Senator Feinstein on President Obama’s New Financial Regulation Framework

June 17, 2009 -- “The President’s plan is a giant step in the right direction. It ends the era of total chaos and the lack of coherent regulation – and outlines a roadmap to establish meaningful transparency and accountability.

The President is proposing new regulation of the over-the-counter derivatives and swaps markets, and new authority for the Federal Reserve. His plan will require that credit default swaps are cleared and will impose position limits for swaps. It also implements new regulatory checks and balances for mortgage-backed securities, over-the-counter derivative contracts, and other exotic financial instruments in order to rein in unscrupulous traders. It gives the Federal Reserve the tools needed to reduce the systemic risk posed by large firms deemed ‘too big to fail.’ It makes a greater commitment to international reforms. And it establishes a new financial consumer protection agency to help safeguard hardworking Americans with mortgages, credit cards, and other loans.

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I do have some concerns. First, I don’t think we should wait for a new study to determine whether the SEC (Securities Exchange Commission) or the CFTC (Commodity Futures Trading Commission) has oversight authority, but rather the decision should be made now so that oversight can be implemented. Second, I have consistently called for full closure of the so-called ‘London Loophole,’ but there is no clear framework for how that will be accomplished. And I believe we need a clearer explanation of how over-the-counter derivatives will be regulated.

Bottom line: the President is taking an important and necessary action. Clearly, there are details that need to be filled in, and they will be filled in.”

Source: Senator Dianne Feinstein