WASHINGTON U.S. regulation of the swaps market, a $600 trillion behemoth that is now largely unpoliced, would be delayed until September 2012 under a Republican bill approved on Tuesday by a House of Representatives committee.
The measure is not expected to become law. Democrats in control of the Senate oppose it, as does the White House, but it shows the persistent clout of Wall Street in Congress almost three years after the worst of the financial crisis.
Swap-market regulation is mandated under 2010's Dodd-Frank financial reforms, approved in response to the 2007-2009 crisis, which was amplified across world markets by unregulated credit default swaps and other off-exchange derivatives.
The Republican-controlled U.S. House Financial Services Committee voted 30-24 to postpone the Dodd-Frank swaps rules until late 2012, amid calls from the financial industry for delay. The rules are mostly on track to take effect this year.
The postponement is part of a broad effort by Republicans to undermine Dodd-Frank by delaying its implementation and cutting funding for the agencies doing the implementing.
The committee vote came as a European Union panel voted on Tuesday for a swaps crackdown. Hurdles lie ahead for the draft EU measure, but its approval moved the EU forward on catching up with the United States on swaps oversight.
The swaps market is dominated by a handful of giant firms, including JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley. All were bailed out by taxpayers in the crisis.
Market players are lobbying to defend their swap-market profits and are saying that the complicated Dodd-Frank crackdown is proceeding too fast. Commercial end-users of swaps also have expressed concern about the pace of reform and called for more time to hash out the intricacies of the rules.
"The additional time and information provided by this bill will allow the regulators to engage in the proper due diligence needed to get the derivatives rules right from the start," said committee Chairman Spencer Bachus, a Republican.
The Commodity Futures Trading Commission and the Securities and Exchange Commission are implementing the new rules.
Democratic Representative Barney Frank, co-author of the sprawling Dodd-Frank reforms, said that the GOP measure "is not a bill to give the regulators more time. It is a bill to prevent the regulators from acting ... People on Wall Street don't like these restrictions."
The Republican-controlled House Agriculture Committee voted on May 4 for an 18-month delay in swap-market regulation.
A U.S. Senate subcommittee will hold a hearing on Wednesday on Dodd-Frank rules dealing with derivatives clearinghouses.
Swaps are contracts traded in private deals among Wall Street banks and commercial corporations that use them to hedge against the risks of changes in the costs of productive inputs such as fuel and raw materials.
(Reporting by Kevin Drawbaugh; Editing by Gary Hill)