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Comment for Proposed Rule 75 FR 63732

  • From: Raquel Simental
    Organization(s):
    Secretary, Women Democrats of Sacramento County

    Comment No: 26384
    Date: 11/15/2010

    Comment Text:

    President Obama signed the Wall Street Reform Bill (HR4173) with the intent of changing the way our countries big banks do business in the wake of the unprecedented crash of our stock market and its resounding effects on our economy as a whole. As your commission reviews how these new regulations will be implemented, I encourage you to hold fast on the regulation of the derivatives market.
    Over the Counter Derivatives played a principle role in the destabilization of the market, and were recklessly traded between big banks in the years leading up to the market’s downfall. The reform bill addressed this by requiring that these transactions be processed by a third party clearinghouse, and limits each interest group to holding an ownership stake not exceeding 20%, with an aggregate limit of 40% for the combined stakes held by banks whose assets exceed $50 billion.
    But now the consideration of allowing an alternate standard, the so-called 5% Rule, undermines the very intent of the legislation. The 20/40 Rule was meant to limit the consolidation of control over a clearinghouse by any one party, and the 5% Rule upholds this intent. But the accompanying 40% qualifier on the 20/40% rule was to prevent big banks from working together to circumvent the true intent of the clearinghouses: establishing transparency and accountability in the market. The 5% Rule contains not such qualifier on the aggregate control held by big banks, therefore allowing such interest to work together to control a clearing house that would both sanction and obscure their dealings in the derivatives market.
    Such actions betray the intent of HR4173, and betray the trust of the American people that are counting on your commission to ensure that the past abuses of power by big banks that led to our recent economic turmoil are not repeated. Please remove the 5% Rule, as it nothing more than a loophole for big banks to bypass the 20/40 Rule.

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