Member Corner

In recent interviews two Democrat officials warned about some of the unintended consequences of the Dodd-Frank Act. These quotes are of particular interest as the Financial Services Committee will consider common-sense legislation next week to promote a functioning derivatives market by giving regulators more time to write the rules and ensure coordination among regulators. H.R. 1573 provides regulators with 18 months to write and vet the rules. With this additional time regulators will be able to conduct cost-benefit analysis that has been lacking in the rule making process, as recently reported by the Inspector General of the CFTC.

H.R. 1573 also realigns the US with the G20 agreement to move to reporting and central clearing by December 2012, reducing the likelihood of divergence in international regulatory regimes and mitigating negative consequences to the competitive position of U.S. markets and market participants.

During a Bloomberg TV interview on May 9, 2011, Phil Angelides, Chairman of the Financial Crisis Inquiry Commission and former California State Treasurer, cautioned:

“They [the international community] are now grappling with the derivatives industry . . .  I think one of the most important issues is to make sure we are in sync so that financial institutions can’t pit the US against the EU so we don’t have regulatory shopping like we had before the crisis.”

Former Democratic SEC Commissioner Annette Nazareth also warned of the unintended consequences of rushed rules under Dodd-Frank:

The Dodd-Frank implementation timetables are “wildly aggressive . . . These agencies were dealt a very bad hand . . . These deadlines could actually be systematic-risk raising.”

-       American Banker, May 3, 2011