Floor Vote Prep | H.R. 992, the Swaps Regulatory Improvement ActPosted by on October 27, 2013
Manufacturers, farmers, ranchers and Main Street businesses are concerned that complicated provisions of the Dodd-Frank Act related to derivatives swaps will inhibit their ability to manage risk and protect themselves from extreme fluctuations in the price of fuel, fertilizer and commodities. This ultimately would increase costs for consumers of their products and hurt America’s economy.
While Dodd-Frank was sold to the public as “Wall Street reform,” its provisions related to derivatives have a much wider reach and a much broader impact. For example:
Under Section 716 of Dodd-Frank, federally insured banks are not permitted to conduct certain swaps trading. This compels banks to “push out” these trades to separate non-bank affiliates, which are less-regulated and more highly leveraged.
The overwhelming majority of derivatives were not the cause of the financial crisis. Swaps based on currencies, interest rates, agricultural products and equities – the same swaps that are the subject of this legislation – performed as expected.
The bipartisan H.R. 992 – which the Financial Services Committee approved 53-6 (.pdf) on May 7, 2013 and the House Agriculture Committee approved 31-14 on March 20, 2013 – amends Section 716 to ensure that federally insured financial institutions can continue to provide risk-mitigation efforts for clients like farmers and manufacturers that use swaps to insure against price fluctuations. Furthermore, H.R. 992 ensures these swaps will take place within financial institutions that are closely monitored by federal regulators, rather than in non-bank affiliates that are not watched as closely by regulators.
The opinions expressed below are those of their respective authors and do not necessarily represent those of this office.
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