Three years after Dodd-Frank, the Securities and Exchange Commission has yet to write a rule implementing “one of the simpler parts of a mammoth and complicated law.” The Washington Post explores the reasons.
CFTC chairman Gary Gensler is trying to make sure that banks cannot shield derivatives bets from effective oversight by funneling them overseas.
“Regulators have to get serious about implementing this law,” AFR policy director Marcus Stanley told the Washington Post. “The derivatives market is dominated by insured banks,” which means taxpayers would be on the hook if they ran into trouble, he said.
“We expected that it would be hard to keep what we’d won and do more going forward,” AFR’s Lisa Donner tells USA Today. “It’s been slower and harder than we’d hoped.”
Citi’s recommendations influenced “more than 70 lines” of an 85-line bill. Two key paragraphs “were copied nearly word for word” from a draft prepared by Citi and two other large banks.
“U.S. bankers and insurers are trying to use trade deals, which can trump existing legislation, to weaken parts of the Dodd-Frank Act…,” according to Carter Dougherty of Bloomberg.
Banks could “take exotic swap dealings and put them inside the public safety net, and we could all get stuck bailing these guys out like we did in 2008,” AFR policy director Marcus Stanley told the Washington Post.
The Dodd-Frank Act, Mike Konczal points out on washingtonpost.com (5/6/13), left it to regulators to decide how much capital banks must set aside. And U.S. regulators have ceded much of the task to the international panel of bank overseers working on the standards known as
Under H.R. 677, the CFTC loses its jurisdiction over inter-affiliate swaps, which are defined so loosely that, according to AFR’s Marcus Stanley, “the affiliates don’t even need to share majority ownership… That’s a big, whopping exemption.”
“Think of the precedent… rushing forward with the aspects of the rule supported by industry while offering the faint possibility that the commission might one day get around to addressing the concerns raised by investors.”