AFTER TWO YEARS, VERY FEW LAWS AND RULES HAVE COME OUT OF COMMITTEE AND MADE LAW......IN ANY OF THESE REGULATORY AGENCIES.  THEY ARE NOW MOVING ON THEM AND WE WILL SEE A LOT OF RULES ADVANCING THIS AND NEXT YEAR.  IT IS VERY IMPORTANT TO COMMENT ON ALL THESE, AS WE KNOW THAT WITH A CORPORATE DEMOCRATIC LEADERSHIP, THE PEOPLE FILLING THE ORGANIZATIONS REPRESENTING THE PEOPLE WILL BE THIRD WAY POLICY PEOPLE.

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Let's remember the course of events that gave us this economy ........it played out in the Clinton Administration as the Clinton economic team worked to break Glass Steagall to unleash global corporations and Wall Street on the American democracy.  TOO MANY MIDDLE-CLASS CITIZENS AND LOW-INCOME LIVING A FIRST WORLD QUALITY OF LIFE SAID THE CLINTON TEAM!!!!!


Wednesday, October 21, 2009

 FRONTLINE: ANOTHER LAISSEZ-FAIRE DEBACLE
Posted by Steven Ramirez  Corporate Justice Blog

I just finished watching Frontline: The Warning, which I highly recommend to anyone interested in financial regulation. The basic storyline should now be familiar to all: in good times the lessons of past financial crises fade quickly; those with economic power co-opt political leaders; regulations are rolled back and new activities are left to market forces; isolated voices may sound alarms but they are ignored or silenced; a new crisis emerges that teaches once again that laissez-faire is an economic dead end. The lesson typically costs trillions. Here the hero is Brooksley Born, the brilliant head of the CFTC, and the antagonists are Alan Greenspan, Lawrence Summers, Robert Rubin and Timothy Geithner. The issue is the regulation of derivatives, which Born pushed hard for and which ultimately led to her resignation.

The interview with Joseph Stiglitz is a classic. Arthur Levitt's regret at failing to support the effort for regulation is rather poignant. Greenspan's famous admission that his laissez-faire views were "flawed," is also a classic moment.

But perhaps the most important part of the documentary is when it traces the propagation of the deregulation mania from Reagan to Clinton to Bush II to the present day Obama administration. It seems like changes in administrations are meaningless when it comes to the power of entrenched elites.

Another disturbing message is that the time for reform is fading. As Paul Krugman recently recognized, Stiglitz too worries that the political energy towards regulatory reform has dissipated. Joe Grant's excellent post on this reality echoes this fact.

Brooksley Born's final statement is downright chilling. She warns that the failure to address gaps in our financial regulatory infrastructure will lead to crisis after crisis until we get regulation right.

I am today more skeptical than ever that future financial crises can be averted. First, the Obama reform proposals were weak at inception. Second, the banks are pulling out all the stops to kill even these weak proposals. Finally, time is certainly on the side of the banks. Since it is now over a year after the collapse of Lehman and the multi-trillion dollar bailouts, the probability of real reform is now receding on a daily basis.

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JP Morgan 'pays another $100m' over London Whale trading scandal Wall Street bank to settle charges with Commodity Futures Trading Commission, according to reports

 JP Morgan last month paid a total of $920m in penalties to four US and British regulators over the London Whale scandal.

JP Morgan Chase has reached an agreement with the Commodity Futures Trading Commission (CTFC) to pay $100m to settle charges related to the bank's "London Whale" trading scandal, according to media reports.

The US derivatives regulator is expected to leverage new powers granted to it by the Dodd-Frank Act and fine JP Morgan for the reckless use of so-called manipulative devices, the Wall Street Journal reported, citing people familiar with the matter.

JP Morgan disclosed last month that it had received a Wells notice from the CFTC and that the regulator intended to recommend enforcement action against the bank.

The CFTC settlement could come as soon as this week and would include the bank admitting some wrongdoing, the New York Times reported, citing people briefed on the negotiations.

The bank last month paid a total of $920m in penalties to four US and British regulators to resolve the biggest civil probes of the bank's $6.2bn Whale derivative losses.



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Does any mention that the LIBOR fraud involved trillions of dollars of fraud and that the US government is acting to protect these banks against private lawsuits by claiming a postage stamp settlement that will sequester evidence just as they did with the subprime loan fraud?

We all know the US Justice Department is working with banks to mitigate all criminal charges and working to allow most of the tens of trillions of dollars in financial fraud stay with the banks.  We also know this is not how Rule of Law and Equal Protection works so when a government suspends Rule of Law....its suspends Statutes of Limitations and leaves open future legal actions!


Libor Settlements Said to Ease CFTC Path in Rate-Swaps Probe By Matthew Leising - Aug 7, 2013 11:49 AM ET
Bloomberg Financial


Play Jenkins Hails Bold Plan to Bolster Barclays Capital The $2.5 billion of settlements reached in the London interbank offered rate rigging scandal are compelling banks to hand over information in the probe of a separate financial benchmark tied to interest-rate derivatives.

Enlarge image Terry Farr, a former broker at RP Martin Holdings Ltd., right, leaves in a taxi after appearing at Westminster Magistrates Court in London on July 19, 2013. Two former RP Martin Holdings Ltd. employees, Farr, and James Gilmour, who became the first brokers to face prosecution in the global probe of manipulation of the London interbank offered rate made their first appearance in a London courtroom. Photographer: Simon Dawson/Bloomberg

8:11 July 10 (Bloomberg) -- W. Richard Holmes, chief executive officer for Europe at Standard Chartered Plc, talks about the new administration of the London interbank offered rate and business outlook. He speaks with Mark Barton and Anna Edwards on Bloomberg Television's "Countdown." (Source: Bloomberg)

Enlarge image The Royal Bank of Scotland Group Plc said in a regulatory filing last week that it “continues to cooperate” with inquiries of its “submissions, communications and procedures relating to the setting of a number of trading rates,” including ISDAfix. Photographer: Chris Ratcliffe/Bloomberg

Enlarge image Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc, the lenders fined in the Libor case, risk criminal prosecution in the U.S. under the settlement agreements if they’re seen as withholding evidence related to potential manipulation of the benchmark known as ISDAfix, according to a person with knowledge of the matter, who asked not to be identified because details of the investigation aren’t public. Photographer: Scott Eells/Bloomberg

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SONY® Alpha NEX CamerasFree Shipping & Exclusive Deals. Shop the Official So... Store.Sony.com/AlphaNEX Buy a link Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc, the lenders fined in the Libor case, risk criminal prosecution in the U.S. under the settlement agreements if they’re seen as withholding evidence related to potential manipulation of the benchmark known as ISDAfix, according to a person with knowledge of the matter, who asked not to be identified because details of the investigation aren’t public.

“Those banks have to cooperate at the risk of blowing whatever agreements they have,” Peter Henning, a Wayne State University law professor in Detroit and a former U.S. Justice Department prosecutor, said in a telephone interview. “They are over a barrel.”

The Justice Department deferred prosecution against the three banks as part of the Libor-rigging settlements and the Commodity Futures Trading Commission, the primary investigator in the ISDAfix probe, will keep it “apprised of what’s going on,” Henning said. Barclays has turned over recorded telephone calls of its traders to the CFTC, Bloomberg News reported last week.

Global Crackdown Kerrie Cohen, a spokeswoman for Barclays, declined to comment, as did Megan Stinson at UBS and Ed Canaday at RBS. Steve Adamske, a spokesman for the CFTC in Washington, also declined to comment.

Regulators are probing manipulation of key financial gauges in world markets on everything from interest rates to currencies to commodities.

Britain’s markets regulator is looking into the currency market, where $4.7 trillion is exchanged each day, after Bloomberg News reported in June that traders have manipulated key rates for more than a decade. The European Commission said in May it was investigating Royal Dutch Shell Plc, BP Plc and Statoil ASA, three of Europe’s biggest oil explorers, over potential manipulation of Brent crude, which helps set prices in the $3.4 trillion-a-year global oil market.

Regulators from Canada to Switzerland are investigating whether lenders rigged interest rates including Libor, a measure representing the cost at which banks say they can borrow from other lenders that serves as a global benchmark for more than $300 trillion of contracts from mortgages to student loans.

Bafin Inquiry German financial regulator Bafin is reviewing whether the country’s banks may have participated in manipulating ISDAfix and so far hasn’t found any indication they were involved, Ben Fischer, a spokesman for the agency, said in an interview yesterday. The U.K. Financial Conduct Authority started an inquiry of how the rate is set in British pounds, Bloomberg News reported in April.

As part of the CFTC’s ISDAfix investigation, the regulator has interviewed more than a dozen traders and brokers since May at Barclays and ICAP Plc, both based in London, and New York-based Citigroup Inc., and plans to talk with people at 13 other banks as it sifts through 1 million e-mails, Bloomberg News reported on Aug. 2.

“The substance of white-collar crime is getting your hands on data,” John Coffee, a law professor who specializes in corporate governance at Columbia Law School in New York, said in a telephone interview. “If you can get your hands on 1 million e-mails or phone calls, you will likely find something interesting.”

Swaptions Trades The correspondence shows that traders at Wall Street banks instructed ICAP brokers in Jersey City, New Jersey, to buy or sell as many interest-rate swaps as necessary to move the benchmark -- set each day at 11 a.m. in New York -- to a predetermined level, the person said.

By rigging the measure, the banks stood to profit on separate derivatives trades known as swaptions, or options on rate swaps, that they had with clients who were seeking to hedge against moves in interest rates. Banks sought to change the value of the swaps because the ISDAfix rate sets swaptions prices, the person said.

Swaptions, which give the holder the right to swap a fixed-for a floating-rate obligation at some future point at a predetermined level, are used by firms from Pacific Investment Management Co., which runs the world’s biggest mutual fund, to the manager of Dutch postal operator PostNL NV’s pension, according to regulatory filings.

Cooperating ‘Fully’ PostNL’s pension earned 6.4 percent on its interest-rate swaps and swaptions in 2010, according to its annual report. Representatives from the Dutch company and Pimco didn’t immediately respond to requests for comment.

Banks set ISDAfix for 10-year rate swaps at 2.807 percent today, up from 1.785 percent at year-end, according to ICAP data.

In their five-year settlement agreements with the CFTC, Barclays, RBS, and UBS said they would “cooperate fully and expeditiously with the commission” and any other governmental agency related to Libor or “any investigation, civil litigation, or administrative matter related to the subject matter of this action or any current or future commission investigation.”

U.S. investigators used such sweeping language to aid probes of other benchmarks, Henning said.

‘Bitten the Bullet’ “They knew this was coming when they settled Libor,” he said. “It’s not like they stumbled across this. That’s why they made it broad.”

Cooperation clauses in deferred prosecution agreements allow banks to order their employees to talk with investigators or face being fired, according to Coffee at Columbia.

“If you breach your deferred prosecution agreement, the government can indict you” and seek greater damages than it received under the settlements, he said. The three firms have already “bitten the bullet,” he said. “They don’t want a second round of penalties.”

Investigators will need to produce e-mails that clearly show manipulative intent by traders, as they did in the Libor probe, said Jack Chen, a financial consultant in New York who has written about the swaps benchmark and Libor for SFC Associates, a financial consulting firm specializing in litigation matters. Otherwise, the banks may be able to defend the actions as typical trading activities, he said.

Lawsuit Risk RBS said in a regulatory filing last week that it “continues to cooperate” with inquiries of its “submissions, communications and procedures relating to the setting of a number of trading rates,” including ISDAfix.

Prior to the CFTC investigation, which began last year, the lenders that contributed to ISDAfix were Bank of America Corp., Barclays, BNP Paribas SA, Citigroup, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Mizuho Financial Group Inc., Morgan Stanley, Nomura Holdings Inc., Royal Bank of Scotland, UBS and Wells Fargo & Co.

ISDAfix rates are distributed by Thomson Reuters, Telekurs and Bloomberg LP, the parent of Bloomberg News, according to ISDA’s website. Bloomberg competes with ICAP in some businesses, including foreign-exchange and swaps trading.

“The real risk to these banks is private lawsuits” from asset managers and pension funds, Henning said. “This isn’t going up against mom and pop,” he said, “and that’s scary for the banks if there was manipulation.”




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Please note that the vote that decided this rule was taken by the democratic member of this board....not Gensler. This democratic member was appointed by a Third Way corporate democratic Senate and was staff of Harry Reid. So, this all important bill on derivatives was sidelined by Third Way corporate democrats. Gensler knew this board was stacked!



The Obama Administration is quietly firing Commodity Futures Trading Commission head Gary Gensler, who ran afoul of big banks by PUSHING FOR GREATER GOVERNMENT OVERSIGHT.
"The ouster comes in the midst of controversy over a proposed CFTF rule, strongly supported by Gensler, that would extend U.S. regulation to swaps--a kind of derivative exhange--involving firms founded or doing business in the United States. This means that foreign banks and hedge funds would face the same regulations as U.S. ones when trading in swaps with U.S. parties."

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Markets & Finance High Drama at CFTC: The Battle Over Swaps and Futures

By Matthew Philips on February 01, 2013  Bloomberg Financial

First, some background: Under Dodd-Frank, the CFTC was given the task of regulating the $300 trillion market for swaps in the U.S. The basic point was to bring light to a dark market and prevent another AIG by pushing as much of the over-the-counter swaps market as possible onto exchanges where prices and volume are posted. With about 80 percent of those swaps rules written, according to CFTC Chairman Gary Gensler, and a bunch of them now in effect, traders have begun “futurizing their swaps”—that is, trading futures contracts instead of entering into swaps deals. Some say that’s a clever way around Dodd-Frank. Others see it as merely a natural evolution of financial instruments.

Whatever the reason, it’s happening. And as arcane as the details may be, the potential consequences are enormous, as evidenced by Thursday’s packed house. The general consensus of those present was that Thursday was the most crowded CFTC hearing in recent memory. Lawyers and lobbyists lined the walls; congressional staffers and industry suits packed the chairs. More than 150 people crammed into the CFTC’s main conference room, and a healthy number of folks watched on TVs in the hallway outside.

Dodd-Frank has upended the derivatives market, and in the shakeout that follows, there will be winners and losers. Perhaps those with the most at stake are IntercontinentalExchange (ICE) and the Chicago Mercantile Exchange (CME), the two biggest futures exchanges in the U.S. As more companies and traders start favoring futures over swaps, the two exchanges stand to capture a much bigger portion of that activity. The potential losers? Dealers such as Goldman Sachs (GS) that have done a lot of swaps business. Standing at the back of the room, Chris Giancarlo, chair of the Wholesale Markets Brokers’ Association, likened the fight over swaps and futures to “the Maginot Line for the exchanges.”

During some seven hours of testimony, the CFTC heard from all kinds of market participants: the exchanges, of course, but also representatives of trading and asset management firms: J.P. Morgan (JPM), BlackRock (BLK), Deutsche Bank (DB), Vanguard, State Street (STT). Donald Wilson, chief executive and founder of high-frequency trading giant DRW, testified on three of the four panels on behalf of the Futures Industry Association Principal Traders Group.

A key theme that kept arising was that swaps provide end-users—such as airlines seeking to lock in jet fuel prices—with a degree of customization and flexibility they can’t get with a futures contract.

Thomas Deas Jr., vice president and treasurer of FMC Corp. (FMC), a Philadelphia-based chemical company that uses over-the-counter swaps to hedge the price of natural gas, said that dealing in futures is simply too complicated. To hedge his full position requires just 100 transactions using OTC swaps, he said, while doing so with futures would take 144,000 transactions. Deas said FMC doesn’t have the trading expertise to handle such a complicated trade.

After opening remarks by Gensler, CFTC Commissioner Bart Chilton chimed in via speakerphone, saying that while he thinks the most standardized swaps contracts (such as energy) probably should’ve been futures from the get-go, he is worried about a broader migration. “I am more concerned about a silent creeper,” said Chilton. “That is, the ‘swapification’ of the futures markets.” Chilton said he’s worried that by converting some types of swaps into futures, the lack of regulation that plagued swaps will somehow be transferred into the futures market. “We need to be cautious about converting certain swaps to futures in an attempt to export the deregulated, opaque swaps trading model to these new futures markets,” he said.




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The crisis happened in 2008, the Financial Reform came out in 2009/10 and now we are entering 2013 with delays of even a watered down policy ruling.  Remember, the banks are rolling in billions of dollars in profit quarterly.....they have $600 trillion in leveraged bets and it is a mess again!


Compliance Policy U.S., U.K. Issue Plan for Dealing With Failing Large Banks  Bloomberg Financial
U.S. and U.K. regulators unveiled a plan for dealing with failing global systemically important banks that will allow them to fire senior executives as well as force losses on shareholders to protect taxpayers.

“A resolution strategy for a failed or failing globally active, systemically important, financial institution should assign losses to shareholders and unsecured creditors, and hold management responsible,” according to a paper jointly released by the U.S. Federal Deposit Insurance Corp. and the Bank of England in London today.

Global regulators are working on ways to handle the failure of large international banks to avoid another crisis like the one inflamed by Lehman Brothers Holdings Inc.’s bankruptcy in 2008 that led to taxpayer bailouts. BOE Deputy Governor Paul Tucker said the joint paper is a “significant step” toward solving the issue.

The U.S. has been developing its strategy under the Dodd- Frank legislation passed in 2010, while the U.K. has focused its efforts under the Banking Act of 2009, according to the paper. They each focus on dealing with the top of a financial group -- the holding or parent company -- to minimize disruptions to sound subsidiaries.

The U.K. and U.S. plans -- aimed at ensuring continuity of banks’ “critical services” and reducing risks to financial stability -- are based in part on recommendations published by the Financial Stability Board, while U.K. policies are also linked to European Union proposals presented in June.

For more, click here.

Dodd-Frank Swap Rules Delayed as U.S. CFTC Eases Transition The U.S. Commodity Futures Trading Commission may delay some Dodd-Frank Act overseas swaps rules for about six months, part of a wave of last-minute exemptions and postponements to ease transition to new regulations.

The derivatives regulator may put off compliance for overseas-based operations of banks including JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) for some risk-management rules that begin to take effect at the end of the month, according to two people who asked not to be identified because the delay hasn’t been made public. The agency has already released more than 40 no-action letters postponing other Dodd-Frank rules, and officials have signaled that more are coming.

“We have and will continue to grant requests for phased compliance,” CFTC chairman Gary Gensler said in a telephone interview Dec. 6. The delays are designed to “smooth the transition” to new oversight rules, he said.

Dodd-Frank derivatives rules, originally intended to be in place in July 2011, have been delayed as the government seeks feedback on how to bring swaps under its oversight. The regulations will for the first time lead Wall Street’s largest banks to register as swap dealers with the CFTC at the end of the year and will require them to use clearinghouses to settle interest-rate and credit-default trades by mid-March.

The CFTC’s rulemaking process will face scrutiny this week from U.S. House lawmakers. A House Financial Services subcommittee hearing on derivatives has been scheduled for Dec. 12, and the House Agriculture Committee has planned a hearing for Dec. 13 on the international scope of the CFTC’s rules.



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NOW THAT THE ELECTION IS ALMOST COME AND GONE WE WILL SEE ALL THIS FINANCIAL REFORM LEGISLATION ROLL OUT THAT HAS EVERYTHING TO DO WITH WINS FOR WALL STREET AND NOTHING TO DO WITH PROTECTING THE PUBLIC FROM A CRIMINAL INDUSTRY.  BELOW YOU SEE THE CREDIT DEFAULT SWAP (CDS) LEGISLATION THAT MAKES IT SO EASY TO TRANSACT AS TO MAKE THIS FINANCIAL INSTRUMENT USAGE EXPLODE.  THE IDEA OF REFORM WAS THAT THESE CDS WERE GROUND ZERO AS A CAUSE FOR THE COLLAPSE AND WOULD BE RESTRICTED.  YOU SEE THEY WERE ENHANCED INSTEAD.

WE NEED TO KNOW THAT IT WAS THE CFTC WHO STATED OPENLY THAT EVEN THOUGH IT IS ILLEGAL FOR WALL STREET TO BET ON ELECTIONS, THEY WERE TURNING THEIR HEADS TO IT BEING DONE AND WALL STREET IS GOING WILD ON BETTING.

WE HAVE TO VOTE FOR OBAMA, BUT WE CAN VOTE THE FARM TEAM OUT OF OFFICE!!!!  STOP REELECTING THE PEOPLE WHO ARE DOING THIS!!!!!

CFTC Said to Allow More Swaps Trading Via Phone in Final Rule

The Commodity Futures Trading Commission will allow more swaps to be traded over the phone than initially indicated under proposed Dodd-Frank Act reforms, according to people familiar with the matter.

Chairman Gary Gensler outlined the changes in a meeting earlier this week in New York with executives of firms that want to create regulated entities allowed to trade swaps, known as swap execution facilities, or SEFs, according to two people who attended.

The details of what will be allowed are still being worked out for the final draft rule, according to one of the people, who asked not to be named because the discussions are private.

The change in phone trading contrasts with the proposal written in the Federal Register in January 2011, which said that “entities offering the following services do not comply with the statutory definition of a SEF: one-to-one voice services for the execution or trading of swaps (other than for the execution of block trades).”

Trades in interest-rate, credit-default and other types of swaps historically have been done over the phone in negotiations between banks and their customers. Gensler, with the backing of Congress through the Dodd-Frank reforms passed in 2010, has made electronic trading of the instruments a central feature of regulation in a market with $648 trillion of contracts outstanding.

David Gary, a CFTC spokesman, declined to comment.

Expanded phone trading would be a victory for inter-dealer brokers who facilitate transactions between banks. The firms, which use a combination of phone and computer trading to match buyers and sellers, lobbied the CFTC through the Wholesale Market Brokers Association, Americas to allow flexible methods of trading.



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BELOW YOU SEE HOW SOMETHING SO SIMPLE IS BEING MADE MORE DIFFICULT BY THE DEMOCRATS IN OUR LEADERSHIP.  THIRD WAY DEMOCRATIC SENATE LEADER HARRY REID HAS PROTECTED THE BANKS LIKE NO OTHER ALL WHILE DECRYING THOSE FAT CAT BANKERS.  WE NEED TO ELECT A MAJORITY OF REAL PROGRESSIVES SO AS TO KEEP THIS LEADERSHIP POSITION FROM GOING RIGHT INTO THE HANDS OF WALL STREET'S POLITICIAN......CHUCK SHUMER.  EVEN DICK DURBIN IS THIRD WAY.  SO OUR SENATE IS CAPTURED.  IT TAKES A MAJORITY VOTE OF ALL DEMOCRATS IN THE SENATE TO NAME THE LEADER.....THAT IS OUR OBJECTIVE.


Legal/Regulatory June 22, 2012,
A Debate Goes Behind Closed Doors
By BEN PROTESS Evan Vucci/Associated Press

Gary Gensler, chairman of the Commodity Futures Trading Commission. In the long war over Wall Street regulation, a little-noticed clash erupted this week over a plan to rein in risky trading overseas.

Signs that a clash was brewing behind the scenes came after the Commodity Futures Trading Commission abruptly canceled a meeting to vote on the overseas trading proposal with just hours to spare. The agency provided no explanation, sending out only a short e-mail that it would “no longer hold a scheduled meeting on June 21, 2012.”

Interviews with regulators, who spoke on the condition of anonymity, show that the agency canceled the meeting after closed-door talks yielded a more flexible proposal that gives Wall Street additional time to comply. Now, rather than debating the issue in public, the commissioners plan to cast their votes in private over the next several days, according to people briefed on the matter.

While such wrangling is business as usual in Washington, and the changes debated this week are relatively modest, the trading commission’s new overseas proposal has become a focal point in the debate over Wall Street regulation. The proposal, stemming from the Dodd-Frank financial regulatory law, takes aim at firms that ship derivatives trading overseas to escape the eyes of American regulators. Roughly four years ago, foreign derivatives trading by American International Group in London nearly brought American firms to their knees.

Gary Gensler, the chairman of the C.F.T.C., has trumpeted such regulation for weeks, pointing to JPMorgan Chase’s recent multibillion-dollar trading loss that took place at a London-based unit.

“Recent events at JPMorgan Chase are a stark reminder of how swaps traded overseas can quickly reverberate with losses coming back into the United States,” Mr. Gensler said in a recent speech to bankers. “The risk can come crashing back here pretty quickly.”

The behind-the-scenes negotiations on this front echo battles over rules passed in the run-up to the financial crisis, when Wall Street won major concessions from regulators. The Securities and Exchange Commission, for example, in 2004 loosened an obscure provision that allowed banks to ratchet up their risk-taking.

The events this week also highlight the challenge facing independent regulators with five-member commissions. The agencies are tasked with writing hundreds of new rules under Dodd-Frank to police Wall Street. At the trading commission, every time a rule comes to vote, Mr. Gensler must secure the blessing of at least two colleagues.

“At the end of the day, democracy is a messy process,” said Dennis Kelleher, president of Better Markets, which supports tougher regulation of banks. “You get less-than-perfect outcomes from independent agencies.”

The trading commission’s roster features two Republicans, two Democrats and Mr. Gensler, a Democratic presidential appointee. Mr. Gensler’s push to rein in Wall Street has met some opposition from the Republican commissioners, who argue that the agency occasionally oversteps its bounds. And while he has loyal support from Bart Chilton, one of the agency’s Democratic commissioners, he has found the deciding third vote somewhat elusive.

“The five-member commission structure means that we have to find consensus, and I think our rules and the American public benefit from reaching a consensus,” Mr. Gensler said on Friday. Others note that about 90 percent of the agency’s votes received support from at least one Republican.

Mark Wetjen is the third Democratic vote. A former aide to Senate Majority Leader Harry Reid, he is the newest member of the agency. In his first several months, Mr. Wetjen has voted with Mr. Gensler on every proposal. But behind the scenes, people close to the agency say, he has emerged as a more independent voice.

In the case of the overseas proposal, Mr. Wetjen sought several significant changes last week. Mr. Gensler, who adopted some tweaks and rejected others, thought they had a deal.

But Mr. Wetjen raised concerns again a day before the scheduled vote. While he never threatened to vote against the rule, neither did he promise to vote for it.

Mr. Gensler briefly considered proceeding, even without assurances, to force Mr. Wetjen’s hand. The chairman still had support from Mr. Chilton, who supported the earlier plan.

“I think there are times on some of these key issues, like the cross-border issue, that we need to be very strong even if a vote doesn’t go our way,” Mr. Chilton said on Friday. “Compromise is one thing; tossing out your beliefs is another.”

The plan would apply new derivatives rules not only to banks in the United States, but also to American banks that have foreign units. The proposal would also apply to foreign banks that conduct significant derivatives trading in the United States.

Mr. Wetjen, concerned that some American banks would face a competitive disadvantage, pushed for more flexibility. He urged Mr. Gensler to give American banks more time to comply, suggesting that the rules not fully take effect until nine months after the proposal was completed, according to a person briefed on the matter.

Proponents of regulation argue that Wall Street has had plenty of time to comply.

“How long do taxpayers have to wait to be protected from the risky activities of these too-big-to-fail banks?” Mr. Kelleher asked.

Ultimately, Mr. Gensler proposed a compromise, putting the proposal back on track. A deal was struck that provided the foreign arms of American banks with a reprieve so that they need not comply with certain provisions for 12 months after the plan is first proposed.

Mr. Wetjen also persuaded Mr. Gensler to give banks based solely in the United States until Dec. 31, roughly a three-month reprieve, to comply with other provisions. In another compromise, the agency is now planning to allow branches of American banks based overseas to apply for so-called substituted compliance, in which the banks will face similar rules from foreign regulators rather than from the C.F.T.C. Some regulators say that the substituted plan would level the playing field and discourage regulatory arbitrage.

Mr. Wetjen declined to comment.

The changes were surprising to some outsiders. People traveling to the meeting learned it was canceled only after arriving in Washington.

Some supporters of the effort questioned the changes, given the recent losses at JPMorgan.

“It’s unbelievable to me that this would be a problem in this day and age, especially because of the JPMorgan loss,” said Michael Greenberger, a professor at the University of Maryland law school and a former regulator at the trading commission.


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WHAT WE SEE BELOW IS A LOOK AT THE CFTC AND ITS RESPONSE TO BARCLAY'S, THE OFFENDER OF LIBOR FAME WHO RECEIVED A TINY FINE AND WAS TOLD TO POLICE ITSELF BETTER AND ADD AN INDEPENDENT AUDITOR.  NOW, THE MASSIVE SUBPRIME MORTGAGE FRAUD WAS COMMITTED WITH A COLLUSION OF BANKERS, LAWYERS, DEVELOPERS/REALTORS, AND ACCOUNTANTS.  THE $25 BILLION SETTLEMENT LET ALL THOSE PEOPLE OFF THE HOOK FOR EVERYTHING ALONG WITH KEEPING THEIR FRAUDULENT GAINS.  SO, THE CFTC IS SENTENCING THIS BANK FOR A MASSIVE, LONG-TERM FRAUD OF LIBOR, A FINANCIAL TOOL TIED TO EVERYTHING, TO NOTHING.

Next on the Financial Front: A Better Libor k
  • 21 Aug 2012  The Wall Street Journal Europe
  • Francesco Guerrera is The Wall Street Journal’s Money & Investing editor.



The prospect of spending months debating the London interbank offered rate isn’t as exciting as hippies preaching free love, strikes paralyzing Britain or a popular uprising in the Middle East.

But for traders, regulators and investors, the return from vacation will be dominated by talk of Libor—the flawed interest rate that governs at least $300 trillion of financial instruments. And not just because several banks will follow Barclays PLC and pay regulators to settle charges that they tried to manipulate Libor.

After convincingly impersonating the Keystone Kops for years, U.K. regulators have sprung into action with plans to reform Libor, raising the prospect of a complete overhaul in coming months.

If Libor —a gauge of the price at which banks can borrow money from one another— sounds esoteric and foreign, think again. Anyone with a credit card, mortgage or car loan should care about their reference rate being manipulated by the very banks that set it.

As the man in charge of the reforms, Martin Wheatley, a top official at the U. K.'s Financial Services Authority, told me last week: “This is bigger than just Libor. It’s about investor confidence in financial markets so we want to fix it.”

I have known Mr. Wheatley for nearly 15 years— from his days as a rising star at the London Stock Exchange to his stint as Hong Kong’s financial watchdog. He’s tough and ambitious, which is a good combination for the task at hand.

His recipe for fixing Libor can be read between the lines of a paper he issued a couple of weeks ago. Ostensibly, the 58- page report keeps an open mind. But because the U. K. government is rushing to enshrine the Libor changes into legislation— responses are due in by Sept. 7 and Mr. Wheatley has to make his recommendations by the end of that month— the broad outlines are taking shape. Indeed, Mr. Wheatley will be stateside this week for discussions with U. S. regulators.

In short, Libor is likely to remain the key financial rate but with modifications to the way it is calculated and policed.

Talk of replacing Libor with other benchmarks is likely to remain just that for two reasons: No substitute would easily work for all the financial instruments Libor serves, and rewriting derivatives contracts tied to Libor would be an herculean, and legally fraught, task.

The “new and improved” Libor would almost certainly do away with the current gymnastics-scoring-meets-clairvoyance method of calculation.

At present, large banks submit daily estimates of their costs of funding to a trade group, which eliminates the highest and the lowest numbers and calculates the rate as the arithmetic mean of the rest. Banks aren’t required to say whether those estimates reflect their true cost of funding— an omission that increases the scope for manipulation.

A simple-sounding remedy would be to force banks to use actual market transactions. The problem is that it would be hard to find enough deals covering all of Libor’s 15 maturities and 10 currencies, especially in periods of financial stress.

The most likely solution is a hybrid system in which banks would still quote their estimated costs but would be required to back them up with as many actual transactions as possible and document how they got to the numbers.

“Blending quote- and transaction-based approaches may prove to be the most practical solution,” Anthony Murphy, a former HSBC PLC executive who is now at the consultancy Promontory Financial Group LLC, wrote in a recent note.

Mr. Wheatley said there is support for a hybrid approach. “People are saying, ‘You just can’t leave it to pure judgment; you have to have the real input.’”

Tougher oversight is also on the cards. The U. K. government is almost certain to take away the responsibility for policing Libor from the British Bankers' Association and hand it to regulators.

Requirements imposed by the U. S. Commodity Futures Trading Commission in the Barclays settlement should help further, provided that they are extended to all Libor banks. The CFTC ordered Barclays, among other things, to keep track of all its submissions and have them checked by an independent auditor once a year.

Better calculations and stricter policing should make Libor more credible. Whether they will buttress the investing public’s confidence in the process, however, is another matter.


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Law & Regulation  Public Comments VIEW UPCOMING & RECENT EVENTS 

Deadline                  Comment                            Description

7/13/2012 Orders and Other Announcements  77 FR 38776  //   PDF Version
 Reestablishment of the Agricultural Advisory Committee    

Open Date: 6/29/2012
Closing Date: 7/13/2012  


7/23/2012 Proposed Rule  77 FR 30596  //   PDF Version

Commodity Futures Trading Commission 17 CFR Part 1; Securities and Exchange Commission 17 CFR Part 240 Further Definition of ``Swap Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-Based Swap Participant'' and ``Eligible Contract Participant''

Open Date: 5/23/2012
Closing Date: 7/23/2012  


7/27/2012 Proposed Rule  77 FR 38229  //   PDF Version

17 CFR Part 43 Rules Prohibiting the Aggregation of Orders To Satisfy Minimum Block Sizes or Cap Size Requirements, and Establishing Eligibility Requirements for Parties to Block Trades

Open Date: 6/27/2012
Closing Date: 7/27/2012  

7/31/2012 Public Information Collection  77 FR 32593  //   PDF Version

Agency Information Collection Activities; Notice of Intent To Renew Collection: Rules Relating To Review of National Futures
Association Decisions in Disciplinary, Membership Denial, Registration, and Member Responsibility Actions

Open Date: 6/1/2012
Closing Date: 7/31/2012  

8/14/2012 Proposed Rule  77 FR 35892  //   PDF Version

17 CFR Parts 3 and 23 Dual and Multiple Associations of Persons Associated With Swap Dealers, Major Swap Participants and Other Commission Registrants

Open Date: 6/15/2012
Closing Date: 8/14/2012  

_______________________________________________
Open Comment Periods

Deadline          Comment Description 


6/6/2012                                 Proposed Rule  77 FR 26709  //   PDF Version

17 CFR Part 49 Swap Data Repositories: Interpretative Statement Regarding the Confidentiality and Indemnification Provisions of Section 21(d) of the Commodity Exchange Act

Open Date: 5/7/2012
Closing Date: 6/6/2012 

 6/26/2012                           Proposed Rule  77 FR 25320  //   PDF Version

17 CFR Parts 3, 32, and 33 Commodity Options

Open Date: 4/27/2012
Closing Date: 6/26/2012   See also:
76 FR 6095 ,  2/3/2011  //   PDF Version 17 CFR Parts 3, 32, 33, and 35 Commodity Options and Agricultural Swaps

6/29/2012                               Proposed Rule  77 FR 31767  //   PDF Version

17 CFR Part 151 Aggregation, Position Limits for Futures and Swaps

Open Date: 5/30/2012
Closing Date: 6/29/2012  

7/23/2012                             Proposed Rule  77 FR 30596  //   PDF Version

Commodity Futures Trading Commission 17 CFR Part 1; Securities and Exchange Commission 17 CFR Part 240 Further Definition of ``Swap Dealer,'' ``Security-Based Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-Based Swap Participant'' and ``Eligible Contract Participant''

Open Date: 5/23/2012
Closing Date: 7/23/2012  

7/31/2012                           Public Information Collection  77 FR 32593  //   PDF Version

Agency Information Collection Activities; Notice of Intent To Renew Collection: Rules Relating To Review of National Futures
Association Decisions in Disciplinary, Membership Denial, Registration, and Member Responsibility Actions

Open Date: 6/1/2012
 Closing Date: 7/31/2012