Derivatives trading, a super risky stock market investment practice often used by hedge funds, those lovely things that helped our nation's economy collapse, are nothing more than gambling and should be regulated just like casinos, according to U.S. Sen. Maria Cantwell (D-Washington).
"The derivatives market has done so much damage to our economy and is nothing more than a very high-stakes casino -- except that casinos have to abide by regulations," said Sen. Cantwell in a press release. "Even in Las Vegas at the Blackjack tables, both the House and the player have to have capital behind their bets. But we allow Wall Street to continue to operate in the dark and without capital to back up bets on derivatives. We remain at risk of further harm until we have the tools to stop abusive speculative practices."
If you don't think the comparison between derivatives trading and gambling is serious, a provision in the Commodity Futures Modernization Act of 2000 actually exempted derivatives traders from state gambling regulations. After the law went into effect, trading in the derivatives market increased from $80 trillion to more than $600 trillion a year. Sen. Cantwell has introduced a bill that would repeal that exemption, once again making derivatives traders subject to regulation as a form of gambling.
Sen. Cantwell's bill (S. 2763), cosponsored by Senators Ron Wyden (D-Oregon) and Bernie Sanders (I-Vermont), would empower state gambling regulators and attorneys general to examine unregulated derivatives trading and take appropriate action to protect citizens from practices considered potentially harmful to the economy.
"Congress must take a strong stand to prevent the kinds of abuses that have cost American workers and taxpayers so much," said Sen. Cantwell. "Empowering states restores an important layer of protection."
Also See: Illegal Ponzi Investment Schemes
Comments
Where were these lawmakers when the G-20 was begging us in 2007 to regulate derivatives?
I think that horse has left the barn.
Kimberly
I am so sick of you people telling us about government’s stimulus–namely your article on cash for appliances. I would just like to know who ever got anything. I tried to get info on this as I need a new a/c unit. No one knows anything about it. Nothing online either. I called the county agency in charge of weatherization. They knew nothing about it and this year they had received nothing for heating/cooling only funds for insulation and that takes two years to get approved (what a joke!!!). She wanted to set up an appointment to have someone come to my house but she didn’t know what day of the week it was so she couldn’t make an appt unless I tell her what day it is. I guess that’s our taxpayer money at work. My a/c man also has not heard about this deal; the only thing he know about is if I buy an expensive energy efficient unit, I can get a tax break. So next time you right an article alleging there are funds out there to help the little guy buy an appliance, it would be nice if you tell us where and how to apply for these funds. thanks for nothing.
Lila: Sears, Lowes and many, many local appliance dealers are participating in Cash for Appliances. So are large utilities like PG&E and SMUD here in California.
Too many derivatives are just bets, the modern equivalent of the pre-Depression “bucket shops” where people essentially bet on stock or commodity closing prices instead of actually buying and selling them. We have billions more in oustanding derivative bets than underlying assets.
Hey, did you seevthe WashPost article noting that Members of Congress’ investments outperform the experts’ and the market. Insider trading loophole.