You are hereCNN Money: Big Business gets a break on financial reform

CNN Money: Big Business gets a break on financial reform


-By Jennifer Liberto

April 18, 2012- Big business scored a major win Wednesday when two regulatory boards agreed to limit the impact of tough rules to regulate the complex trades that helped spur the 2008 financial crisis.

Regulators have been struggling for months to figure out who should be included in a new crackdown of swaps or derivatives -- complex financial bets derived from other financial products such as the price of jet fuel or mortgages.

Derivatives were the key reason that American taxpayers were on the hook for the American International Group (AIG, Fortune 500) bailout in 2008. Derivatives also threatened to take down the global financial system when Lehman Brothers collapsed.

When Congress passed Wall Street reforms in 2010, lawmakers left the big decisions of how to regulate derivatives up to supervising agencies. Generally, the Democratic-controlled Congress wanted swaps to be more transparent and safer.

The two regulatory bodies in charge of derivatives, the Securities and Exchange Commission and the Commodity Futures Trading Commission, originally suggested that the new rules should target those who trade more than $100 million worth of swaps a year.

But over the past two years, big business, ranging from Wall Street to energy and agricultural companies, have spent millions of dollars lobbying regulators. They wanted the regulators to back off on tougher rules that would require disclosure of the price of a swap as well as capital to back up those bets.

Opponents of tougher rules argued the crackdown would prevent their ability to make bets to hedge against price volatility. Tougher rules also hike the cost of making all financial bets, while shrinking profit margins.

On Wednesday, the CFTC and SEC voted to sharply narrow the pool of companies that must abide by tougher rules. The rule narrowed the definition of who qualifies as a swaps dealer by raising the threshold from a suggested $100 million to $8 billion in swaps traded each year.

In three years, the threshold would broaden and impact those that trade $3 billion in swaps per year.

CFTC officials couldn't say Wednesday how many companies would have to register as swaps dealers when the new rules kick in.

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