In the News

By Craig Gilbert

Washington, D.C. -- With Milwaukee Democrat Gwen Moore a vocal supporter, the House passed a bill Wednesday that would exempt from US regulation many overseas trades in derivatives.

While the bill drew overwhelming GOP support, it sharply divided House Democrats, with critics charging it would weaken new regulations aimed at curbing risky Wall Street trading.
Moore, who sits on the House Financial Services committee, called it a “very modest change” that will help maintain American competitiveness.

Moore said in an interview Wednesday that “I appreciate … how frightening these derivates and swaps have been.” But she said, “The notion that Dodd-Frank is being dismantled here is something that is really not the case and if I felt that it were, I’d be stridently opposed to it.”

The legislation is supported by the financial industry but opposed by a liberal coalition of labor and advocacy groups and the Obama administration. Opponents charge the bill is one of several being pushed by big banks to loosen the new curbs on derivatives contained in Dodd-Frank, the big regulatory overhaul enacted after the financial meltdown of 2008. Derivates are complex financial securities that played a role in that crisis.

Under the legislation, trades made overseas in the world’s nine biggest foreign markets would be exempt from US regulation. Critics say that creates a major loophole in the regulation of derivatives, allowing banks to dodge the tougher rules that have now been adopted in this country.

“We shouldn’t have to rely on foreign regulators who don’t even have regulatory regimes to protect us. We should protect ourselves,” said California Democrat Maxine Waters, saying the measure would drag swaps “back into the shadows” and put the nation at greater economic and financial risk.  

Another opponent, New York Democrat Carolyn Maloney, said it “blows a hole” in Dodd-Frank. Supporters said the bill would ensure American banks are competitive and US companies have access to foreign markets when they use derivatives.

Moore said it was important to major manufacturers in her district who legitimately use derivatives as financial tools. She and other supporters said the bill would relieve American businesses from uncertainty, because it forces the key US oversight agencies to agree on how “cross-border” swaps are regulated. The bill’s supporters said that American regulators could still bring trades back under US rules if they find that regulations in a given country are significantly weaker than in the US.

All but two Republicans voted for the measure, including Wisconsin’s five GOP House members.

Only 73 Democrats supported the bill while 122 opposed it. Of the other two House Democrats from Wisconsin, Ron Kind of La Crosse voted as Moore did in support of the measure; Madison’s Mark Pocan voted against it.

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