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July 23, 2020

The CFTC Recklessly Outsources the Protection of American Taxpayers to Foreign Regulators Who Have Repeatedly Failed to Protect Their Own Taxpayers

Thursday, July 23, 2020
Contact: Pamela Russell at 202-618-6433 or
Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement with respect to the Commodity Futures Trading Commission’s (CFTC) proposed regulations governing the cross-border application of U.S. law:
“The old saying ‘Banks live globally but die locally’ means that, in good times, Wall Street’s global banks love making money and pocketing bonuses from their far-flung, worldwide activities. However, when they get in trouble, they come home to be rescued and for bailouts, which cumulatively exceeded $29 trillion in 2008 and beyond. That’s great for Wall Street, but terrible for the U.S. and U.S. taxpayers. That’s why the Dodd-Frank Act required U.S. regulators to put a stop to it and regulate derivatives wherever they occur if they ‘have a direct and significant connection with activities in, or effect on, commerce of the United States.’
“Ignoring that recent history and their legal duties, the CFTC’s action today on cross-border deregulation is one of the most reckless acts of any U.S. financial regulatory agency since the 2008 financial crash. It irresponsibly endangers the financial stability of the U.S.,  jeopardizes the safety and soundness of U.S. banks, and puts U.S. taxpayers on the hook for future bailouts, as spelled out in our comment letter and this one-page summary
“The CFTC’s action today not only invites Wall Street’s biggest banks to engage in regulatory arbitrage and pretend to conduct their derivatives businesses through overseas affiliates but also outsources the protection of American taxpayers to foreign regulators who have failed repeatedly to protect their own taxpayers.  In addition, as proved before, during, and after the 2008 crash, foreign regulators will not protect American taxpayers because they have a serious conflict of interest: the less they regulate, the more business they attract from Wall Street’s biggest banks. That business lost to the U.S. creates jobs and increases tax revenue in foreign countries. At the same time, it leaves U.S. taxpayers on the hook for bailing out those New York-based megabanks when their overseas bets go wrong.

“That’s exactly what happened in 2008, and it has been a repeated lesson of the recent past, including with respect to the failures or near-failures of Citigroup’s structured investment vehicles, Bear Stearns’ hedge funds, AIG Financial Products, and numerous foreign affiliates and branches of U.S. investment and commercial banks, like Lehman Brothers, Citigroup and Merrill Lynch, during the financial crisis. That’s in addition to reckless London-based foreign derivatives trading inside U.S. banks as occurred with J.P. Morgan Chase’s post-crisis ‘London Whale’ losses.

“The CFTC should not be incentivizing U.S. banks to use U.S.-located personnel and booking fictions to trade, clear, and ultimately hold derivatives risks in U.S. banks and other financial institutions, while evading the requirements Congress placed on those activities in light of their potential for mass destruction. The CFTC should follow the law and protect U.S. taxpayers directly while reducing the likelihood of bank failures and the need for bailouts.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit
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