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Dodd-Frank Delays Bring 'Temporary Relief' for Banks

There are yet more delays in implementing financial reform. The Commodity Futures Trading Commission has said it needs extra time to write a set of derivatives rules required by Dodd-Frank, and others that were scheduled to go into effect automatically next month may be deferred until the end of the year—leaving the multitrillion-dollar market mostly unregulated for the time being. The agency is meeting today to hammer out the details of the delay.

Derivatives are essentially bets on the value of an asset, and though there are many legitimate uses for these financial instruments, they can also be used by speculators in such a way that destabilizes markets—or, for that matter, entire financial systems. Dodd-Frank aims at making many of those transactions more transparent.

The commission’s chairman, Gary Gensler, said the extra time could be considered “some interim relief” for Wall Street. He’s also said in recent days that volatile commodities prices and speculation in the commodities market show that new derivatives rules are needed.

The delay doesn’t come as a surprise. As the New York Times noted last week, the agency in April extended the time for public comments by a month. It has been swamped with meetings with financial industry lobbyists and has even received forged comment letters from stakeholders hoping to influence the derivatives rules.

All this lobbying may have had an effect. Gensler spoke to the U.S. Chamber of Commerce last fall and laid out a strict timetable for implementing derivatives regulations—and nine months later, his agency is figuring out a new one.  

The CFTC isn't the only one falling behind on derivatives rules. Securities and Exchange Commission—which is tasked with writing rules for a category of security-based derivatives—has said that it will also be delaying them and providing some “temporary relief." The Washington Post noted that the SEC has yet to draft some of its rules.

But derivatives are just one of several areas of the financial reform overhaul that’s running into stumbling blocks, as we’ve reported. Regulators had to get past the threat of budget cutbacks, many key positions at regulatory agencies still sit empty, and various players have been lobbying hard to loosen the rules.

And there’s also this: Opponents to financial reform are still trying to repeal the bill or roll back key parts of it. The Wall Street Journal reported that at least three Republican senators are considering attaching fin-reg busting amendments this week to a non-controversial bill about economic development:

In fact, one amendment filed by tea-party Sen. Jim DeMint (R., S.C.) would repeal the whole financial law.

… Meanwhile, Sen. Jerry Moran (R, Kan.) has filed an amendment that would replace the new Consumer Financial Protection Bureau—a centerpiece of Dodd-Frank that would have broad powers over the financial industry—with a six-person board. His amendment would also allow Congress to make decisions on the agency's funding levels. The board would include the comptroller of the currency and other agencies.

… A third amendment, filed by Sen. David Vitter (R, La.) would repeal parts of the Dodd-Frank law that give a council of regulators, known as the Financial Stability Oversight Council, the authority to decide if a company is "too big to fail." It would also block the Federal Reserve from bailing out failing companies and set rules for Fed emergency-lending programs.

Some of the law’s more outspoken critics have also vowed to block any candidate to lead the Consumer Financial Protection Bureau.

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