Congressman Stephen F. Lynch (MA-08) led a group of 25 Representatives in calling on the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) to implement strong rules to protect American taxpayers from risky overseas derivatives transactions and to issue guidance on those transactions without delay. The letter urges the CFTC not to bend to pressure from large banks and derivatives dealers by further delaying guidance on how its rules will apply to U.S. banks’ overseas transactions.
"We learned during the financial crisis that U.S. financial companies’ risky international derivatives trades can cost our constituents billions of dollars. AIG's London affiliate engaged in reckless behavior that nearly destroyed the company and when the bill finally came due, U.S. taxpayers picked up the tab to the tune of $182 billion,” Lynch said. “The sooner we get strong cross-border guidance in place, the sooner the promise of protecting taxpayers from another overseas bailout will be realized.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act gave regulators the authority to apply U.S. derivatives rules to American companies’ overseas transactions when those transactions have a “direct and significant” effect on U.S. commerce. Last year, the CFTC issued proposed guidance on overseas financial transactions but delayed the effective date of the Dodd-Frank Act’s cross-border application until that guidance could be finalized. That Exemptive Order expires July 12, 2013.
“There is no reason the CFTC should not lift its Exemptive Order and go forward with its cross-border rules on July 12. After more than 2 ½ years of work and 300 comment letters from stakeholders on all sides of the issue, the CFTC is ready to implement its thoughtful, reasonable approach to the cross-border application of U.S. derivatives reforms,” the Representatives wrote to CFTC Chairman Gary Gensler and SEC Chairman Mary Jo White. “America must lead on this issue.”
The full text of the letter can be found here.