Second House Panel Votes to Delay Swaps Rules

Measure would postpone effective date for new regs until September 2012

The Financial Services Committee today became the second House panel to approve a measure to delay the implementation of new U.S. rules for the derivatives market dominated by banks like JPMorgan Chase & Co. and Goldman Sachs Group Inc.

Chairman Spencer Bachus, the Alabama Republican who co-sponsored the bill to delay the rules until Sept. 30 of next year, said the legislation was “needed to restore order to the Dodd-Frank Act derivatives rulemaking process.”

Lawmakers approved the measure in a 30-24 party-line vote, with all 24 Democrats present voting against the proposal. The House floor would be the next stop for the bill, which is unlikely to progress beyond that because Democrats control the Senate and White House.

The Commodity Futures Trading Commission and Securities and Exchange Commission are writing regulations, mandated by Dodd-Frank, for the $601 trillion swaps market after largely unregulated transactions helped fuel the 2008 credit crisis.

House Republicans, who took power in January, have pushed changes on several fronts to the Dodd-Frank law enacted last year. The lawmakers, who almost unanimously opposed it, have said the law represents regulatory overreach.

Bachus and his colleagues have moved several bills through the committee designed to roll back or reshape provisions, including the power of the new Consumer Financial Protection Bureau.

More Time
The House Agriculture Committee approved a delay for the derivatives rules earlier this month. Under the version approved today, most new derivatives rules would not take effect until September 30, 2012.

Lawmakers on both sides agreed that regulators will need more time to finalize the rules, most of which are due by July 21. The disagreement, Democrats said, is language in the bill halting even finalized regulations from implementation.

“This is an effort to postpone substantive regulation over the swaps market,” Representative Barney Frank of Massachusetts, the top Democrat on the committee, said today. The measure would “prohibit” regulators from implementing the bulk of the rules before the new deadline, Frank said.

Lawmakers approved, by voice vote, an amendment that would reduce the delay to the end of September from Dec. 31, 2012, as well as the requirement that the SEC complete its clearing rules within the original timeline. Lawmakers also approved an amendment that would maintain the deadline for any CFTC and SEC rules that would “address speculative trading.” Representative Stephen Lynch, a Massachusetts Democrat, offered the amendment, which was adopted by voice vote.

“This bill shouldn’t be partisan,” said Representative Frank Lucas of Oklahoma, a Republican who also serves as the chairman of the Agriculture Committee, which approved the bill earlier this month. “It doesn’t repeal anything or make substantive changes.”

On the same day lawmakers voted to give the CFTC more time to complete the rules, members of the House Appropriations agriculture subcommittee voted to cut the agency’s funding by 15 percent. The subcommittee, by voice vote, approved a $30 million reduction in the CFTC’s annual budget -- to $172 million from its current level of $202 million.

The budget cut is likely to be opposed by Democrats who control the Senate and who have blocked previous efforts to restrict funding for agencies implementing Dodd-Frank rules.



Bloomberg News

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