“A bipartisan group of four representatives introduced a sneaky little bill Wednesday that would dismantle a huge chunk of the historic financial reform laws enacted after the financial crisis.

“The Swap Jurisdiction Certainty Act, introduced by Reps. Scott Garrett (R-N.J.), Mike Conaway (R-Tex.), John Carney (D-Del.), and David Scott (D-Ga.), three of whom sit on the House Financial Services Committee, would allow big banks to shift risky activities to foreign subsidiaries in order to avoid US regulations. Part of the landmark 2010 Dodd-Frank financial reform act requires that derivatives—financial products whose value is based on things like currency exchange rates and crop prices—be traded in public marketplaces, instead of in private. The new bill could exempt foreign companies from these US derivatives rules, which sounds reasonable; the law purportedly just affects other countries. But what it would mean is that huge US-based banks that operate internationally could just do their paperwork through their international arms to avoid US regulations, effectively gutting the section of Dodd-Frank that gave federal regulators the authority for the first time to regulate derivatives such as the credit default swaps that helped cause the 2007 bank failures.

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“But last year, when Congress introduced a similar bill, financial reform advocates slammed it. Americans for Financial Reform, a group of national and state organizations that push for common sense financial reforms, wrote an open letter to representatives in May 2012:

“The legislation “would create an overwhelming temptation to move swaps business overseas, indeed to the foreign jurisdictions where regulation was most lax compared to the US. In addition to seriously undermining the basic transparency and accountability requirements in the US, such a ‘race to the bottom’ would be a serious blow to the entire international effort to make derivatives markets safer.

“Walter has said the derivative rules were the “critical linchpin” of Dodd-Frank because of the “global nature of the market.”

“Indeed, says Dennis Kelleher, president and CEO of the Wall Street watchdog group Better Markets. “The CFTC proposed very strong cross-border guidance,” he told Mother Jones. “Even if the CFTC gets all of the other rules correct—if they don’t get the cross-border rules right, then a lot of their other work doesn’t matter.””

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Read full Mother Jones article here