Congress Has Nine Bills Pending That Would Weaken Derivatives Regulations

JP Morgan’s $2 billion derivatives trading debacle has forced House Republicans to, at least temporarily, delay their efforts to repeal the Dodd-Frank financial reform law. Republicans on the House Agriculture Committee yesterday pushed back votes on a series of bills that would weaken the derivatives portion of Dodd-Frank.

Those bills had already been cleared by the House Financial Services Committee, which has been making a concerted effort to chip away at Dodd-Frank. And overall, according to a report from Public Citizen, nine bills are pending in Congress that would weaken Dodd-Frank’s title on derivatives:

Since the passage of Dodd-Frank, industry has engaged in a concerted effort to weaken it. At least nine bills are pending in Congress that would water down its derivatives reforms. Three additional bills would saddle federal agencies with additional burdens to fulfill requirements to issue concerning financial services, including those involving derivatives.

Among other things, these bills would eliminate a requirement for federally insured banks to spin off their derivatives operations; reduce disclosure requirements for certain derivatives trades; provide a broad exemption from Dodd-Frank’s provisions for swaps involving foreign affiliates of U.S. companies; and exempt purportedly small players, even those with up to $200 billion in the notional value of their derivatives exposure.

These proposals threaten to create large oversight-free zones that could allow risky behaviors to flourish.

All but one of those nine bills is sponsored by a Republican, with Rep. Jim Himes (D-CT) the lone Democrat.

In addition to attempting to gut derivatives regulation, House Republicans have also refused to give the Commodity Futures Trading Commission, which is charged with enforcing those regulations, the funds needed to do its job. As CFTC Commissioner Bart Chilton wrote this week, the CFTC “is shy over $100 million of what is needed and what was requested in the President’s budget. And, the CFTC is a front-line regulator charged with overseeing the exact type of trading that caused the economic collapse and dealt the body blow to JPM.”