Only Time Will Tell If the CFTC’s Future Partial Regulation of Cross-Border Derivatives Dealing Will Be Adequate to Protect the American People from Another Financial Crisis Ignited by Derivatives
“After 2 ½ years of extensive deliberations and considerations, including receiving and reviewing more than 322 comment letters, almost all from industry, the CFTC approved the future partial regulation of cross-border derivatives transactions. Unfortunately, this mixed bag of some very good, some not-so-good and some to-be-determined provisions will mean that Wall Street’s war on regulation of high risk cross-border derivatives dealing will not end today. Worse, the American people will have to wait to find out if they are finally protected from, as Warren Buffet correctly labeled them, ‘financial weapons of mass destruction,’” said Dennis Kelleher, President and CEO of Better Markets, a nonprofit organization that promotes the public interest in the financial markets.
“Protecting Wall Street’s profits rather than Main Street’s pockets continues to dominate the attempted implementation of financial reform, which is supposed to be about protecting the American people from another financial and economic crisis. The financial collapse five years ago is going to cost the U.S. more than $12.8 trillion and the economic wreckage from it is still inflicting pain and suffering across the country,” Mr. Kelleher said.
“Although the details of the actions taken today remain unknown, this critically important regulation will not be implemented for months, if not years in certain aspects. And, the CFTC opened yet another 75 day comment period on the exemptive order and industry will no doubt flood the CFTC with yet dozens more comment letters and demands for meetings. This will result in the inevitable calls from industry for more delay and changes. That is great news for Wall Street’s lobbyists, but bad news, again, for Main Street, which, five years after the financial crisis, deserves better,” said Mr. Kelleher.
“Most worrisome is what is referred to as ‘substituted compliance’ which makes U.S. regulations and regulators inapplicable overseas. Instead, foreign regulators are supposed to enforce their own regulations which are supposed to be the same as the U.S. History has proven repeatedly, however, that is often not what happens and it becomes just a way for Wall Street, with little more than a keystroke, to move massive amounts of derivatives business across borders and avoid regulation. If not done right by the CFTC in the future, ‘substituted compliance’ will be little more than outsourcing the protection of the American taxpayer to foreign regulators who have repeatedly failed to protect their own taxpayers, investors and depositors,” Mr. Kelleher said.
“Regardless of the specific action taken today, CFTC Chairman Gary Gensler should be applauded for setting a deadline, sticking to it and trying to bring this 2 ½ year process to a close. He should also be congratulated for fighting for the strongest protection for the American people, in spite of unremitting criticism, unprecedented attacks and enormous pressure from the most powerful forces in this country and Europe. As a former partner at Goldman Sachs, Chairman Gensler knows well the dangers posed by the high-risk gambling of the Wall Street derivatives dealers club and how they evade laws, rules and regulations through their convoluted global activities. Only his unwavering commitment to implement the financial reform law, prevent evasion and protect the American people caused today’s action to happen, however imperfect it may be,” Mr. Kelleher concluded.
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Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts. To learn more, visit www.bettermarkets.com
