Wednesday, December 22, 2010

Incoming Chair of House Oversight Subcommittee Might Introduce Legislation Delaying Dodd-Frank Regulations

Congressman Randy Neugebauer (R-TX), the incoming Chair of the House Financial Services Subcommittee on Oversight and Investigations, might introduce legislation to delay for one year the implementation of some provisions of the Dodd-Frank Act, presumably including derivatives rulemaking mandates. This was reported on theHill.com blog. The possible legislative delay of Dodd-Frank regulations was heralded by an earlier letter from Financial Services Committee Chair Spencer Bachus (Rp-AL) to SEC Chair Mary Schapiro and CFTC Chair Gary Gensler stating that Congress will consider legislation to delay the statutory deadlines in Dodd-Frank if that will allow the SEC and CFTC to move deliberately and carefully to ensure that the derivatives regulatory regime is correctly implemented. Rep. Bachus voiced concern over the direction and pace of the SEC-CFTC efforts to implement the derivatives regulatory regime mandated by the Dodd-Frank Act; and warned that derivatives regulations adopted hastily and without due care could damage the economy.

At the time the Dodd-Frank Act was passed by the House, Reps. Bachus and Neugebauer favored an alternative derivatives regulatory regime whose centerpiece would have been a comprehensive OTC derivatives trade repository that would provide transparency to the market, give regulators the ability to analyze appropriate data to detect and prevent fraud. It would also help regulators understand and analyze counterparty exposures in order to prevent excessive risks from building up within the system.

The Bachus-Neugebauer alternative would also have required regulators to review market data and report back to Congress if they identify an entity not already regulated by a prudential regulator that should be more heavily regulated based on its size or activities in the OTC derivatives markets.