Wall Street Sues for Pre-Crisis Rules, CFTC’s Chilton Says

Wall Street’s court challenges to the Dodd-Frank Act are an effort to return regulations to their state before the 2008 financial crisis, said Bart Chilton, a member of the U.S. Commodity Futures Trading Commission.

Chilton, a Democrat, criticized trade groups that have turned to courts to overturn CFTC regulations. The Securities Industry and Financial Markets Association, U.S. Chamber of Commerce and International Swaps and Derivatives Association Inc. are among trade organizations challenging the agency’s rules with lawsuits by arguing that the CFTC hasn’t adequately assessed the costs and benefits of the regulations.

“They want us to write off the 2008 financial crisis as an aberration and ignore countless reputable scholars who’ve found that the costs of opaque, unregulated derivatives markets are borne by the public,” Chilton said in remarks prepared for an event today in Washington held by policy groups including Americans for Financial Reform. “There is more trash talk and more action regarding litigation related to financial regulation than ever before.”

The court challenges based on cost-benefit analysis are part of a “D.C. Quadrikill” strategy of confronting regulations: “1. kill the bill; 2. defund it; 3. regulate it; and, 4. litigate it,” Chilton said. Americans for Financial Reform, a coalition that includes the AFL-CIO and other labor unions, is joined in sponsoring today’s event by Public Citizen, the Center for Progressive Reform, Economic Policy Institute and Public Citizen.

Organizations including the Chamber of Commerce, the nation’s largest business group, and the Business Roundtable have successfully challenged the legality of regulatory measures by claiming authorities didn’t fully assess the costs. In July, the U.S. Court of Appeals in Washington overturned a Securities and Exchange Commission rule that was intended to expanded shareholder rights.

Schapiro’s Guidance

SEC Chairman Mary Schapiro has responded with guidance instructing agency staff that all rules must be accompanied by an analysis that explains why a regulation is necessary, identifies alternative approaches and considers the costs and benefits on both a quantitative and a qualitative basis.

Representative Scott Garrett, a New Jersey Republican, and Senator David Vitter, a Louisiana Republican, are pushing legislation that would codify the requirement that the SEC conduct a thorough cost-benefit analysis before proceeding with a rule.

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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