Published in The Roanoke Times
There have been times when I sat across the table from U.S. Sen. Mark Warner as a member of Virginia Organizing to tell him that he needs to do better by the people in Virginia. Today, I’m proud to stand with Senator Warner and thank him for his leadership in establishing new derivatives market protections.
When I first heard the term “derivatives market,” I was not quite sure what that meant — you might not either. A derivative is a type of security — something with financial value like a stock or bond or option — that is based on some sort of financial value, which can be a current or future value. According to the investing website, Investopedia, derivatives were originally used for fair international trading; buyers and sellers wanted to be sure they were not being cheated due to complicated currency exchange rates. But derivatives are now used for just about everything, including oil and weather speculation. Investors are able to place bets on the markets and sometimes, when the investors win, the American people lose.
You might have heard the terms “futures” or “speculation” in terms of the 2008 financial crisis. These were part of the derivative market that led to the crisis. This same crisis became the catalyst for the Dodd-Frank reforms, which created the Consumer Financial Protection Bureau among other things. When the crisis was over, the Financial Crisis Inquiry Commission found that there was a severe lack of oversight for the derivatives market. Big Wall Street banks capitalized on the lack of oversight — and they won a pretty substantial government bailout to cover their risky behavior.
Dodd-Frank also gave new authority to the Commodity Futures Trading Commission (CFTC) to regulate the derivative market. True to form, Congress inserted loopholes in this legislation to weaken the enforcement and penalty authority of the CFTC. Even if the CFTC wasn’t riddled with loopholes designed to protect the big Wall Street banks, underfunding makes the commission ineffective.
Senator Warner joined with two of his colleagues (U.S. Sen. Elizabeth Warren and U.S. Rep. Elijah Cummings) to introduce the Derivatives Oversight and Taxpayer Protection Act. The Act will direct the CFTC to collect user fees from financial firms to cover its budget and manage the oversight responsibilities, update the enforcement authority to impose meaningful civil penalties for those who break the law, close the loophole allowing large financial firms with operations overseas to avoid CFTC requirements, and more.
This act does not just strengthen oversight — it protects taxpayers and prevents another expensive bailout of “too big to fail” Wall Street banks. For all the flack Senator Warner is taking from those big Wall Street banks, he deserves a huge hand from Virginians who want to see Congress taking action to protect the financial interests of all, not just the wealthiest few. Thanks, Senator Warner, for betting on us.
