Uh-Oh: The Market Is Going to Test Obama’s Legacy on Banking Reform

What’s to stop the financial weapons of mass destruction that blew up iconic Wall Street firms in 2008 from doing it again?

By Pam Martens and Russ Martens of Wall Street on Parade

On January 26 of this year, the Dow Jones Industrial Average set a record high of 26,616.71. It has been backing and filling since then but the trend line has been decidedly down. Yesterday, the Dow closed at 23,930.15 – almost 2700 points lower than its high set in January, despite the passage of a massive corporate welfare tax cut and hundreds of billions of dollars in announced stock buybacks. (Just this week, Dow component Apple announced it would be implementing a new $100 billion share repurchase program.)

Yesterday, the Dow closed just barely in positive territory after having been down almost 400 points intraday. But, notably, big Wall Street bank stocks such as JPMorgan Chase, Citigroup, Goldman Sachs, Bank of America and Morgan Stanley all closed the day in the red. These banks share a common feature, and risk: together they control the vast majority of derivatives traded in the U.S. while also owning commercial banks holding insured deposits, the combustible mixture that the Dodd Frank financial reform legislation of 2010 was supposed to correct, but didn’t.                                        

For us here at Wall Street On Parade, the most troubling day of Barack Obama’s presidency came at a March 7, 2016 press conference when he told what we documented to be a monster lie to the American people. Worse yet, his Wall Street regulators who flanked him at this press conference undoubtedly knew that what the President was saying was light years away from the truth, and yet, they remained silent.

The lie was about his Dodd-Frank reform of derivatives, the financial weapons of mass destruction that had blown up iconic Wall Street firms and the mega insurer AIG less than eight years prior to Obama’s press conference, leading to the largest U.S. taxpayer bailout in global banking history. Obama told the public at that March 7, 2016 press conference that when it comes to derivatives “you have clearinghouses that account for the vast majority of trades taking place.”

Either Obama was dangerously uninformed or he was willfully ignorant. His own Federal agency that oversees all national banks, the Office of the Comptroller of the Currency, had reported for four consecutive quarters that the vast majority of derivatives were still not centrally cleared. For the fourth quarter of 2015, the OCC reported that just “36.9 percent of the derivatives market was centrally cleared”

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