Notwithstanding President Obama's denunciation Wednesday night of the empty "prosperity" that was "built on a housing bubble and financial speculation," the Wall Street bubble profiteers are shocked -- shocked! -- to discover that there was gambling going on in their establishments. In particular, in all those commodity-future-based index funds, mortgage-backed securities, and, well, nothing-backed securities -- you know, the ones that the financial world made a mint selling until they ran the global economy off of a cliff.
More precisely, Wall Street heads have professed themselves shocked to realize that the prices of said "investments" had little to do with the supply and demand for houses, or for commodities, or for, well, credit defaults. (The problem isn't that most people didn't understand that term -- the problem is that, apparently, nobody understood it). Instead, those prices were a big old bubble reflecting the supply of bubble-riding global investment cash -- and, as we have seen, when those bubbles pop, they take the rest of us down with them.
"The next 2-3 weeks are crucial for getting any significant financial reform as the Senate works on finalizing Senator Dodd's bill," says says Dave Kane, one of the activists behind www.stopgamblingonhunger.org. "We have an incredibly broad alliance of over 450 business, labor, consumer, farmer, religious and international development organizations working together for common-sense reform, but we see that Wall Street, incredibly, still has a lot of power in Congress. Wall Street spent over $300 million just in the last part of 2009 to weaken any financial reform efforts, and it has paid off. It's important that Congress hears from more than just Wall Street. Senators need to hear from voters that they want strong financial reforms."
This is a clarifying moment for me, because it looks like, in its starkest form, a battle between the real economy of actual goods and services on one side, and the "financial" economy on the other. (Don't get me wrong -- I like having a checking account; it's just the crashing-the-world-economy part, and helping-cause-the-2008-food-crisis part that I am opposed to.)
So, what are advocates like Kane demanding? For the financial-reform bill currently being crafted in the Senate, primarily two things:
1) Make all "over-the-counter" derivatives trade or clear through an exchange clearinghouse. Although the name sounds innocuous, as if Goldman Sachs was out there selling financial ibuprofen, what "OTC" means on Wall Street is that it's a deal which isn't listed out in the open on a stock exchange. The people who sell them insist that this is because each one has to be hand-crafted to be too extra-special to be listed on an exchange. It is nothing more than coincidence -- honest! -- that "over the counter" sales also happen to be a way to avoid putting down any actual collateral for your purchases, as exchanges require, or letting buyers better gauge what the going price should be (so that Wall Street can't take advantage of their clients), or letting markets and regulators know who owns what so that they can see systemic risks and avoid panics.
2) For energy (and carbon) futures, real limits on how much any one Wall Street bank or trading house can buy up at one time, to prevent bubbles that hurt farmers, eaters, etc. (Actual commodity producers or consumers looking to hedge their financial risks would be exempt.)
The message of advocates like Dave is clear: No back-room gambling on hunger. No Wall Street loopholes. No excuses.
Elizabeth Palmberg is an assistant editor at Sojourners magazine.