House Financial Services Committee Chairman Barney Frank (D-MA) today circulated a discussion draft of legislation to regulate over-the-counter (OTC) derivatives. Chairman Frank also announced this week that the Committee will hold a hearing on Wednesday, October 7, to discuss the reform of the largely unregulated OTC derivatives market as well as the discussion draft released today. A full text of the discussion draft can be viewed here.
“Lacking and lagging regulation of OTC derivatives was a major contributing factor to last year’s crisis, including the highly-leveraged credit default swaps at AIG that prompted government intervention. I commend the hard work of the Chairman and the Committee on this issue. This bill moves us in the right direction by reducing risk to the economy with robust and dynamic oversight of major market participants, while preserving appropriate risk-management tools for end users,” said Congresswoman Melissa Bean (D-IL), Financial Services Committee member and co-chair of the New Democrat Coalition’s Financial Services Task Force.
“The New Democrat Coalition, applauds the work of Chairman Barney Frank and the members of the Financial Services Committee for crafting a proposal to provide greater regulation and transparency to the over-the-counter derivatives market,” said Congressman Joseph Crowley (D-NY), Chair of the New Democrat Coalition. “I congratulate my fellow New Dem Members, 15 of whom serve on the Financial Services Committee, for their work with Chairman Frank to reform our financial system to provide greater protections for American consumers and businesses while ensuring continued access to valuable tools to manage risk. New Dems are dedicated to continuing our work with Chairman Frank to reform the derivatives market and our financial system as a whole.”
“I want to thank Chairman Frank for accepting suggestions from the New Democrat Financial Services Task Force in crafting new rules for derivatives trading,” said Congressman Gary Peters (D-MI), a Member of the New Dem Financial Services Task Force and the House Financial Services Committee. “These changes will provide additional clarity for industry while still maintaining tough standards that will prevent abuse.”
“For all those who believe we need comprehensive, thoughtful regulatory reform, Chairman Frank is exactly the leader you want to have in the fight,” said Congressman Michael E. McMahon (D-NY), Member of the New Democrat Coalition. “Chairman Frank’s draft provides a solid start to discussions about reforming the derivatives market. A year ago, many critics of derivatives were ready to eliminate the entire over-the-counter market. This reaction was unreasonable and not in the best interest of our economy. The Frank proposal addresses the systemic risk issues by mandating exchange clearing and trading for the majority of products while preserving the over the counter market for specialized contracts, in much the same way that the bill I introduced with the New Dems does. The New Dems and I have been working closely with Financial Services Committee to address a number of key concerns about protecting end-users and the transparency and integrity of the US financial market, and I look forward to working with Chairman Frank, Chairman Peterson and all my colleagues on this important issue.”