Frank's (Financial Regulation) Plan Criticized As Too Lax

Source: WSJ

WASHINGTON -- Two federal regulators criticized parts of Rep. Barney Frank's proposal to overhaul financial regulation, saying it will let large companies escape restrictions on the types of financial products that contributed to last year's crisis.

Wall Street firms have pressed Mr. Frank, chairman of the House Financial Services Committee, to tone down the Obama administration's plan to have all "standard" derivative products trade on regulated exchanges or electronic platforms. The firms say that would hurt companies by making it harder to manage risk with tailored financial products such as contracts tied to the future price of energy or crops.

Nodding to the concerns, Mr. Frank's draft legislation eliminates mandates for trading on exchanges or equivalents. It also narrows the kinds of trades that would have to pass through a central clearinghouse.

Gary Gensler, chairman of the Commodity Futures Trading Commission, told a meeting of the committee that Mr. Frank has made the bill too lax on financial firms. He cited a provision allowing major companies that trade swaps to escape new regulations if they are making the trades to manage business risk.
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Republicans called Mr. Frank's bill a step in the right direction. "When viewed in the context of the proposal that had been previously put forward by the administration on derivatives, Chairman Frank's discussion draft is an improvement in some respects," said Rep. Scott Garrett (R., N.J.).

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These swaps that Barney Frank wants to exclude from regulation were a major cause of the financial crisis. Frank's proposals here are incredibly reckless -- this is a multi-trillion dollar market with enough weight to bring down the entire world economy.

I didn't think Barney was one of them. Live and learn.

I remembered the name of the poster, I would pm an apology.