Banksters stick together

This important story is destined to sink into the memory hole over the weekend. Our dear TreasSec Geithner laughs off regulating foreign derivatives:

The Treasury Department plans to exempt foreign exchange derivatives from new Wall Street reform regulations, a Treasury official said Friday, dismissing concerns about a market that prompted $5.4 trillion of emergency support from the Federal Reserve in late 2008.

David Dayden has this one nailed already:

Even beyond the foreign exchange market’s problems post-Lehman, which are well-documented, simple common sense would dictate that you don’t keep a $30 trillion segment of the market unregulated. When I wrote about this possibility in March, I said just that: “It’s obvious that whatever financial innovation exists in the shadows will be the one used most frequently to maximize risk. So it’s not the type of instrument but how well-regulated it is relative to others that matters.”

The other fear is that derivatives traders could attain an exemption simply by attaching a ForEx trade to their standard derivative deal. So this decision could be a cro-bar to pry the entire derivatives market away from regulation. Before long the entire market could wind up back in the shadows. And your humble blogger isn’t the only one saying this: it’s the argument of CFTC Chairman Gary Gensler, the guy who would be responsible for regulating the derivatives market.

We are so screwed. The wolves are guarding the henhouse and us little people are ones who will get plucked again.