Wall Street Packaging Derivatives to Main Street? Sharing the risk?

[WhiskeyGirl]

Wall St. Reconsiders How It Sells Derivatives
June 2, 2010, 4:30 am

Wall Street’s biggest firms are considering the suitability of selling opaque financial products to governments, endowments and not-for-profit institutions after the contracts magnified credit-market losses that plunged the U.S. into a recession, Bloomberg News reports.

“There is no distinction among very different groups of investors, and this is where things might change,” said Dino Kos, a managing director at Portales Partners in New York and former head of the Federal Reserve Bank of New York’s open market operations. “Wall Street cannot pretend anymore that the treasurer of a small town in the Midwest on a civil service salary and no analytical support has the same level of sophistication as a specialized hedge fund.”

Are they after what is left of the 401k's, IRAs, other retirement funds?

more here - http://dealbook.blogs.nytimes.com/2010/06/02/wall-st-reconsiders-how-it-sells-derivatives/?src=busln

[WhiskeyGirl]

"Wall Street Sees Derivatives Sales Flaws After SEC Goldman Suit"

While securities laws differentiate between the financial transactions companies can sell to individuals and to institutions, there’s growing recognition that local governments and endowments shouldn’t be equated with hedge funds, according to four Wall Street executives who spoke on the condition of anonymity because their firms haven’t made any decisions.

Goldman Lawsuit

The soul-searching was triggered in part by a Securities and Exchange Commission lawsuit against Goldman Sachs Group Inc. for allegedly failing to inform a German state bank and New York-based collateral manager ACA Management LLC about the role of hedge fund Paulson & Co. in a mortgage-linked security.

In Pennsylvania, state Auditor General Jack Wagner has asked lawmakers to repeal legislation passed in 2003 that allowed school districts and local governments to enter into swaps, which he said are “tantamount to gambling with taxpayer money.” In April he said the state’s turnpike commission would lose $145.7 million, almost three months of toll revenue, if it had to terminate its swaps on more than $2.23 billion in debt.

Will the casinos remain open after Obama's 'Financial Reform'?  Maybe the pages of rules will just apply to some, but not all?  Lots of Obama loopholes for Wall Street and big bank gamblers?

The financial reform bill  that passed the U.S. Senate last month attempts to address sales of swaps. The legislation, which needs to be reconciled with a version passed by the House of Representatives in December, would require swaps dealers to adopt a fiduciary duty in dealings with state or local governments, endowments and pension or retirement plans.

Although the measure is designed to protect taxpayers who end up footing the bill, it has been opposed by state treasurers. In a May 16 letter to Christopher Dodd, the Connecticut Democrat who chairs the Senate Banking Committee, the National Association of State Treasurers said suitability requirements, not fiduciary duty, should apply to dealers.

Does Congress and the White House work for Main Street or Wall Street?

“There are some very sophisticated and professional municipal and pension fund managers and some less sophisticated hedge-fund managers,” Sacks said. “At some point you run out of tests for sophistication, and you have to rely on the representations of the person in front of you, the qualifications of the person in front of you, and, as imperfect as it is, the assets under management of the person in front of you.”

This sounds a lot like the Weiner/Beck/Goldline problem.  I wonder how many from Wall Street went to Goldline and other alternative investment 'opportunities' for Main Street?

more here - http://www.bloomberg.com/apps/news?pid=20601208&sid=abTDrobk37WQ