Abstract
Gramm-Leach-Bliley Act (1999) and the Commodity Futures Modernization Act (2000) are perhaps the two most significant laws signed by President Clinton. They have opened the door for banks to invest, speculate and gamble on the paths of price movements of securities and commodities without any type of meaningful boundaries or controls. In this paper, I hypothesize that these two legislations have taken the country back to pre-1908 economic environment with rampant bucket shops undermining the real economic activity. A brief review of the history of bucket shops is followed by addressing the similarities between Over-the-Counter derivatives and the bets placed with bucket shops. The volume and growth of OTC derivatives since 2000 is testimonial of a system that has skewed big banks to be more like bucket shops than financial intermediaries. This is documented by examining the relationship between OTC derivatives to total assets of the largest holders of these derivatives as well as by the high magnitudes of the revenues they earn from OTC derivatives.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.