A lot of people seem very invested in telling the story that Blanche Lincoln’s unseen derivatives reform package is scaring Wall Street to death. First of all we don’t know exactly WHY it’s scaring them. The reasons we assume why it is, because spinning off derivative trading desks will eat into the profits that big banks make off of the swaps market, is certainly plausible – Jamie Dimon’s screaming today that it’ll cost JP Morgan $2 billion, which they can afford, by the by – are unclear. One thing we appear to know is that the bill wouldn’t even statutorily put derivatives on exchanges. She gives up the discretion for that to the Commodity Futures Trading Commission:

Meanwhile, Senator Blanche Lincoln, the Arkansas Democrat who is chairwoman of the Senate Agriculture Committee, plans to offer her derivatives legislation on Thursday. Her proposed amendment to the financial regulatory bill in the Senate would give the Commodity Futures Trading Commission the power to determine which trades would go through an exchange, but it would also require real-time reporting of all trades to the public.

The current CTFC head would probably crack down, but future chairs may not be as stingy with the banking sector. And I’m curious why Lincoln describes this effort as a bid for transparency when trades may not even have to go through exchanges.

I think most people want to see these bets on securities, the most distilled form of gambling we have in the financial markets, either opened up or ended entirely. But consider the timeline here. Lincoln leaks to Politico that her bill will take on the big bad banks. This is a day after her primary opponent launches a campaign to tie Lincoln to those very banks. Everyone goes off of Politico, without having seen actual language, that the Lincoln bill is tough. Chris Van Hollen starts blabbing to the world that derivatives trading will be a partisan wedge issue. All of a sudden. And the context is that national Democrats and the White House have backed Lincoln against Bill Halter.

Meanwhile, nobody has asked Blanche Lincoln if she’ll support the underlying bill, and the kind of things necessary to really protect the taxpayer. Has she made a statement on whether she favors defined capital and leverage requirements for the large financial firms? Does she favor Sherrod Brown’s amendment to cap the size of the largest banks? Does she support the resolution authority in the bill?

Moreover, according to observers on Capitol Hill, this won’t even make the final bill, in all likelihood. It’s an effort to change the subject and maybe force a confrontation for political purposes, but that has little to do with policy. In fact, it’s entirely possible that this strong effort on derivatives represents a poison pill that would actually kill the bill entirely.

Whether you believe Lincoln’s internal polling or the more independent polling, she’s going to have a fight in May. That this derivatives legislation popped up so fortuitously, putting her to the left of the White House, should give some pause. I don’t think we have any clue what the real story is here.