Comment Text:
Chairman Gary Gensler
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
202-418-5000
202-418-5521, fax
202-418-5514, TTY
E-mail: [email protected]
Re: No Offshore End-Run Around Derivatives Reform
Dear Chairman and Commissioners:
Stand up for rules that apply the transparency and safety requirements of the Dodd-Frank Act to all derivatives transactions relevant to U.S. markets, regardless of whether these transactions are routed through a foreign subsidiary or entity.
We need rules that cover all transactions, wherever they occur, which have the potential to jeopardize America’s financial institutions and financial security. That’s how the rules must to be structured in order to work.. And that’s how Dodd-Frank was written. I call on you to uphold that standard.
Exempting the transactions of overseas subsidiaries from the full scope of derivatives regulation would be a giant loophole, encouraging banks to move transactions offshore and permitting an indefinite continuation of the kind of reckless activity that helped crash the economy in 2008.
Delay, too, can be a strategy for weakening and evading the law. Four years after the financial crisis and two years after the passage of Dodd Frank, it is time to insist on high standards that apply to all the derivatives transactions of U.S. banks and their subsidiaries.
Thank you for the opportunity to bring these remarks to your attention.
Yours sincerely,
Robert E. Rutkowski
cc: House Minority Leadership
2527 Faxon Court
Topeka, Kansas 66605-2086
P/F: 1 785 379-9671
E-mail: [email protected]
Overview
One of the major accomplishments of the Dodd-Frank Act of 2010 was to require basic regulatory standards of transparency and safety in the market for derivatives – the complex and previously unregulated financial markets that brought down AIG and helped trigger the financial crisis. That effort now faces a major threat. Wall Street’s latest scheme for undermining reform is to limit the applicability of the law so that companies can escape derivatives oversight by shifting business overseas – something they can do simply by hitting a key or two on a computer screen.
The Commodity Futures Trading Commission is writing the rules to implement the law, and the approach they proposed covers transactions that could jeopardize our country’s financial security, no matter where they occur. That’s how it should be. It’s how Dodd-Frank was written. Modern financial markets are inherently global. The big banks have hundreds of foreign subsidiaries each. They can move transactions among them with ease; and their profits and losses return to affect the parent company, the U.S. economy, and taxpayers.
Now Wall Street – with help from foreign banks and foreign regulators – is pushing for rules that would effectively limit the scope of U.S. enforcement to derivatives traders physically based in this country. This would be a giant loophole, encouraging banks to move transactions offshore to escape regulation, and thus permitting an indefinite continuation of the kind of reckless activity that helped crash the economy in 2008 and more recently led to JP Morgan’s massive “London whale” debacle, at a cost of $6 billion and counting.
We need strong rules that cover all transactions with an impact on our economy in order to protect us from the perils of unregulated derivatives trading. The banks say it should be enough for them to follow the rules of the countries where their subsidiaries are located. But some countries are years away from serious regulation of derivatives, and some see loose rules as a way of wooing business. Exempting companies from U.S. regulation would trigger a ”race to the bottom” as foreign countries compete to become regulatory havens.
Re: AFR Statement to Agriculture Committee:
http://ourfinancialsecurity.org/2012/12/afr-statement-on-international-derivatives-transactions/
