Blowing a Hole in Dodd-Frank

Treasury Secretary Timothy Geithner is widely expected to exempt currency derivatives from coverage. But the Fed spent trillions to prop up that market in 2008.

Robert Kuttner | March 18, 2011 | web only
American Prospect

Treasury Secretary Timothy Geithner is close to a decision to exempt the $4 trillion-a-day foreign-currency market from key provisions of the Dodd-Frank Act requiring greater transparency in the trading of derivatives. In the horse-trading over the final conference version of that legislation last year, both Geithner and financial-industry executives lobbied extensively to give the Treasury secretary the right to create this loophole. As the practical reach of Dodd-Frank is defined by the executive branch, this will be the first major decision to signal whether regulators will act to strengthen or weaken the reforms.

Update: Treasury Deputy Assistant Secretary Steve Adamske, after reading our story, said, "This in no way diminishes our commitment to enforce the rest of Title VII," [regulating derivatives], in effect confirming that a decision from Geithner to grant the foreign exchange exemption is imminent.

(More here.)