UPDATE: House Republicans Introduce Bill To Delay Derivatives Rules
April 15 2011 - 6:13PM
Dow Jones News
House Republican lawmakers introduced legislation Friday to
delay new derivatives regulations for 18 months following financial
industry complaints that regulators are moving too quickly.
The bill pushes the deadline to December 2012 in order to synch
U.S. and European regulatory efforts, House Financial Services
Chairman Spencer Bachus (R., Ala.) said Friday in a statement.
"There is no need to rush and meet arbitrary deadlines when the
rest of the world is at least 18 months behind the United States,"
Bachus said.
December 2012 is a deadline put forth by the Group of 20
industrialized nations to rein in the nearly $600 trillion
over-the-counter derivatives market. The rule-writing has been
moving more quickly in the U.S. because the Dodd-Frank financial
law mandated regulators write the rules by July 2011.
"Without this legislation, the rulemaking process will be
unnecessarily rushed--we are ensuring that regulators have enough
time to get this right," Rep. Scott Garrett (R., N.J.) said in a
statement.
Neither the Commodity Futures Trading Commission nor the
Securities and Exchange Commission, which were tasked with erecting
a new regulatory scheme for over-the-counter derivatives, have
asked Congress to relax the deadlines.
But CFTC Chairman Gary Gensler has said his agency, charged with
the bulk of the derivatives rule-writing, will not have all the
rules in place by July. The SEC has pushed back the adoption of
several key derivatives rules until later this year, according to a
new schedule posted on its website.
CFTC Commissioner Bart Chilton, a Democrat, said the legislation
wasn't necessary, arguing the rules need to be finalized promptly
to prevent an opaque market from hurting the broader economy again.
Bad bets on credit default swaps, a form of derivative, nearly
toppled insurance giant American International Group Inc. (AIG)
during the financial crisis.
"Hundreds of trillions of dollars in trading remain completely
unregulated," Chilton said in a statement. "It is exactly this
'dark' trading that helped lead to a hideous bail-out paid for by
taxpayers."
SEC spokesman John Nester declined to comment about the measure,
but noted the two agencies will host a public meeting next month to
discuss the timing of the rulemaking "with an emphasis on getting
the derivatives rules right."
A CFTC spokesman declined to comment.
Large banks and other financial market players have pushed to
delay the derivatives rules.
A top official of CME Group Inc. (CME), the largest U.S. futures
exchange, complained about the Dodd-Frank law's deadlines in a
hearing Wednesday. CME's Executive Chairman Terry Duffy said the
law "left many important issues to be resolved by regulators with
little or ambiguous direction and set unnecessarily tight deadlines
on rulemakings by the agencies."
Republicans say the measure would erase legal uncertainty for
companies the lawmakers say could arise if the rules aren't
finished by the law's deadlines.
Rep. Mike Conaway (R., Texas), chairman of a House Agriculture
subcommittee that oversees the commodities markets, said earlier
Friday he was concerned companies could face lawsuits if they don't
comply with the law's provisions, even if it they aren't in place
by deadlines written in the law.
"It's during that interim period that the industry and market
participants are subject to laws that are out there, but the
regulations aren't written yet," Conaway said. The House
Agriculture and Financial Services Panels share oversight of the
implementation of the Dodd-Frank law.
Separately, House Democrats sent a letter to regulators Friday
urging them to harmonize rules and coordinate with international
regulators.
"Regulatory certainty is urgently needed in the markets, but it
is just as important that the rulemaking process be thorough so
that we end up with the right result," lawmakers said in the
letter, signed by 24 house Democrats.
Rep. Gary Peters (D., Mich.), who signed the letter, said
extending the deadline is not the solution.
"I don't support a delay, it's very important to put these
regulations in place and have some certainty in these markets,"
Peters said.
-By Jamila Trindle, Dow Jones Newswires; 202-862-6684;
jamila.trindle@dowjones.com
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