Banks lose battle to keep swaps desks as US lawmakers lose the plot

14 Jun 2010

US politicians are finally set to get their first big mouthful of bank flesh over the next two weeks as the financial regulation bill is finally signed into law. With the bill is a provision that will force US banks to spin-off their derivatives business. But this fails to attack the real cause of the crisis. Swaps trading was not the culprit; lending was. For banks it will be a painful and costly exercise. But more worryingly, derivatives business would become even more concentrated in the hands of a few non-US banks, providing a potential source of increased systemic risk to which everybody, including US shops, would be exposed.

For anyone labouring under any lingering doubt about how very unpopular banks are in the US at the moment, the likely final provisions of the financial regulation bill before Congress should provide conclusive evidence.

Negotiators from both parties in House and Senate are engaged in last minute discussions to ...

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