[Vision2020] The Latest Assault on Bank Reform

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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July 4, 2013
The Latest Assault on Bank Reform By THE EDITORIAL
BOARD<http://www.nytimes.com/interactive/opinion/editorialboard.html>

When the Dodd-Frank financial reform law passed in 2010, President Obama
said it would “lay the foundation for a stronger and safer financial
system<http://www.washingtonpost.com/wp-dyn/content/article/2010/07/15/AR2010071500464.html>.”
But that won’t happen if the senators from New York, Charles Schumer and
Kirsten Gillibrand, have anything to say about it.

Recently, Mr. Schumer, Ms. Gillibrand and four other Democratic senators
wrote to the Treasury secretary, Jacob Lew, seeking his help in shelving
crucial “cross-border” guidelines on derivatives from the Commodity Futures
Trading Commission. The guidance makes it clear that numerous new
derivatives rules under the Dodd-Frank law apply to foreign affiliates of
American banks and to foreign banks operating in the United States.

Without strong cross-border rules, derivatives regulation will be
meaningless because big American banks that dominate the global market in
derivatives will simply engage in risky trades and rank speculation abroad.
When those risks and wagers go wrong, American institutions and American
taxpayers will be on the hook — again.

In the letter to Mr. Lew, the senators
say<http://www.bloomberg.com/news/2013-06-26/u-s-needs-more-time-on-overseas-swaps-democratic-senators-say.html>that
to avoid confusing the banks, the C.F.T.C. cross-border guidelines
should not take effect until the Securities and Exchange Commission
completes a separate set of derivatives rules. That is ridiculous. The
C.F.T.C. oversees virtually all of the multitrillion-dollar derivatives
market; the S.E.C. a relative sliver. The C.F.T.C. has diligently issued
its required rules under the Dodd-Frank law over the past three years and
has set a deadline of July 12 to put the cross-border guidelines into
effect. The S.E.C. first got around to issuing a pathetically weak derivatives
proposal in May <http://www.sec.gov/news/press/2013/2013-77.htm>.

Equally important, the law specifically requires the C.F.T.C. to apply its
rules to derivatives trades that “have a direct and significant connection”
to commerce in the United States. The law does not require the S.E.C. to
issue any such cross-border rules. If the C.F.T.C. waited for the S.E.C.,
what would it be waiting for?

Then again, indefinite delay — which would preserve a status quo that
benefits the banks — is, in effect, what the senators are advocating.

The letter goes on to make the unfounded assertion that derivatives can be
effectively regulated only by international agreement. But when failed
derivatives bets rocked the global financial system in the crisis, the
United States bailed out American and European banks alike. Banks
recovered, but the economic damage persists. The United States should lead
in reform, as the C.F.T.C. is trying to do. It should neither wait for the
S.E.C. nor outsource the job to regulators in other countries, where
derivative rules are weak or nonexistent.

Mr. Schumer, Ms. Gillibrand and their four colleagues are not only going
against lawmakers in their own party, most of whom have resisted attempts
to delay the cross-border rules. They are also going against the cause of
reform, lobbying for delays that would derail the law.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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