Treasury Backs Frank’s Derivatives Overhaul After Revisions

By Dawn Kopecki and Shannon D. Harrington

Oct. 15 (Bloomberg) -- The Treasury Department backed legislation to overhaul regulation of the $592 trillion over- the-counter derivatives market after a House panel changed provisions the Obama administration said left loopholes.

“The House has taken major steps toward enactment of this bill and is well on the path toward comprehensive financial reform,” Assistant Treasury Secretary Michael Barr said on a conference call with reporters after the House Financial Services Committee amended the measure yesterday.

The committee, headed by Representative Barney Frank, a Massachusetts Democrat, is set to complete action today on the legislation, which would require many derivatives transactions to go through central clearinghouses. The administration wants to subject broker dealers such as JPMorgan Chase & Co. and derivatives users such as American International Group to new margin, collateral and disclosure requirements.

Opaque financial products, including derivatives, have contributed to almost $1.6 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg. Toppled companies included Lehman Brothers Holdings Inc., the investment bank that filed for bankruptcy, and insurer AIG, which is surviving on government loans.

(More here.)