CHUM

Hapless Harry Reid will play bumper cars again today with Mitch "Froggy the Gremlin" McConnell on the financial reform bill. Reid promises a procedural vote everyday until the Republicans or just one of them caves. The Republicans scored the headlines around the country as the party blocking reform, while yesterday's poll showed over 2/3rds of Americans want reform.

The big enchalida here is the regulation of the $430 trillion derivatives market. Warren Buffet called them "weapons of mass financial destruction" and naturally his Berkshire-Hathaway holds $30 billion worth. The derivatives market is one of the last totally unregulated areas of the economy and given how well deregulation has worked elsewhere this is a major disaster just waiting to happen. To give you some idea, the GNP of all Planet Earth is $54 trillion. Derivatives are the huge black hole of finance. We saw the consequences of its wake in the sub-prime mortgage scandal, where non-performing mortages were scissored up and sold in the derivative market. The collapse of our state and muncipal governments is directly linked to the manipulation of the bond markets by the very people who peddle derivatives.

President Obama promised to veto any bill that didn't regulate derivatives. This, despite former Obama backer Warren Buffet's plea not to. Bill Nelson's vote yesterday--the only Democrat--against cloture is directly linked to Buffet's Omaha business. The de-regulation of derivatives came in the Clinton Administration after Republicans Phil Gramm and Jim Leach pushed for the repeal of the Seagall-Glass act created during the Depression to prevent another financial metldown. Egged on by Richard Rubin and Larry Sumners, Clinton signed the bill. Only Democratic Senator Dorgan went at great length to alert the public of the dangers here. Interestingly enough, given Progressives' attacks on her, Blanche Lincoln of Arkansas has written a tough amendment to regulate derivatives.

Since there is now overwhelming support for financial reform, this seems like a win-win situation for Democrats, even if the Republicans managed to hold the fort. But Senator Bernie Sanders warns the public that President Obama, even with polls showing he is more trusted than the Republicans on this issue, is now going up against "the most powerful people in the world." The financial industry is going to throw everything they can at stopping this reform and we're in for some wild arguments against the measures.

There have been some tentative arguments put forth. Rachel Maddow quoted the first statements by the Tea Party Nation against the reform because "it would penalize advertising companies for false advertising." By this morning, I have read that it will end PayPal, regulate EBay, and hurt mainstreet because the banks will be reluctant to loan to small businesses. By the end of the day, there will be even more. Let's face it folks, these people own the United States and dictate what our economics is.

On Too Big Too Fail, don't worry about it. The United States Government will bail out the banks again if a crisis reoccurs--both parties know this. What the Obama Administration is trying to formalize is a rational way to dismantle a failing institution and to get the industry to pay for it. The lobbyists for both the derivative traders and the banks are fighting tooth and nail over provisions which would require more actual money being put up as insurance for the next time everything collapses. Here, the argument is that this will affect jobs--like the collapse of the system didn't.

The more the whole issue is discussed, it's quite clear that economists haven't really accounted for the effects of a situation that wasn't a recession or a depression brought on by natural financial cycles but a near Depression brought on by systematic criminal activity. Almost all elements of the 2008 crisis were the natural results of fraud being committed by all our financial institutions because of personal greed. And this fraud is central to understanding the devastating effects on society. And you can bet that there will be no RICO acts being invoked against Wall Street.

I think there is a similarity between the financial world's arguments against reform and the Vatican's statements yesterday that they worry parishioners might drop their pledges to the Church because of the pedophile scandals. Maybe Wall Street and the Vatican should hire the same P.R. firm.