A Republican-controlled U.S. House of Representatives committee voted on Wednesday for an 18-month delay of regulations intended to reduce risk in the vast over-the-counter derivatives market following the financial crisis.
The delay may be passed by the House but has little chance of becoming law. There is no similar Senate bill and futures regulators say they do not need the additional time.
Sponsor Frank Lucas said regulators are rushing to implement dozens of rules and risk errors through slapdash drafting.
"It is time for us to slow it down," said Lucas, chairman of the House Agriculture Committee, which oversees futures markets.
The bill is part of a broader Republican effort to strangle last year's Dodd-Frank financial oversight law through delays, budget constraints and structural changes to the new consumer financial agency.
Committee members approved the 18-month derivatives delay 25-20, a rare party-line vote in a panel that prides itself on collegiality. The bill now goes to the House Financial Services Committee, whose chairman also is a sponsor.
The Dodd-Frank law, passed less than a year ago, extended federal regulation to the $600 trillion over-the-counter derivatives market. It requires derivatives to go through clearinghouses and to trade on regulated exchanges as much as possible. Clearinghouses would reduce the risk of default and trading on exchanges would make public prices and sales terms.
Collin Peterson, the Democratic leader on the agriculture committee, said the proposed delay was a gift to the big banks and trading houses that dominate OTC derivatives.
"In the Republican vision for financial reform, all we need, I guess, is reporting of swaps to regulators" rather than regulation, said Peterson.
Lucas' bill would delay until Dec 31, 2012, most of the derivatives rules required under Dodd-Frank. It would keep the deadline of this July for swaps traders to report their deals to regulators and for regulators to define who is covered by the law.
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