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<a href="http://www.nytimes.com/"><img src="http://graphics8.nytimes.com/images/misc/nytlogo153x23.gif" alt="The New York Times" align="left" hspace="0" vspace="0" border="0"></a></div><br></div>
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<div class="timestamp">April 1, 2012</div>
<h1>Their Contributors’ Bidding</h1>
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Don’t they ever learn? Large bipartisan majorities in the House and Senate have now passed the deeply flawed <a title="New York Times" href="http://www.nytimes.com/2012/03/28/us/politics/final-approval-by-house-sends-jobs-bill-to-president-for-signature.html?scp=6&sq=%22Jobs%22%20%22obama%22%20&st=cse">JOBS Act</a>
and President Obama is expected to sign it soon. The full name is
equally seductive: Jump-start Our Business Start-ups Act. What it is is
an invitation to a fresh round of financial malfeasance. It rolls back
important investor safeguards from the post-Enron Sarbanes-Oxley law and
the post-financial crisis Dodd-Frank law. </p>
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The official justification for the legislation — debunked in <a title="Jay Ritter" href="http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=a5ded25c-135d-484a-943a-bfa52fba3206">expert</a> <a title="Lynn Turner" href="http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=5aaabb66-36eb-4b1e-8195-3cbeda832814">testimony</a>
— is that rules on disclosure, accounting and auditing make it unduly
difficult for new companies to raise money by issuing stock. The real
driving force behind the bill is the eagerness of politicians in both
parties to please bankers and business executives who relentlessly
demand deregulation and have the deep pockets to get their way,
especially in an election year. </p>
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The drive to deregulate doesn’t stop there. Bipartisan majorities in the House passed <a title="H.R. 2779" href="http://www.govtrack.us/congress/bills/112/hr2779">two</a> <a title="HR 2682" href="http://www.govtrack.us/congress/bills/112/hr2682">more</a>
damaging bills last week that would undercut provisions in Dodd-Frank
to rein in derivatives, the complex financial instruments at the heart
of the financial crisis. The bills’ supporters say the measures are mere
technical corrections. In fact, they are aimed at limiting regulators’
ability to police derivatives. </p>
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The more egregious of the two would exempt a swath of derivatives
transactions from almost all Dodd-Frank regulation — including reforms
to enhance transparency and deter fraud. At issue are deals that occur
between bank affiliates, as opposed to between banks and their clients.
Such transactions can be routine and harmless, or complex and risky.
Current law gives regulators the authority to decide which ones require
scrutiny, but the House bill would broadly exempt the deals from
regulation — in effect, replacing regulators’ authority with a statutory
ban on regulatory oversight. </p>
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Two more measures to shield banks from derivatives regulation could come to the House floor in the next months. <a title="HR 2586" href="http://www.govtrack.us/congress/bills/112/hr2586">One</a>
would water down pending rules to require that most derivatives be
traded on open exchanges, rather than as private contracts between banks
and clients. Exchange trading is a vital step toward a stable and
transparent market, but banks oppose it because it would reduce the fees
they earn from dealing in the dark. <a title="HR 3283" href="http://www.govtrack.us/congress/bills/112/hr3283">Another</a>
bill would let the banks avoid Dodd-Frank regulation by conducting
derivatives deals through foreign subsidiaries, a loophole that would
virtually invite banks to engage in unregulated transactions on a
potentially vast scale. </p>
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Unless President Obama changes his mind, the JOBS Act is a done deal.
And sooner or later, investors will be harmed by its heedless weakening
of important protections. Congressional Democrats and Mr. Obama can
still stop the attempted rollback of derivatives’ regulation. They need
to refresh their memories about how the country got into the financial
mess — before it happens again. </p>
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<br clear="all"><br>-- <br>Art Deco (Wayne A. Fox)<br><a href="mailto:art.deco.studios@gmail.com" target="_blank">art.deco.studios@gmail.com</a><br>