On the recordOctober 30, 2013
While I recognize the many legitimate uses of derivatives in today's financial marketplace, I also believe it is critically important that derivatives be properly regulated so that end-users and consumers can reap their benefits without putting the larger economy at risk. For that reason, I think we need to tread carefully before making material modifications to the regulatory regime for derivatives established in the Dodd-Frank Wall Street Reform Act-- and this note of caution is equally applicable to what might be described as piecemeal changes to Title VII of Dodd-Frank, given the inherently complex and interrelated nature of these sophisticated financial instruments. In that regard, the Swaps Regulatory Improvement Act would substantially revise Section 716 of the Dodd-Frank Act to permit a broader array of derivatives transactions--including those involving commodity swaps, equity swaps and certain credit default swaps--to occur inside federally backed financial institutions, rather than in separately capitalized subsidiaries as required under current law. Impacted institutions argue that this existing ``push out'' requirement for these categories of derivatives places them at a disadvantage relative to their foreign competition by increasing the cost of those transactions and by effectively preventing the netting of positions between themselves and their customers. Additionally, proponents of H.R.…
