was quoted as saying by Reuters.

Right now, derivatives, which derive their value from underlying sources like the cost of wheat or interest rates, are mostly traded over the counter, which means there’s little public information about trading prices, the structure of the derivatives, and who’s trading with whom. The opacity of the OTC derivatives market, worth around $450 trillion, played a major role in the collapse of the global economy. Because Wall Street and other financial heavyweights used derivatives to dangerously bet on the financial markets, and did so without sharing information on the cost and nature of those deals, when those bets went sour in 2008 and 2009, there was no safety net or cushion across the industry to absorb those losses. The result was the crippling of firms like AIG.

New derivatives regulations proposed by the House and Senate would require greater transparency in derivatives trading and would also require that many of the firms buying and selling these products would together bear the brunt of the next crisis, thus preventing a handful of firms from getting pummelled. These are crucial reforms needed to bolster how corporations, utility companies, farmers, and many others use derivatives, and Obama appears ready to make sure those reforms happen.

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate