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The Wonk Room reports that just as it looked like Senator Blanche Lincoln’s (D-AR) pre-primary Hail Mary pass, a proposal that might actually put some real teeth in derivatives reform, was gaining traction, the New Democratic Coalition has stepped in to put the kibosh on it.  The Coalition, which counts our Russ Carnahan (D-03) as a member, has prepared a letter asking that the Lincoln proposal, known as Section 716, be removed and replaced by the much weaker derivatives proposals in the House legislation.

According to Gary Gensler, Chairman of the Futures Trading Commission, a kind of de facto derivatives overseer, the House bill :

… may be read to provide for a more liberal exemption for entities using derivatives to hedge commercial, balance sheet or operational risk, … . Every exemption for financial companies creates a link in the chain between a dealer’s failure and a taxpayer bailout. Every slice of the financial system that we cut out through an exemption could allow one bank’s failure to spread like fire throughout the economy. It is essential that financial reform does not allow loopholes that leave interconnectedness in the system. Such exemptions will only come back to haunt us in the future.

Forbes.com‘s Lee Sheppard is even more emphatic:

Sen. Blanche Lincoln’s derivatives proposal, usually referred to as the divestiture or “push down” requirement, is the only worthwhile proposal in the Senate financial regulation bill. The rest of the derivatives regulation component of both the House and Senate bills is meaningless filler.

You get the idea: Lincoln’s Section 716 is the real thing; the House bill is window dressing. Even Barney Frank (D-MA), Chairman of the House Financial Services Committee, admits that the Lincoln proposal would do a better job of regulating derivatives.

Politico asserts that the force behind the New Democratic Coalition letter is Rep. Michael McMahon (D-NY), known for having, as the Wonk Room’s Pat Garofalo puts it:

…argued for the extension of the Bush tax cuts for the wealthy on the grounds that people making $250,000 per year are “barely making ends meet.

So does Russ Carnahan really support McMahon’s position on derivatives? And if he does, why?

An even bigger question is why do I have to keep writing about actual Democrats, and my Democrats from Missouri at that, engaging in maneuvers that we expect from Republicans?  Why do the guys who promise to support the middle and working classes put themselves out so readily to defend the interests of the big guys, in this case the big banks that, thanks to the era of lax regulation ushered in by the GOP, have dumped us into the biggest financial crisis since the Great Depression?