Wall Street may not be popular this year — but that doesn’t mean every Democrat in Congress is keen to send New York jobs overseas for no good reason whatsoever.
Opposition is building in the House of Representatives to a push from Sen. Blanche Lincoln (D-Ark.) to force Wall Street banks to spin off their derivatives-trading arms as part of the financial-reform bill now working its way through Congress.
Lincoln wants derivatives — complex but lucrative hedges against firms’ defaulting on their loans — isolated from the main banking system because of the role they played in the financial meltdown of 2008.
But as 43 moderate House Dems — including eight New Yorkers — wrote yesterday in a letter to colleagues ironing out the differences between the House and Senate bills, this makes no sense: Forcing banks to shed their derivatives operations only pushes that trading into less-regulated areas.
Meanwhile, Reps. Gary Ackerman and Michael McMahon are circulating a letter among New York’s congressional delegation expressing “deep concerns” that the measure will spur banks to move their derivatives arms overseas — costing New York City jobs and financial-sector-related tax revenue.
Their logic is unassailable: If American banks are forced to create entirely separate corporate structures just to stay in the derivatives game, they lose a lot of their incentive to keep that structure in New York — or America.
After all, why not reconstitute the whole thing in London, Hong Kong or Singapore?
Besides, as Ackerman points out, skipping off overseas allows them to avoid regulation entirely.
“Those of us in New York represent not only Main Street, but Wall Street as well, and understand very much that Main Street is affected by Wall Street,” he said.
It’s always an open question whether Congress — and this Congress in particular — will act with common sense when it counts.
What Ackerman and McMahon propose makes a lot of sense — and here’s hoping their colleagues catch on.