What Does It Mean When Even the Guy Who Blocked Regulation of Credit Default Swaps is Calling for Stricter Regulation Than Congress?

Yesterday, I pointed out that Gary Gensler, chairman of the Commodities Futures Trading Commission (an agency with responsibility for overseeing derivatives trades) – and one of the main people who blocked regulation of credit default swaps in the past – said that Congress’ proposed regulation of CDS leaves huge loopholes.

Bloomberg notes that Gensler testified:

Legislation by Representative Barney Frank to tighten derivatives regulation contains an exemption that may let most financial firms escape new collateral and disclosure rules…

What does it mean when even the guy who blocked regulation of CDS is saying that Congress’ proposed bill won’t do anything, and contains more holes than Swiss cheese?

I’ll give you a 4-word hint: regulatory capture of Congress.

Similarly, the SEC’s Henry Hu testified:

Frank’s proposal[‘s] “ambiguous” definition of risk management may leave a large number of corporations unregulated.

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  • It means that Gary Gensler was well chosen and has learned from a past mistake. Unfortunately my words for Barney Frank would be far less kind, considering his earlier remarks and now how he's basically vowing to weaken needed financial reform.He's basically stated that he was powerless to stop the abuses because he was in the minority. Where's the excuse now?