The Post-Reform Guide to Derivatives and Futures

382 Pages·2012·8.246 MB·English

by  Gordon F. Peery

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The Post-Reform
Guide to Derivatives
and Futures
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The Post-Reform
Guide to Derivatives
and Futures
GORDON F. PEERY
John Wiley & Sons, Inc.
iii
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Copyright (cid:2)c 2012 by Gordon F. Peery. All rights reserved.
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To Pamela and Andrew, Allison, David,
and the rest of the Peery family:
For their love and support each day.
Also to David Perry, Jonathan Yarowski, Andrew Petersen,
Anthony Nolan, Michael Caccese, Donald Moorehead,
Richard Bendit, Richard Jones, Mac Dorris, John Vogel,
Thomas Phelps, Bill Quicksilver, Ted Latty, Steve Molitor,
and finally Susan Ervin: For professional opportunities
in large law firms for over 15 years
in finance, in general,
and futures and derivatives, in particular.
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Contents
Preface xiii
Acknowledgments xix
Introduction 1
PARTONE
TheCrisesThatLedtoDerivativesReform 15
CHAPTER1
SevenCausesofthe2008MarketCrises 17
IgnoringtheWarningSigns 18
MorethanSevenCausesofthe2008MarketCrises 20
AnIncompleteResponsetoProblemsExposedin
theEnronBankruptcy 26
EnronFinanceUsedbyBanksandtheLackofRegulation 29
TheAbsenceofEffectiveRegulation 30
TheShadowBankingSystem 34
DevelopmentofanUnregulatedGlobalDerivativesMarket 39
TheRiseofCreditDerivativesandtheCreditDefaultSwap 44
Private-LabelResidentialMortgage-BackedSecuritization 45
U.S.PolicyFosteringHomeOwnershipand
GSEMismanagement 47
DerivativesandStructuredProductsAccountingPractices 49
Notes 52
CHAPTER2
TheCrisesandReformTimeline 55
March17,2008:BearStearnsIsSold 57
March27,2008:BarackObamaIntroduces
ReformPrinciples 58
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viii CONTENTS
September15,2008:ABankruptLehmanBrothers 59
November2008toJanuary2009:AmericanLeadership
Ascends 60
March26,2009:GeithnerProvidesTestimonytoCongress
onReform 60
May13,2009:GeithnerWritesaLettertoHarryReid 61
June2,2009:AnEarlyVoiceSpeaksOutagainst
theClearingMandate 61
June22,2009:AmericanCorporationsLobbyagainst
CentralClearingMandatesforOTCDerivatives 62
July22,2009:IntroductionofLegislationFavoring
ExemptionstotheClearingMandate 62
July30,2009:IntroductionofBroadOutlines
oftheNewLaw 63
September8,2009:TheIndustryDemonstratesCommitment
toCentralizedClearing 63
October2,2009:HouseReleasesDraftofOTC
DerivativeLegislation 63
November11,2009:SenateReleasesDraftofOTC
DerivativeLegislation 64
December11,2009:HousePassestheWallStreetReform
andConsumerProtectionActof2009 64
January1,2010:TheNewYorkFedPublishesThePolicy
PerspectivesonOTCDerivativesMarketStructure 65
April7,2010:FinancialCrisisInquiryCommission
BeginsHearings 65
April16,2010:SenatorLincolnIntroducestheWallStreet
TransparencyandAccountabilityActof2010 66
April22,2010:PresidentObamaReturnstoCooperUnion
toSpeakonReform 66
April26to27,2010:SenateVotestoDelayDebateon
DerivativesReform 67
April27,2010:TheGoldmanHearing 67
April28,2010:SenateVotesAgaintoProceedwithFinancial
ServicesReform 70
May20,2010:SenatePassesItsVersionoftheLegislation 70
June30,2010andJuly15,2010:CongressApproves
LegislationandSeeksthePresident’sApproval 71
July21,2010:PresidentObamaSignsDodd-FrankintoLaw 71
U.S.RuleMakingin2010and2011 73
U.S.ReformBlazestheTrailforGlobalDerivativesReform 79
Notes 80