WASHINGTON, April 21 (Reuters) - Wall Street banks and dealers will escape “meaningful” regulation if the Federal Reserve oversees over-the-counter derivatives, said a U.S. House chairman on Tuesday, decrying their political power.
Agriculture Committee chairman Collin Peterson said the Commodity Futures Trading Commission should be the lead regulator of OTC trading, as proposed by his committee. He said CFTC is an experienced market regulator and the Fed is not.
“I’m very troubled with the way this is heading,” said Peterson, whose committee oversees the CFTC. He said Wall Street firms wanted “to get out of being regulated in any meaningful way.”
The financial industry is a major political donor, Peterson told the North American Agricultural Journalists. “We are up against some big forces.”
In the end, he said, Democratic leaders in the House will decide the details of financial reforms submitted to a floor vote. There are proposals to create a new “systemic risk” regulator and to require OTC derivatives to be cleared through central counterparties to bring liquidity into the market and make public the terms and participants of OTC dealings.
The IntercontinentalExchange (ICE.N) launched a clearinghouse in March that has the backing of nine of largest dealers in credit default swaps. It has sought the New York Federal Reserve as its regulator because banks are its major users.
“They’re going to the New York Fed because they won’t have to tell anybody what they’re up to,” said Peterson.
The Agriculture Committee approved a bill on Feb 12 to require OTC transactions to go through clearinghouses unless CFTC grants an exemption. It bars the Fed from regulating clearinghouses. (Reporting by Charles Abbott; Editing by Bernard Orr)