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Bachus demands Dodd-Frank slowdown

Monday 20 December 2010 - by Will Henley

Spencer Bachus (left) and Barney Frank (centre)

The incoming chair of the powerful US Congressional House Financial Services Committee has written to the country's top financial lawmakers to demand a rethink of the "scope and direction" of securities rulemaking.

In a letter seen by GFS News, Spencer Bachus warns Treasury Secretary Tim Geithner, Securities and Exchange Commission chairman Mary Schapiro, Commodity Futures Trading Commission chairman Gary Gensler and Federal Reserve chairman Ben Bernanke that implementing the Dodd-Frank Act "hastily or without due care" risks badly damaging the US economy.

The Republican from Alabama urges policy makers to reject attempts to force end-users to post margin requirements, to carefully consider swap dealer and security-based swap participant definitions and to ensure that foreign exchange swaps and forwards are exempt from clearing and exchange trading requirements.

"As our economy slowly recovers, we have serious concerns that Dodd-Frank will force American companies, which did not cause nor contribute to the financial crisis, to move billions of dollars in capital onto the sidelines to comply with the law," Bachus wrote in the letter, which is dated last week.

"Requiring end-users to post margin will delay or prevent businesses from expanding and will limit the creation of badly needed jobs. End-users must be able to rely upon their exemption from the clearing and exchange trading requirements without having to overcome unnecessary bureaucratic obstacles.

The chairman argues that Congress had never intended that margin requirements be applied to end-users when the Dodd-Frank Act was passed.

"To impose such requirements on companies that engage in the hedging of legitimate business risks would therefore defeat the purposes of the end-user exemption and contravene Congressional intent."

The letter is jointly signed by Frank Lucas, ranking member on the House Committee on Agriculture.

Last week, outgoing chairman Barney Frank warned that Bachus may launch an "assault" on financial regulation.

Frank said: "The assault he intends to lead against improved financial regulation is based on a seriously flawed view of the relationship that should exist between financial institutions and those who set the rules governing safety and soundness."

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