Tuesday, June 14, 2011

Marian Wang: Dodd-Frank Delays Bring ‘Temporary Relief’ for Banks

Dodd-Frank Delays Bring ‘Temporary Relief’ for Banks
by Marian Wang
Pro Publica

There are yet more delays in implementing financial reform. The Commodity Futures Trading Commission has said it needs extra time to write a set of derivatives rules required by Dodd-Frank, and others that were scheduled to go into effect automatically next month may be deferred until the end of the year [1]—leaving the multi-trillion-dollar market mostly unregulated for the time being. The agency is meeting today [2] to hammer out the details of the delay.

Derivatives are essentially bets on the value of an asset [3], and though there are many legitimate uses for these financial instruments, they can also be used by speculators in such a way that destabilizes markets—or, for that matter, entire financial systems. Dodd-Frank aims at making many of those transactions more transparent.

The commission’s chairman, Gary Gensler, said the extra time could be considered “some interim relief [4]” for Wall Street. He’s also said in recent days [5] that volatile commodities prices and speculation in the commodities market show that new derivatives rules are needed.

The delay doesn’t come as a surprise. As the New York Times noted last week [6], the agency in April extended the time for public comments by a month. It has been swamped with meetings with financial industry lobbyists and has even received forged comment letters [7] from stakeholders hoping to influence the derivatives rules.

All this lobbying may have had an effect. Gensler spoke to the U.S. Chamber of Commerce last fall and laid out a strict timetable [8] for implementing derivatives regulations—and nine months later, his agency is figuring out a new one [9].

The CFTC isn't the only one falling behind on derivatives rules. Securities and Exchange Commission—which is tasked with writing rules for a category of security-based derivatives—has said that it will also be delaying them and providing some “temporary relief [10]." The Washington Post noted that the SEC has yet to draft some of its rules [11].

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