- Welcome to Capital Account. In Washington, not all deadlines are as pressing as the Fiscal Cliff. The date for the final draft of the Volcker Rule has been pushed back, from end of this year to possibly the first quarter of 2013, according to CNBC. Does this simply leave more time for bank lobbying wins like the one scored from the Treasury over foreign exchange swaps?
According to Bloomberg, big banks, including UBS and Deutsche Bank, lobbied for the regulatory exemption of foreign exchange swaps from Dodd-Frank. This effort comes as no surprise since foreign exchange contracts were the second largest source of derivatives trading revenue for US bank holding companies in Q2 of 2012. Moreover, foreign exchange swaps and forwards are part of a 4 trillion dollar global daily foreign exchange market. But is that all? Might there be a way through some tricky maneuvering to use foreign exchange swaps as a simulation of interest rate swaps? If so, this would also exempt the 379 trillion dollar interest rate swap derivatives market from Dodd-Frank. Our guest, Bob English, contributing editor for Zerohedge and guest contributing editor for EconomicPolicyJournal.com, tells us how Geithner exempted 410.8 trillion dollars (or 64%) of OTC Derivative Swaps from Dodd-Frank with the stroke of a pen.
Plus, third quarter GDP growth was revised to 2.7 percent, up from the 2 percent gain previously reported by the Commerce Department. There are many reports that this gain could reverse, but more importantly should we put stock in GDP as a measure of the economy’s health at all? Lauren breaks it down in today’s Reality Check.
Also, earlier this week we asked financial commentator Peter Schiff about his call for hyperinflation and the interview received attention from a certain NY Times economist. Paul Krugman to be exact. Lauren and Demetri discuss Paul Krugman’s post in today’s Loose Change, along with some interesting privacy news from google.