U.S. Senate approves derivatives rules

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April 22--A U.S. Senate panel on Wednesday advanced tougher bills on complex financial tools called derivatives on a 13-8 vote, media reports said Thursday.

The bill offered by Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., would also improve transparency of most derivative trades.

Lincoln's derivatives bill is expected to be incorporated into the broader regulatory legislation before it is taken up by the full Senate.

Derivatives are financial products -- such as corn futures or stock options whose values depend on the values of underlying investments. Companies use them to hedge against risks, such as interest rate swings or oil price spikes. Derivatives also became a vehicle for speculation and helped trigger the financial crisis.

Under Lincoln's bill and other Democratic proposals, companies such as AIG would be subject to closer regulation. They also would have to keep minimum levels of capital to protect against market downturns.All the major plans would require that most derivatives be settled in a centralized system and traded over exchanges.
What sets Lincoln's bill apart is a rule that would bar companies that receive federal guarantees, like insurance from the Federal Deposit Insurance Corp., from most derivatives activities.

(Agencies)




Backgrounder: Chronology of events since financial crisis began


BEIJING, Sept. 24 (Xinhua) -- The Group of 20 (G-20) summit, which opens Thursday in Pittsburgh, will focus on measures to deal with the global financial crisis. The summit will be the third gathering of G20 leaders since the crisis began a year ago.

The following is a chronology of major economic and financial events in the past year:



　　2008

Sept. 15, Lehman Brothers, the fourth largest investment bank, filed for bankruptcy protection while Merrill Lynch, the third largest investment bank, struck a buy-out deal with the Bank of America, marking the start of the financial tsunami that swept the world.

Sept. 20, the U.S. government proposed a 700-billion-U.S.-dollar bailout plan to address the devastating financial situation. The plan was signed by President George W. Bush on Oct. 3 after being approved by both the Senate and the House.

Early October, Iceland's three major banks declared bankruptcy in succession within two weeks, accompanied by a dive in stock prices and depreciation of the country's currency. The International Monetary Fund provided 6 billion U.S. dollars for the north European country to bolster its paralyzed financial system.

Nov. 9, the Chinese government announced a 585 billion U.S. dollars stimulus package to be rolled out over the next two years aiming at expanding domestic demand and promoting economic growth.

Nov. 15, the first G-20 financial summit was held in Washington D.C. The participating countries reached consensus on a variety of issues, including stepping up international coordination to combat the crisis and reform the global financial system.

Nov. 25, the United States pledged another 800 billion U.S. dollars to loosen the credit market for house purchases and small business loans.

Dec. 11, Bernard Madoff, a Wall Street financier, was arrested on charges of fraud. Madoff, who also was a former Nasdaq chairman, for 20 years conducted the biggest ever Ponzi scheme and cheated investors out of more than 50 billion U.S. dollars. Madoff was sentenced to 150 years in prison on June 29, 2009.



2009

Early 2009, Eastern European nations saw severe capital flight and a sharp drop in exports amid downturns in their western neighbors. The International Monetary Fund provided at least 52 billion U.S. dollars to Hungary, Serbia, Latvia and Ukraine.

Feb. 4, U.S. President Barack Obama placed a 500,000-U.S.-dollar cap on the salaries of financial executives whose companies would receive bailout money from the American government.

Feb. 17, Obama signed a 787-billion-U.S.-dollar stimulus package in hopes of invigorating the U.S. economy through government investment and tax cuts.

March 12-13, tax havens, including Switzerland, Andorra, Liechtenstein, and Belgium agreed to loosen their confidentiality rules to cooperate with other nations on cracking down cross-border tax evasion.

Mid March, large AIG executive bonuses were revealed, angering the U.S. public. Obama ordered the Treasury Department to prevent the 165 million U.S. dollars from being paid. The executives returned part of their bonuses under the pressure of public reprimand.

March 23, the U.S. government announced a "toxic asset plan" that would form public-private partnerships to help cleanse banks of up to 1 trillion U.S. dollars in toxic assets.

April 2, the G-20 leaders held their second summit to address the global economic woes in London. The participants agreed to provide up to 1.1 trillion U.S. dollars to the International Monetary Fund and the World Bank as well as to tighten monitoring of financial activities.

June 1, General Motors filed for bankruptcy protection in order to restructure its assets. The U.S government would be holding 60 percent of the new General Motors' shares after the protection process.

July 17-19, the U.S. government announced a comprehensive reform plan on financial monitoring in hopes of reviving confidence in the American financial system. The EU leaders also passed a reform plan aimed at establishing a pan-Europe financial monitoring system.