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June 26, 2013

Senators' Letter to Treasury Secretary Lew on Cross Border Wrong on the Facts

Six U.S. Senators wrote a letter today to Treasury Secretary Lew jumping into the heated debate about whether or not the CFTC should finalize its cross border regulation, which Wall Street, its allies and others are fighting mightily to prevent.  The Senators basically argued that the CFTC should not finalize its cross border regulation until the SEC does (and, even then, only after waiting for foreign governments and regulators to pass and implement comprehensive derivatives reform, which none of them have done yet, five years after the financial collapse that was caused largely by unregulated, high risk derivatives). 

They claim the SEC and CFTC must “harmonize” their rules to avoid a host of purported problems.  The Senators, however, failed to note a number of material facts essential to understand the issues and properly evaluate them.  Better Markets sent a letter to Secretary Lew bringing those facts to his attention.  The full letter is attached below, but here are the key points in summary:

“First, the recently proposed rule by the Securities and Exchange Commission (‘SEC’) is inapplicable to the Commodities Futures Trading Commission (‘CFTC’) as a legal matter due to entirely different statutory mandates.  Second, it is also inapplicable as a practical matter:  the CFTC has jurisdiction for more than 96.5 percent of the derivatives markets and the SEC less than 3.5 percent.  Third, the SEC just proposed it’s 650 page rule in May, while the CFTC has been considering cross border regulation for more than 2 ½ years, has received and reviewed more than 322 comment letters, and proposed its guidance a year ago.”

“The CFTC should delay no more and the SEC should follow its process as appropriate.  Neither should be held hostage to each other, particularly because they are largely irrelevant to each other.”

“Five years ago now, the American people suffered the worst financial crash since 1929 and are still suffering from the worst economy since the Great Depression.  The human and monetary costs inflicted on the American people have been enormous, ultimately costing more than $12.8 trillion.  Given that much of this was caused by cross border derivatives trading and investments, it is already past time for the CFTC to protect the American people by finalizing its regulation.” 



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