US Sens. Levin, Collins Seek To Allow Regulation Of Swaps
By Sarah N. Lynch, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Two key senators Monday introduced legislation that
would allow federal regulators for the first time to oversee the trading of
over-the-counter derivatives such as credit-default swaps.
The bill, which was introduced by Sens. Carl Levin, D-Mich., and Susan
Collins, R-Maine, would repeal provisions of the Commodity Futures Modernization
Act of 2000. That law is now blamed by some critics for exacerbating the current
financial crisis because it barred regulators from overseeing the opaque swaps
market.
"Multi-trillion-dollar unregulated swaps markets are going full bore without
government oversight or authority to protect taxpayers from risk," said Levin in
a statement. "Our legislation would take the first step to reduce risk by
removing statutory barriers and giving federal regulators clear authority to put
a cop on the beat in the swaps markets."
Exotic off-exchange financial instruments came under scrutiny last year after
credit-default swap agreements nearly sank insurance giant American
International Group (AIG).
Fearful swap agreements may be posing unknown risks to the wider marketplace,
many federal lawmakers have since called for new regulations over them.
The issue has stirred up old conflicts between securities and commodities
regulators over which agency should have the jurisdiction to oversee swaps.
Despite those differences, the Federal Reserve, the Securities and Exchange
Commission and the Commodity Futures Trading Commission have worked with the
private sector to develop centralized clearing platforms for credit-default
swaps in the hope to minimize potential risks.
IntercontinentalExchange Inc. (ICE) finally opened its clearinghouse earlier
this year and CME Group (CME) got the green light for its platform, but the
clearing of credit-default swaps is only voluntary and questions still remain
over which regulator should be tasked with swaps oversight.
Collins and Levin said Monday their bill should be seen as an "interim
measure." It does not delineate authority over swaps to one particular regulator
nor does it mandate swaps regulation.
Although neither Levin nor Collins sit on the Senate Banking Committee, both
senators have introduced legislation this session aimed at reforming the
financial regulatory structure.
Sen. Levin is a co-sponsor of a bill that would require hedge funds to
register with the SEC.
Sen. Collins, meanwhile, was the first senator to introduce a bill to create a
systemic risk regulator by pooling together a council of existing regulators to
patrol for potential risks to the markets.
Neither of those bills have been put to a Senate vote.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@dowjones.com
(END) Dow Jones Newswires
05-04-091619ET
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