From the ATR website.
As the House and Senate enter a conference to reconcile their different financial reform bills (HR 4173 and S 3217), it is clear that the different derivative regulations may pose more of a threat to economic prosperity than had previously been suspected.
- Both bills agree that the vast majority of swap derivative contracts should be traded and cleared on public exchanges, as opposed to through private over-the-counter negotiations between large firms
- The House bill would offer exemptions to a wide variety of end-user corporations like agribusiness, airlines, industrial manufacturers, auto dealers, and others
- The Senate version limits the pool of those who can avoid the onerous regulation to a much smaller group
- Likewise, both bills would subject this new exchange to more regulatory oversight, and the House specifies the SEC and the CFTC as the organizations to exercise that authority, which already adds an unnecessary and burdensome compliance cost
- Given the type of investors who deploy these complex strategies, these regulatory structures add no additional expertise or scrutiny
The crucial difference between the two bills is Sen. Lincoln’s (D-Ark.) amendment 3739 which creates Section 716. This section would require that all federally-insured banks spin-off their swap trading desks at an initial cost of billions to the firms hardest hit by the collapse.
Their economic hit continues for years because of the billions in lost revenue.
As Mike Cavanagh, chief financial officer of JPMorgan Chase explains, “The net result is going to be a shift in the competitive balance in favor of international banks and unregulated entities, which would be very detrimental to the U.S. banking system and economy.”
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