September 29, 2010

Oh just wonderful - does anyone read (and UNDERSTAND) these things

From Yahoo/CNBC:
Will Dodd-Frank Help High Frequency Traders Crash The Bond Market Too?
Lawmakers may have unintentionally opened the bond-market up to high frequency traders by passing controversial derivatives-clearing requirements as part of the Dodd-Frank financial reform bill.

The Blanche Lincoln-sponsored clearing-house requirements will force certain derivatives, including many credit default swaps (CDS) on corporate bonds, to be cleared by centralized clearing houses and traded on swaps exchanges. The hope is the this will make the market in derivatives more transparent and reduce counter-party risk.

Very little attention has been paid to the likely unintended consequences of this move. Let's begin with a simple observation: government intervention into established market processes always produces unknown and unintended consequences.
Emphasis mine -- Boy Howdy! Let us not forget Dodd's comment back in mid-September:
�I don't know what it is. I never heard of it before,� said a flabbergasted Dodd to TPMDC. �It's kind of unique isn't it?�
He never read (or comprehended) the bill that carries his name. Thirty-five days and counting to get these morons out of office... Posted by DaveH at September 29, 2010 8:06 PM