Rep Peterson Is 'Flat Opposed' To Fed, SEC Regulating Swaps
February 03 2009 - 2:17PM
Dow Jones News
House Agriculture Chairman Collin Peterson, D-Minn., said
Tuesday he is "flat opposed" to allowing the Federal Reserve to
regulate credit derivatives.
"I have made it clear that the Commodity Futures Trading
Commission is the agency that has the knowledge and expertise in
these markets," Peterson said. "I am flat opposed to the Fed having
a role in clearing or overseeing these products. If I could have my
way, the Fed would not be involved; however that is not the
political reality of today."
Peterson made his remarks at a hearing to dissect his draft bill
on derivatives regulation. The bill seeks to mandate clearing for
over-the-counter products and rein in excessive speculation. It was
unveiled last week at a time when the CFTC, the Securities and
Exchange Commission and the Fed are still engaged in a
jurisdictional battle over which agency should have authority over
credit-default swap clearing.
Several exchanges, including CME Group Inc (CME) and
IntercontinentalExchange Inc (ICE) are planning to offer clearing
for credit derivatives. But while CME's platform would be regulated
by the CFTC, ICE has structured its clearinghouse as a limited
purpose bank so it will be regulated primarily by the Fed. Many
large banks, meanwhile, have also lined up in support of ICE's
plan.
Peterson said he isn't surprised that most banks are "clamoring"
for the Fed to regulate credit-default swaps, given their "cozy
relationship with Fed members."
"They probably think it is a good idea to have a regulator with
the resources to bail them out when things go south," Peterson
said.
He also expressed strong doubt about the Securities and Exchange
Commission's ability to regulate credit-default swaps.
"How much confidence can we have in an agency that repeatedly
ignored calls, even from within its own agency, to examine the
investment advisory business of Bernard Madoff?" he said. Madoff
has been charged with securities fraud after he allegedly told his
sons that he had been running a Ponzi scheme.
Peterson's bill gives the CFTC primary authority over credit
derivatives and other swaps, although it would still acknowledge
that the Fed and SEC have some powers to regulate the instruments
as well.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com
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