Representatives Vote to Deregulate Overseas Swaps

Washington, D.C. — On June 12, the House of Representatives voted 301-124 to pass the “Swaps Jurisdiction Certainty Act,” a bill that would create new requirements for the Dodd-Frank rule-making process and limit regulation of U.S. banks on derivatives transactions known as swaps.

The bill would direct the Commodity Futures Trading Commission and the Securities and Exchange Commission to issue rules jointly on cross-border derivatives trades by U.S. financial institutions.

The SEC recently issued  rules on cross-border trades that would allow overseas branches of U.S. banks to be exempt from U.S. regulations when conducting swaps transactions that only involve non-U.S. dealers. The Commodity Futures Trading Commission is pursuing tougher rules on cross-border swaps that would require overseas branches of U.S. banks to follow U.S. regulations when conducting all swaps transactions. The Swaps Jurisdiction Act would force the Commodity Futures Trading Commission to weaken its rule in order to match the SEC’s rule exempting cross-border swaps from U.S. regulations.

According to an analysis from Bloomberg News, more than half of all derivatives trades by the biggest American banks are conducted by overseas affiliates.

The bill is supported by the American Bankers Association, the Securities Industry and Financial Markets Association, and the U.S. Chamber of Commerce, and opposed by Americans for Financial Reform, the AFL-CIO, and Public Citizen, among others.

Data: MapLight analysis of campaign contributions to members of the House from interests supporting or opposing the Swaps Jurisdiction Act from Jan. 1, 2011 – Dec. 31, 2012. Contributions data source: OpenSecrets.org

• House members voting ‘YES’ received, on average, 102 percent more money from interest groups supporting the bill than house members voting ‘NO.’
• House Democrats voting ‘YES’ received, on average, 75 percent more money from interest groups supporting the bill than house  Democrats voting ‘NO.’
• House member Scott Garrett (R-NJ), bill sponsor, received $416,249 from supporting interests.

A link to this story can be found  here.

In May, the House Financial Services Committee approved six bills that would roll back pieces of the Dodd-Frank Act designed to improve regulation of the derivatives market. The most contentious of the bills, H.R. 992, would repeal most of Sec. 716 of the 2010 financial reform bill, Dodd-Frank, which requires banks to spin off their derivatives activities into separate affiliate institutions that do not have access to federal bank subsidies. Many financial reform advocates consider Sec. 716 to be Dodd-Frank’s key measure for preventing public subsidies of speculative derivatives trading.

A link to the money and vote analysis for H.R. 992 can be found here.

Note: Bank of America, Goldman Sachs, JPMorgan Chase, and Citigroup collectively hold 93.2 percent ($208 trillion in notional value) of all derivatives contracts.