Mary Schapiro, chairperson of the the SEC, wants to collect critical data on derivatives transactions to pursue market abuses.
Schapiro said that regulators need the data to construct an audit trail to find out who is doing insider trading and market manipulation. The U.S. Senate is investigating the derivatives markets but is up against a brick wall because it cannot pin down who it is that actually pulled the trigger on the trades. So they are relying on the SEC to provide this data. Schapiro said that the SEC is having difficulty identifying derivative investors and the size of their trades.
Derivatives are financial instruments derived from stocks, bonds, loans currencies, and commodities, or linked to specific events such as changes in interest rates and the weather.
Credit default swaps (CDSs) ensure investors against bond defaults and can be used to speculate on a company's creditworthiness.
It was the excess speculation in the derivatives markets that primarily caused our financial meltdown. It all began in 2000 when Congress exempted derivatives from government oversight.
Within the past nine years, the derivatives have grown into a $195 trillion market. The market has grown so unwieldy that at the height of the meltdown last year no one knew who the traders were and what their positions were. There were and still are billions of dollars of duplicate and redundant trades that have never been settled. Just last week, banks in Europe tore up $16 billion of redundant derivatives on Thompson SA in order to clean up traders' positions.
Schapiro also said that she wants to invoke a a seven-year law that states that executives must return their bonuses if the firm is found guilty of misconduct.
This is a mere beginning. To actually find out who the derivatives traders are and what their positions are is going to be a monumental task.
But if we are ever to have faith in our financial institutions again, this task must be done and the people responsible for our financial meltdown brought to justice.
Do you believe that the SEC will bring to justice the guilty persons who caused our financial meltdown?
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Reader Comments (Page 1 of 1)
9-01-2009 @ 1:37PM
Larryeart said...
SEC has been sleep at switch, or in bed with business, hence not doing its job of oversight. Even now, after business/brokerages cost us $trillions, the SEC weakly went along with tiny ass fine for Bof A/Merrill collusion-so blatant that court judge refused to honor the "settlement", in which neight BofA nor Merrill had to ADMIT any wrongdoing...( they just committed securities fraud which cost investors $$$$$$$$-but paid their executives $$$$$$$$$$$)