Tales from the Trail

At first glance it would appear that Congressman Barney Frank and lawmakers backed by the Tea Party movement would have little in common -- one is a liberal Democrat, the others are conservative Republicans.

Look again.

Frank said his quest to reduce military spending will probably attract Tea Party lawmakers who campaigned on a platform of fiscal discipline, even to cuts in an area that typically meet strong resistance from Republicans.

"I think the notion of nation building, of America enforcing stability over the world ... is wasted money because it doesn't work," Frank told the Reuters Future Face of Finance summit. "I think there's some potential alliance there."

Frank also sees another area in which the Tea Party might be allies -- any attempt by the Republican majority in the House to roll back reforms on derivatives in the wake of the financial crisis. "If they were to try to roll back derivatives regulation legislatively, yes, the Tea Party people would be allies of ours," he said.

What about their ideological differences? "You learn to work with people that you don't have anything in common with," Frank said.

While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn’t go rotten.

The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.

Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.

The Democrats’ chances of retaining control of the House of Representatives are slipping away. Our latest Reuters/Ipsos poll suggests that Republicans are poised to win around 227 seats and Democrats about 208 seats in next month’s election. Unemployment is top of the agenda for voters, and there is no good news coming on that front between now and November 2 (the next reading on the jobless rate doesn’t even come until the Friday after the election). That means there is very little chance that Democrats can pull off a late surge.

Also slipping away is President Barack Obama’s approval rating, to a new low in our poll, with much of the decline coming from his own Democratic supporters. His handling of the economy remains a leading cause of the drop. Again, any hope of energizing the Democratic base now looks slim.

More interesting is the race for control of the Senate. Ipsos says the poll numbers suggest Democrats will win 52 seats to 48 seats for the Republicans, the same margin predicted by the poll of polls compiled by Real Clear Politics. But a number of races are still very close.

The latest blame game circulating in Washington on financial regulation may end up with those who point fingers  finding that they have three fingers pointing back.

During the debate on tightening financial regulations, there have been some backhanded jabs at regulators with the implication that perhaps they were asleep at the wheel. Just this morning on NBC's "Today" show, Democratic Senator Claire McCaskill said Wall Street had been creating things just to bet on -- "they were like the casino, but they had less regulation than Las Vegas."

Well hold on. Who's fault is that?

We asked Sheila Bair, chairman of the Federal Deposit Insurance Corp.

She said when it comes to regulating many of the complex over-the-counter derivatives, the blame actually fell into the lap of Congress which decided against putting them under the oversight of the SEC or CFTC or insurance regulators. And in fairness to Congress, the Federal Reserve and Treasury condoned that action, she said.

Gary Gensler, chairman of the Commodity Futures Trading Commission, likes to go to the past -- sometimes as far back as 1,000 years -- to explain the financial situations of today.

For example, derivatives existed for 145 years, since the Civil War, and they became regulated in the 1930s, he said at a Reuters Global Financial Regulation Summit in explaining that derivatives need regulation.

If you only want to go back a couple hundred years, Gensler had this to say:  "Somebody in the 19th century invented street lights, somebody invented stop signs, somebody invented traffic lights."

The fight over new rules that will dramatically change Wall Street and financial markets is approaching the finish line in Washington, with both lawmakers and the financial industry making last-ditch efforts to put their stamp on the reform effort. Reuters will be hearing from the key players in the debate on April 26-29 during the 2010 Reuters Global Financial Regulation Summit.

Top regulators, watchdogs, lawmakers and stakeholders will provide their perspectives on how this landmark legislation will impact banks, investors, traders and consumers. The talks will focus in on proposals for a strong new consumer agency, strict oversight of derivatives and attempts to end the perception that some financial firms are “too big to fail.”