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March 25, 2013

Is it already time to weaken Dodd-Frank?

One of the biggest problems with financial reform is having to discuss issues that most people find painfully boring. For instance, “derivatives.”

But “derivative” is an important word! And the concept is crucially important to both the financial crisis and where reforms need to go. There’s a reason why Warren Buffett said, “Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” And why Bill Clinton said he was wrong to avoid regulating derivatives when he had the chance. These financial instruments played a central role in the financial crisis, culminating with the collapse and bailout of AIG.

A key effort in the Dodd-Frank financial reform act has been to bring transparency and reforms to the complex, shadowy market of derivatives. On Wednesday, however, Republicans and Democrats on the House Agriculture Committee approved seven bills that would roll back parts of the Dodd-Frank financial regulations. The bills will now proceed to a floor vote.”

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Read full Washington Post Wonkblog post here

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