U.S. House lawmakers may advance legislation that would ease Dodd-Frank Act derivatives rules and give banks greater ability to trade swaps overseas.
The House Agriculture Committee is meeting today to consider seven measures, including one that would allow units of banks that hold government-insured deposits -- such as JPMorgan Chase & Co. and Citigroup Inc. -- to trade almost all varieties of derivatives. A separate bill would restrict U.S. regulators’ ability to apply rules to overseas transactions.
The measures, which would need approval from the House and Senate before heading to President Barack Obama for his signature, are part of an effort to amend or limit the Dodd- Frank overhaul of financial regulation before the rules are completed. Dodd-Frank requires the Commodity Futures Trading Commission and Securities and Exchange Commission to complete new regulations after largely unregulated trades helped fuel the 2008 credit crisis.
“The bills we’re considering are targeted fixes to Dodd- Frank so that derivatives can remain a useful, risk management tool for end-users, agricultural producers, local utilities, and small businesses,” Representative Frank Lucas, an Oklahoma Republican and chairman of the agriculture panel, said in a statement. “This is a bipartisan effort to get it right.”
Congressional efforts to change the law have so far failed to win passage in Congress, while the CFTC and other regulators work on finishing the regulations.
One measure calls for altering the 2010 law’s requirement that banks with access to deposit insurance and the Federal Reserve’s discount window move some derivatives trades to separate affiliates that have their own capital. Commodity, equity and structured swaps tied to some asset-backed securities would be allowed in banks under the legislation.
Americans for Financial Reform, a coalition including the AFL-CIO labor federation as well as other unions and consumer advocacy groups, has opposed changes to the so-called push-out rule.
A second bill requires the CFTC and SEC to complete joint rules defining when swaps regulations apply to cross-border transactions. The full rulemaking process requires agencies to conduct analysis of costs and benefits of regulations; federal courts have overturned rules based on inadequate economic assessments.
The CFTC’s proposed guidance, which lacks an economic analysis, has spurred opposition from JPMorgan, Goldman Sachs Group Inc. and other U.S. banks which say they will be hurt compared with foreign-based rivals.
“What this bill is is an attempt to derail the guidance and tie down the ability of the CFTC to do anything,” Marcus Stanley, policy director for Americans for Financial Reform, said in a telephone interview.
Additional legislation is intended to exempt commercial and manufacturing so-called end users from having to post collateral to support trades. A separate bill would prevent trades between company units from being considered swaps and subject to clearing and other Dodd-Frank regulations.