United States Senate
Washington, DC 20510
May 14, 2010
Re: Dorgan Amendment #4008 to Restoring Financial Stability Act of 2010 to Regulate Credit Default Swaps
Dear Senator:
The over 250 consumer, employee, investor, community and civil rights groups who are members of Americans for Financial Reform (AFR) write to express strong support for Amendment No. 4008 to S. 3217 offered by Senator Dorgan. The amendment will mandate that all credit default swaps must clear through, and trade on, an exchange without exception. This amendment will also end the destructive practice of betting against the survival of a company or government entity survival through “naked” shorting of credit default, thereby filling an important gap in an otherwise strong package of derivatives reform proposals.
America has experienced the worst economic recession since the Great Depression due in large part to the proliferation of unregulated and opaque over-the-counter (OTC) derivatives which Warren Buffet famously called “weapons of financial mass destruction.” During the crisis in 2008, speculators made dramatic short bets against companies’ survival by entering “naked” positions in credit default swaps. These abusive trading practices (which harm entities credit at the worst possible time) continue to be employed today, as speculators gang up to bet on the demise of Greece – a sovereign nation.
With Senate Bill 3217, the Senate is now taking the necessary steps to mandate that clear-able OTC derivatives must clear through a central counterparty and that trade-able OTC derivatives must be moved onto an exchange for trading. We strongly support your efforts as the most important thing America can do to prevent the next financial meltdown and stop damaging trading practices. We also strongly support the adoption of Amendment 4008 offered by Senator Dorgan to end abusive, destabilizing practices related to credit default swaps.
Please contact Lisa Lindsley, Director, Capital Strategies, AFSCME, for more information: 202.429.1275 or llindsley@afscme.org.
Sincerely,
Americans for Financial Reform