The Journal did some three-yards-and-a-cloud-of-dust work last week on Wall Street’s retrograde lobbying efforts—particularly to keep credit-default swaps from being heavily regulated. The New York Times today takes the handoff and advances deep into the red zone.

Forcing the murky world of CDS into real openness would mean forcing them to be traded on public exchanges. Wall Street wants them traded in private clearinghouses, to keep some opacity, which means higher profits for Wall Street.

How so?

But increased transparency of derivatives trades would cut into banks’ profits — hence the banks’ opposition. Customers who trade derivatives would pay less if they knew what the prevailing market prices were.

Unsurprisingly, to say the least, Treasury Secretary Tim Geithner is coming down on the Wall Street side. It’s what he does.

But what’s really interesting is that reporters Gretchen Morgenson and Don Van Natta Jr. get hold of a memo written by a Wall Street lobbying consortium. It matches up all too neatly with Geithner’s proposal, issued last week, to regulate CDS.

Mr. Rosen and other bank lobbyists have pushed on Capitol Hill to keep so-called customized swaps from being traded more openly. These are contracts written for the specific needs of a customer, whose one-of-a-kind nature makes them very hard to value or trade. Mr. Rosen has also argued that dealers should be able to trade through venues closely affiliated with banks rather than through more independent platforms like exchanges.

Mr. Rosen’s confidential memo, dated Feb. 10 and obtained by The New York Times, recommended that the biggest participants in the derivatives market should continue to be overseen by the Federal Reserve Board. Critics say the Fed has been an overly friendly regulator, which is why big banks favor it.

Mr. Rosen’s proposal for change was similar to the Treasury Department’s recently announced plan to increase oversight. Treasury officials say that their proposal was arrived at independently and that they sought input from dozens of sources.

“Independently,” huh? The Times has already reported several paragraphs up that the memo did, in fact, influence Treasury:

A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.

So either Treasury is lying or the Times’s reporting is wrong. You make the call.

The paper reports that Geithner’s plan has a massive loophole:

…little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default.

If we know anything about Wall Street, it’s that you give them an inch and they’ll take two miles.

Like, for instance, when Obama put a Wall Street-pushover into Treasury Department, you get this:

What makes this fight different, say Wall Street critics and legislative leaders, is that financiers are aggressively seeking to fend off regulation of the very products and practices that directly contributed to the worst economic crisis since the Great Depression. In contrast, after the savings-and-loan debacle of the 1980s, the clout of the financial lobby diminished significantly.

Excellent historical context.

And who knew derivatives trading made up such a big portion of profits?

JPMorgan, the largest dealer of over-the-counter derivatives, earned $5 billion trading them in 2008, according to Reuters, making them one of its most profitable businesses.

That’s $5 billion in profit, not revenue, and much of that is derived from distortions in the market from its opacity, as the Journal pointed out last week. No wonder they’ve got the nerve to fight this stuff.

And the reporting here is pretty amazing. I have no idea how the Times got possession of this email, showing how the big boys employed some subterfuge to wrest control of a broader trade group’s agenda:

Mr. Rosen, co-author of a treatise on derivatives regulation, frequently counsels the industry on these complex contracts. In late January, according to e-mail messages, he asked the members of the CDS dealer group if they would support his testifying before Congress on behalf of the Securities Industry and Financial Markets Association, a trade group. The CDS dealers are a much smaller group with a far larger interest in derivatives than Sifma as a whole.

Mr. Rosen received an e-mail response from Mary Whalen, managing director for public policy at Credit Suisse, the Swiss bank, which is active in the derivatives market:. “It is a good idea for Ed to write the testimony and if necessary testify. That way we can be sure that the banks’ point of view is expressed, rather than taking a chance on testimony that Sifma might craft.”

Sifma’s members include 650 firms of varying size and interests, many of which do not trade complex derivatives.

Have fun at the next Sifma convention, Mary.

And how about this?

(Minnesota Democrat Collin) Peterson’s bill specifically bars derivatives trading in a clearinghouse regulated by the New York Federal Reserve, which he said in an interview “is a tool of the big banks” that “wouldn’t do much” to regulate the contracts.

Because the banks’ lobbyists persuaded some of his Republican colleagues to resist more sweeping changes, Mr. Peterson said, he has had to modify a bill he introduced that is similar to Mr. Harkin’s in calling for wide-ranging limits on derivatives.

“The banks run the place,” Mr. Peterson said. “I will tell you what the problem is — they give three times more money than the next biggest group. It’s huge the amount of money they put into politics.”

And that’s not the only really aggressive quote the piece has. It really does anything but fall into the he said/she said trap.

It’s just an excellent piece of reporting by the Times. Read the entire thing.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.