Repeal of Dodd-Frank provision to allow swaps trading at federally insured banks

Jim Himes

Jim Himes

U.S. lawmakers recently introduced legislation that would, through the repeal of part of Dodd-Frank, allow additional swaps trading to be conducted at federally insured banks.

The House and Senate measures call for the repeal of the Dodd-Frank requirement that federally insured banks and the Federal Reserve’s discount window push some derivatives trades to separate, capitalized affiliates. The legislation also allows equity, commodity and structured swaps linked to certain asset-backed securities to be transacted at banks, Bloomberg reports.

“People who object are going to say this allows banks to take huge risks,” Rep. Jim Himes (D-Conn.), one of the bill’s sponsors, said, according to Bloomberg. “Not true. It’s going to allow them to maintain inventory of the swaps that their customers need to buy from them; just the same way when you go to buy a car from a car dealer.”

The legislation, one of several efforts to amend or limit the reach of Dodd-Frank, would require congressional approval before moving to President Obama for signature. Previous efforts to limit the legislation, however, have not succeeded in Congress.

The Senate bill was sponsored by Sens. Kay Hagan (D-N.C.), Pat Toomey (R-Penn.), Mark Warner (D-Va.) and Mike Johanns (R-Neb.), and the House measure, in addition to Himes, was sponsored by Reps. Randy Hultgren (R-Ill.), Richard Hudson (R-N.C.) and Sean Patrick Maloney (D-N.Y.), Bloomberg reports.

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