Oppose Chambliss Amendment #3816 to Senate bill 3217 which attempts to weaken proposed derivatives regulations

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 opposition to Amendment No. 3816 offered by Senator Chambliss.  For all intents and purposes this amendment would strip out the meaningful reform measures meant to bring the currently opaque and completely unregulated over-the-counter (OTC) derivatives markets into a comprehensive regime of full regulation.

Specifically Senator Chambliss’ amendment would:

• Water down the definition of “swap dealer” and “major swap participant” found in the current version of S. 3217 so that far fewer entities would be classified as swap dealers and major swap participants.  This would greatly reduce the number of entities subject to comprehensive regulation of capital, margin, business practices, etc., allowing many perpetrators of the financial crisis to escape meaningful regulation.
• Greatly reduce the clearing requirement so that as much as 66% of all outstanding OTC derivatives would escape clearing.  This would leave in place the interlocking web of derivatives exposures, which nearly caused a worldwide financial meltdown, greatly increasing the chances of another crisis.
• Eliminate the trading requirement for OTC derivatives, which would leave 100% of OTC derivatives to trade in the shadows with little or no transparency, making it very difficult for regulators to police these markets and prevent future crises, and impossible for market participants to know when entities like AIG are amassing unsustainable levels of risk.

Amendment 3816 would preserve the status quo.  It gives the appearance of reform while in fact it eviscerates the derivatives title.  We urge you to OPPOSE this amendment.