Monday, 28 July 2014
Last updated 10 hours ago
Jan 26 2009 | 2:10am ET
Less than a week into his administration, the outlines of President Barack Obama’s plan to overhaul America’s financial regulatory systems are coming into focus. And it is becoming increasingly clear that the plan will involve some sort of mandatory hedge fund registration and surveillance.
Although most of his top economic advisers are still awaiting confirmation by the Senate—including Treasury Secretary-designate Timothy Geithner and Securities and Exchange Commission Chairman-designate Mary Schapiro—Obama is expected to offer details of his plans before traveling to London on April 2 for a Group of 20 meeting. The Obama administration is also laboring under an April 30 deadline—set by last year’s Emergency Economic Stabilization Act—to offer his regulatory recommendations to Congress.
One clear break with the previous administration of George W. Bush is over hedge fund registration. Obama and his point men on the issue appear to favor it, while the Bush White House sought to discourage it. Former Treasury Secretary John Snow, for one, criticized then-SEC Chairman William Donaldson for siding with Democrats to push through a hedge fund registration rule—later invalidated by the courts—against the pleas of his fellow Republicans.
“I support the goal of having a registration regime for hedge funds because we need greater information and better disclosure in the marketplace,” Geithner wrote Friday in response to questions for Sen. Carl Levin (D-Mich.).
Several other planks of the Obama plan will also have a major impact on the way hedge funds do business. The new administration is likely to seek to regulate currently unsupervised areas such as credit derivatives, which sank many hedge funds (and made a few others very rich) during the subprime mortgage and credit crisis. Schapiro, testifying before a Senate committee earlier this month, noted the importance of tackling conflicts of interest at credit rating agencies. There is also talk of federal standards for mortgage brokers, and a role for the SEC in overseeing the underwriting standards of mortgage-backed securities.
Obama is also getting behind the effort—already underway—to create a central clearinghouse for credit derivatives, or to have them traded on securities exchanges. The new president is likely to require that such derivatives, including credit default swaps, be traded either on an exchange or through the clearinghouse.
One proposal that does not seem to be in Obama’s plans is former Treasury Secretary Henry Paulson’s suggestion that the SEC and Commodity Futures Trading Commission be merged.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…