Before the crisis, Warren Buffett described derivatives as "financial weapons of mass destruction" that pose a "mega-catastrophic risk" not just for the firms that traded them but for the entire economy. Contracts were often difficult to untangle and some even appeared to be the work of "madmen."

Now what Robert Reich calls the "biggest battle in bank reform" is over a derivatives provision introduced by Arkansas Senator Blanche Lincoln in the financial reform bill. While progressive economists and policymakers like Joseph Stiglitz, Nouriel Roubini and Robert Reich are strongly in favor, as well as the Americans for Financial Reform coalition that includes AFL-CIO and CEPR, the media is doing all it can to shut them out of the debate and manufacture a false story about how "virtually everyone" is opposed.

The corporate-owned media has ridiculed the provision. In their false story, the "hard to fathom" provision somehow "emerged from nowhere."

This is bullshit.

Unfortunately this false narrative has been pretty universal. Being good servants of the elite and the establishment, the media naturally kisses ass and cuts out the opposition from the discussion. So you get Ezra Klein saying:

Given the opposition of the White House, the Federal Reserve, Paul Volcker, the FDIC, Chris Dodd and all the banks, I was surprised to see that Blanche Lincoln’s proposal to separate derivative swap desks from banks survived an amendment designed to weaken it.

What Klein does not mention, because his job is to report on what powerful people say instead of reporting what well-qualified people say, is the progressive opposition. His observation is quite accurate: that the provision has survived this long is surprising, because collectively the banks, the White House, Republican Fed Chief Bernanke, Republican FDIC Chief Sheila Blair, and Economic Recovery Advisory Board Chair and Democrat Paul Volcker, represent a very powerful force. But accurate does not mean complete. It’s an absurdly incomplete observation, but it’s possible to maintain this incompleteness and blindness because the opposition has little power.

The false story then gets accepted even by outlets that are supposedly liberal. Here is The Atlantic:

Who’s against this proposal? Opponents include the White House, FDIC Chairwoman Sheila Bair, Federal Reserve Chair Ben Bernanke, Former Fed Chair and financial reform advocate Paul Volcker, Senate Banking Committee Chairman Christopher Dodd, most (if not all) Republicans. In other words, virtually every significant Washington economic policymaker outside of Congress plus Republicans.

And again you have the same situation as with Klein. The quote seems technically true to me, because the opposition is only former policymakers as opposed to policymakers. Progressive former policymakers are opposed, including a Nobel Prize winner, but since they are now out of power they don’t matter.

Instead of manufacturing a false consensus to scrap the Lincoln provision, pundits could be allowing the public to hear about this:

But right now, the institutions who write the vast majority of these derivatives are too big to fail. Ideally, responsibility for writing derivatives should be spun out to a totally independent entity. The agriculture committee bill does not go this far; rather, it strikes a reasoned compromise between political expediency and economic good sense.

That’s from the Joseph Stiglitz article linked to in the intro. He’s saying that the Lincoln provision represents a compromise, and that ideally we should go even farther than it requires. How’s that for a consensus?

Please, call your senators on Monday and tell them not to scrap Blanche Lincoln’s provision. I highly doubt her motives for introducing it are sincere. She’s probably just reacting to the primary threat from Bill Halter, who I hope at least qualifies for a runoff on Tuesday.

But the Blanche Lincoln derivatives provision, Section 716, is a truly huge provision. It’s a provision we need to keep. It may be the biggest battle in bank reform. So please call your senators come Monday and tell them to keep it.