The proposal also seems to invite tension between the Securities and Exchange Commission and the Commodity Futures Trading Commission, the main regulators that would oversee derivatives.
Summers, one of Robert Rubin's eager-beaver deregulators, helped to repeal the Glass-Steagall Act and to squash an effort to oversee derivatives in 1998.
The Dodd-Frank law charged two agencies with writing a broad range of new rules to rein in derivatives — the Commodity Futures Trading Commission, which oversees derivatives linked to oil, crops and other commodities, and the Securities and Exchange Commission, which oversees securities-based derivatives.
Mr. Wetjen is a soft-spoken lawyer from Iowa; Mr. Gensler, a former Goldman Sachs banker whose job was to oversee derivatives trading.
Jayanth Varma, who oversees derivatives trading at SEBI, seems confident that safeguards are in place for the contracts to be traded without abuses.
They include some positive proposals, like one to improve the regulatory system's ability to oversee derivatives, but also some questionable suggestions, including encouraging more investors to short, or bet against, stocks.
Investors who bought derivatives on Greece "are just gaming the situation," said Michael Greenberger, a professor at the Francis King Carey School of Law at the University of Maryland and a former official at the Commodity Futures Trading Commission, which oversees derivatives in the United States.
FINANCIAL TIMES | WALL STREET JOURNAL Futures Agency Budget Setetoto Be a Third Less Than Requested | Congressional negotiators have agreed to $205 million in funding for the Commodity Futures Trading Commission for the fiscal year, less than the $308 million the Obama administration had requested for the agency, which oversees derivatives, The Financial Times reports.
When the Commodity Futures Trading Commission, which oversees derivatives markets, began looking into interest-rate setting in 2008, we were guided not only by questions about the decline of actual unsecured lending among banks, the supposed basis of Libor, but also by our founding statute, the Commodity Exchange Act.
The agency's chairman, Gary Gensler, said: "The result of the House bill is to effectively put the interests of Wall Street ahead of those of the American public, by significantly underfunding the agency Congress tasked to oversee derivatives — the same complex financial instruments that helped contribute to the most significant economic downturn since the Great Depression".
