Amended Derivatives Bill Voted Out of Committee, Killed by Frank

An amended version of Batshit McCrazy's Rep. Collin Peterson's derivatives bill was voted out of the House Agriculture Committee today [update: post-markup information available here; main revisions in the Manager's amendment and the Boswell amendment]. I'm still waiting for the markup report, but Reuters is saying that the CFTC's authority to ban trading in CDS was scaled back during markup, and now applies only when the SEC institutes a short-selling ban, and then only to "naked" CDS written on reference entities that appear on the SEC's do-not-short list. The committee also revised the section on the clearing of OTC transactions. According to Reuters, the revised bill apparently requires all OTC transactions to be cleared by a CFTC-regulated clearinghouse unless the CFTC grants an exemption; the alternative of reporting OTC transactions to the CFTC was stripped out of the bill.

However, Barney Frank has effectively killed Peterson's bill. This morning's CongressDaily AM ($) reported that Frank "said he would seek a referral of the bill to his panel and called Peterson's measure to regulate the derivatives market a mistake." Not surprisingly given his close relationship with the House leadership, the bill was referred to Frank's House Financial Services Committee, where it will die a slow, justified death. It's worth noting that Peterson was one of only eleven House Democrats who voted against the first draft of the stimulus bill, so this isn't a "liberal vs. conservative" dispute, it's a "stupid vs. smart" dispute.

The CongressDaily report also draws my attention to another crazy provision in the bill, which I didn't notice the first time around: apparently the bill would "deny the Fed -- which has oversight of banks -- the authority to establish regulations or rules with regard to clearing OTC transactions." (See Section 13(d)(3)). That would of course hurt ICE Trust, the proposed dealer-backed clearinghouse for CDS, which would be organized as a bank supervised by the New York Fed.

Can you say, "jurisdictional turf war"? Luckily, this is a turf war Barney Frank will win. Like I said yesterday, there's no way Collin fucking Peterson is going to write the new financial sector regulations.