Treasury’s Foreign Exchange Exemption Is an Unjustified Loophole
Washington DC, November 16, 2012—
“Tonight’s decision by Treasury to exempt foreign exchange swaps and forwards creates a large unjustified loophole in derivatives regulation,” said Dennis Kelleher, President and CEO of Better Markets, a nonprofit organization that protects the public interest in the financial markets.
“During the 2008 financial crisis, the market for foreign exchange swaps and forwards collapsed along with the other markets. This required the Federal Reserve Bank to bail out the foreign exchange markets with $5.4 trillion in the three months following the Lehman Brothers bankruptcy,” said Mr. Kelleher.
“This exemption is a loophole that Wall Street’s financial engineers will undoubtedly exploit. It is an early Christmas gift to Wall Street and a piece of coal to American taxpayers who will be at increased risk of having to fund yet more bailouts in the next crisis,” said Mr. Kelleher.
“Wall Street fought hard to convince Treasury to grant this loophole, which is unjustified by independent research. That may be why, after two years of consideration, the United States Treasury announced such an important financial regulation decision on a Friday night at 5PM when Congress is on recess and on the eve of the Thanksgiving holiday. The goal of such a ‘Friday night special’ is to avoid media coverage and public attention. While it is all too common in Washington, DC, the American people deserve better,” said Mr. Kelleher.
About Better Markets
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts.