The backer of one of the efforts to create a film futures exchange is using Treasury Secretary Timothy Geithner’s words to try to stop congressional efforts to ban trading based on weekend box office receipts.
In a letter sent to all members of the Senate, Trend Exchange CEO Robert Swagger said that “banning a futures contract at the request of a powerful special interest group like the MPAA sets a dangerous legislative precedent. It undermines the role of existing regulators, and sets up a case that any time a new contract is developed, opponents will run to Congress and a decision is made to either accept or deny the request of the special interests solely for political reasons.”
Swagger then puts this passage of the letter in underline and boldface: “Even Treasury Secretary Timothy Geithner, when asked by ABC’s George Stephanopoulos last week about the government banning movie box office futures, stated, ‘Well, you can’t — you can’t stop innovation.'”
The Senate version of the financial reform package — apparently now ready to hit the floor— includes the ban on movie futures trading after it was inserted into a derivatives reform bill by Sen. Blanche Lincoln (D-Ark.). Today a group of 10 House members, including Howard Berman (D-Calif.), Rep. Jason Chaffetz (R-Utah) and Rep. Betsy Markey (D-Colo.) sent a letter to Gary Gensler, the chairman of the Commodity Futures Trading Commission, expressing their opposition unless it can be demonstrated that the creation of movie futures contracts is in the public interest.
They noted that many members of the House Agriculture Committee worried whether the trading would be “inherently prone to abuse and manipulation from the start.” “Furthermore, many members made the point that if you exclude those most likely to use futures to hedge risks from the market, we are concerned that the only participants remaining are those looking to use movie futures as a high stakes gambling tool.”
In the interview with Stephanopoulos, Geithner appeared to support the idea of movie futures trading, with strong oversight. Supporters have argued that the idea has been unfairly lumped in with financial reform efforts, as the proposals to reign in Wall Street derivatives trading will give them the oversight that the movie futures market already would have.
Here’s the transcript from Geithner’s appearance on “This Week”:
STEPHANOPOULOS: We were talking about derivatives a moment ago. There’s now a proposal to have movie futures traded. Do you think that’s a good idea?
GEITHNER: No, I don’t — here’s what I think about this, George. The financial sector will be creative and will innovate and will come up with products that meet some real need people have and to also come up with those products which are designed to help people bet on some basic outcome. That’s going to happen. It’s a necessary part of running a good financial system. But those things come with risks. And our job, our obligation is to make sure that we’re reducing those risks, we can contain the damage when those financial innovations go awry. And again, you need the government equipped to do a better job earlier, preemptively, to limit the risks that come with innovation.
STEPHANOPOULOS: So they shouldn’t be banned?
GEITHNER: Well, you can’t — you can’t stop innovation. You can’t run a system where you have a bunch of bureaucrats in Washington trying to figure out what’s risky and what’s not, because the risk is they’ll miss it, they’ll be too late, or they’ll overdo it. So the best thing we can do for the country is to make sure the system just has better protections in place when innovations go a little too far.