Deputy Treasury Secretary Neal Wolin said the Obama administration will resist efforts by lobbyists and Republican lawmakers to slow the changes required by the Dodd-Frank overhaul of U.S. financial regulations.
“We must move forward with implementing this law,” Wolin said today in a speech at the Pew Charitable Trusts in Washington. “We are doing so quickly, carefully and responsibly. We will continue to do so in the face of these criticisms. And we will continue to oppose efforts to slow down, weaken, or repeal these essential reforms.”
Dodd-Frank, the sweeping rules overhaul enacted last year, created a council of regulators to expand oversight of the country’s biggest financial firms in response to the 2008 credit crisis that led to the collapse of Lehman Brothers Holdings Inc. The law also bolsters supervision of derivatives trading as well as consumer lending and proprietary trading by banks.
Republican lawmakers, including House Financial Services Committee Chairman Spencer Bachus, wrote to regulators in March, urging them to slow implementation to ensure there is sufficient time to gather public comment and to ensure the new rules don’t inhibit economic growth.
“All of us know that on the highway ‘speed kills,’” Bachus of Alabama said today in a statement responding to Wolin’s remarks. “Speed can also kill jobs when Washington rushes sweeping regulations into place without giving the public adequate time to comment.”
The Securities Industry and Financial Markets Association, Wall Street’s biggest lobbying group, said Dodd-Frank shouldn’t be rushed “for the sake of meeting arbitrary deadlines,” according to a statement released after Wolin’s speech.
“Rushing to meet deadlines without proper thought, analysis and coordination amongst regulators will only result in a fragmented regulatory structure, regulatory arbitrage, and uncertainty in the market place,” Tim Ryan, Sifma’s president and chief executive officer, said in the statement. Moving too hastily “would lead investors to withhold capital desperately needed to fuel economic growth,” he said.
Regulators are taking steps to make derivatives markets more resilient and transparent to reduce the risk and costs of a potential crisis, Wolin said. Proposed rules take into account the lower risk posed by commercial end-users who use derivatives contracts to hedge operations rather than to speculate, he said.
“The statute does not allow capital requirements to be imposed on commercial end-users of derivatives,” Wolin said. “Recently, the regulators have further clarified in the proposed rules that when these end-users operate within established risk limits, they will not have to post margin on their contracts -- leaving that capital free for job creation and investment.”
Regulators have proposed two sets of rules for margin requirements in swap transactions that may force commercial end-users such as airlines and large manufacturers to set aside money to reduce risk in certain trades.
End-users would escape margin requirements in swaps with non-bank dealers or major swap participants under a proposal by the Commodity Futures Trading Commission. A joint proposal released by the Federal Deposit Insurance Corp., the Federal Reserve and three other regulators could force end-users to post margin in swaps with banks.
Wolin also said the Office of Financial Research, created by the law to help agencies collect and coordinate information, is “hard at work” even though it doesn’t have a director. He said he expects a voting member who specializes in insurance oversight to be named “quite soon” to the Financial Stability Oversight Council.