Derivatives Regulation Quotes

AIG’s failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG’s failure. The OTC derivatives market’s lack of transparency and of effective price discovery exacerbated the collateral disputes of AIG and Goldman Sachs and similar disputes between other derivatives counterparties. AIG engaged in regulatory arbitrage by setting up a major business in this unregulated product, locating much of the business in London, and selecting a weak federal regulator, the Office of Thrift Supervision (OTS).

What I think about derivatives is if every institution that owns or trades them is properly margined and marked to market, including end-users, including every institution, including sovereigns and multilateral institutions, then the system would be safe - if people were margined the way customers of investment banks are margined.

The reality is that what we did in 2010 with the Dodd-Frank wasn't enough.

The basic architecture of Dodd-Frank makes sense. At the same time, as a number of regulators and legislators have observed, the act was a complex effort that produced thousands of pages of rules.

The Orderly Liquidation Authority prescribed by Dodd-Frank should be repealed and replaced by an amendment to the U.S. Bankruptcy Code which would operate to prevent cross-default provisions from impacting derivatives books so long as mark-to-market payments are being made in a timely fashion.

Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary.

The decision-making process in the White House does not let most issues get up to the President. The Council thought opening up global markets to derivatives that would destabilize other countries wasn't likely to create a lot of jobs in the U.S. and might adversely affect U.S. interests by causing global economic instability.

AIG's failure revealed systemic problems in the OTC derivatives market that went well beyond the failure of a single market participant.

To say accounting for derivatives is Americais a sewer is an insult to sewage.

There are elements of Dodd-Frank that clearly need to be curtailed.

Do we have to regulate derivatives? Yes, we do. 'Cause when I did this in my investments, frankly, no one knew who could pay who. But derivatives have an important place in our economy.

It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade. The worst have failed; investors no longer fund them and are not likely to in the future.