Just Skip to the Crossword.

Today's Object of Ridicule and Scorn is the New York Times Editorial Board. The Times' liberal slant, particularly on the editorial board, has been well-established. When David Brooks is the conservative anchor of the operation, you know something's a little off.

Here, the Times has wandered way outside its wheelhouse and into the realm of high finance. Andrew Rosenthal & co. should stick to subjects it's more comfortable with--defending the artistic chops of fecal sculptures, supporting the socialist propaganda in middle school education, bludgeoning conservatives with White Guilt, and swooning for Hugo Chavez. Never forget: write what you know.

The clumsiness of the argument belies an unfamiliarity with the subject matter altogether. Leave the big-boy talk to the Wall Street Journal, and just skip to the crossword. Quick! What's an eight letter word for "utterly uninformed?" Damn it. Now I need a five letter word for "lacking in originality."

THE SENATE AT THE FINISH LINE. New York Times Editorial.

It is...

I loathe when any piece of writing opens with an ambiguous pronoun.

...a bad sign, as the Senate enters the home stretch on financial regulatory reform, that there are so many unresolved issues since weaknesses and ambiguities in the legislation play into the hands of opponents of reform at this late date.

I need a nap after reading this sentence. Does the New York Times pay extra for excess commas and conjunctions?

It is...

Starting a sentence “It is…” is lazy writing. Doing it twice in a row is a crotchpunch to the reader. I really wish I knew who wrote this garbage. I'm going to call him/her/it "home-skillet" just to spice things up.

...especially disturbing that the vital area of reform — the regulation of derivatives trading — is being left to last.

The whole thing's disturbing, home-skillet.

This multitrillion-dollar market in largely unregulated derivatives

This would be an exceptional time to explain derivatives for the financially illiterate readers. Even a rudimentary definition would be helpful.

was at the heart of the speculation that inflated the bubble,

Perhaps something about an underlying security would give readers a better idea of what you're talking about, which is wrong anyways.

amplified the bust

Options, forwards, futures, and swaps. Are you talking about all of them together?

and led to the bailouts.

That disaster rests squarely on the shoulders of the Congress. The housing bubble was the direct result of an environment in which unqualified applicants could easily get credit at relatively low rates. Derivatives, including the infamous Credit Default Swaps, are nothing more than a way to repackage and sell that risk exposure. For every party that loses their shirts on a derivative, there is a counter-party that makes just as much. That is, unless the counter-party defaults. Since most derivatives contracts are written by major corporations, the counter-party default risk exposure is in derivatives contracts is identical to that of the bond market. Yet we don't hear Senators clamoring for the government to establish a clearing house for bond defaults.

Unless they are reined in,

You can feel free to trust a glorified DMV drone that couldn’t spell Black-Scholes with three tries.

derivatives are bound to endanger the financial system again, no matter what other reforms are adopted.

Boy, if only there were some sort of naturally-occurring event that forced financial institutions to re-make themselves to be better equipped to handle crises as they come up. Oh wait, I’m thinking of the natural business cycle of a free-market economy. Nevermind. That’s just preposterous.

Many derivatives are now traded as private, bilateral contracts, outside the purview of regulators and other investors.

I have to sift through all the ambiguity of this nonsense, but I now have to point out that they’re talking about forwards and swaps. Options and futures, the two other classes of derivatives, are exchange-traded and mostly standardized.

To clarify, home-skillet is advocating that the government insert itself between two consenting parties that have agreed to exchange financial instruments. The government doesn't do this with stocks. The government doesn't do this with bonds. The government doesn't do this with commodities. Next thing you know, the Times is going to be advocating purchasing a cheeseburger from McDonalds through the FDA.

Lack of oversight has fostered recklessness and abuse.

Lack of oversight has made it one of the few functional areas of the world financial environment, accessibly only to sophisticated investors.

It also fostered huge profits, as the five banks that dominate the business — JPMorgan Chase, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup

Isn’t it great that these are all American companies? No offshoring here.

— have been able to keep clients in the dark about what other clients pay for similar products and services.

Most derivatives contracts are highly specialized and drafted specifically for certain clients—it’s not like picking up a standardized can of soup at the store. A better example would be hiring a contractor for a kitchen remodel. You shop around for the best bid and the most trustworthy counter-party. The bidders you don’t necessarily show you what your neighbor paid to get their kitchen remodeled because a) that’s private and b) it probably wouldn’t be a comparable estimate anyways.

The central reform of derivatives is a provision that would require most derivative contracts to be traded on transparent, regulated exchanges and to be processed, or cleared,

The first adjective used to describe the derivatives market was “multitrillion,” as in, multiple trillions of dollars. Only the full weight of the federal government of the United States could serve as a clearinghouse for that obscene sort of volume. If this reform goes through, the next time there’s a crisis in the derivatives market, it would then fall directly to the taxpayer.

through a third party

Uncle Sam.

to guarantee payment if one of the participants was unable to pay.

Derivatives traders have a whole phrase designed to encapsulate the risk associated if one of the participants is unable to pay. It’s called counter-party risk, and it’s one of the reasons that derivatives investors need to be so sophisticated. These calculations often result in interest rate swings in amounts less than a basis point (.01%) that can make or break the profitability of a contract.

Banks also would be forced to move their derivatives businesses into separate entities or affiliates, to separate risky derivatives from federally insured deposits.

If that’s what you want, just re-enact parts of Glass-Steagall. You'd get a hell of a lot more traction.

Virtually every effort to weaken the bill involves watering down or undoing those reforms, either explicitly or by adding fiendishly convoluted language that obscures the reforms’ purpose.

The purpose of the reform being to destroy wealth and quash opportunity. Got it.

A must-pass amendment by Senator Maria Cantwell, a Democrat of Washington, would state clearly that it is illegal to enter into a derivatives deal that has not been cleared and exchange traded.

Which would make customized derivatives contracts impossible, thereby negating most of the benefit of the instrument and nearly all of the value added by the banking sector.

Only specifically defined transactions would be exempt.

I don’t even have to read the bill to know that these specifically defined transactions would be those between Goldman Sachs and General Electric.

The amendment would ensure that regulators and investors would be able to stop or undo a transaction if banks knowingly or recklessly violated the trading requirements.

So, if two people decided to enter an agreement without using the government as an intermediary, the government has the right to stop their agreement? Careful. If you stretch the interstate commerce clause that far it might pull a hamstring.

Another reform, which the banks want to kill, is one that would impose a fiduciary duty on them when they enter into derivative deals with pension funds, retirement plans, government entities and endowments.

Pension funds, retirement plans, and government endowments are already fiduciaries for the people the money actually belongs to. You’re proposing that a fiduciary needs a fiduciary? I'm confused. What would the money managers at the pension funds be doing again?

The need for this rule is made clear by the municipalities and other investors that have been damaged by derivatives deals they clearly did not understand.

I’m sorry…why should we subsidize their stupidity again?

The only change to the provision should be to tighten the language to clarify that the obligation to put the client’s interest first applies when a bank gives advice and makes recommendations,

The idea that anyone would enter a multiple million dollar swap contract without doing the due diligence is unfathomable. The idea that the government wants to encourage that type of behavior by subsidizing it is, well, sadly expected.

not when it is merely providing financial services.

Finally, the banks do not want to spin off their lucrative derivative dealings,

Who would?

and Senator Christopher Dodd has filed an amendment that would allow them to put off even partial restrictions for at least two years. That would put bank profits ahead of protecting the system and taxpayers.

If the bank crisis in 2008 taught us anything it’s that bank profits are requisite to any effort to protect the system and the taxpayers.

Banks don’t want clarity because clear rules are hard to evade.

What’s unclear about an unregulated market?

Which is all the more reason for senators to clarify and strengthen the derivatives regulation

There is no current derivatives regulation; adding it would necessarily muddle the situation.

while there is still time to do so.

You mean…before the American people stage an electoral revolt against the massive overreach into the private sector of the American economy and oust every elected official left of Newt Gingrich?