Congressman Barney Frank
Representing Massachusetts' 4th District

Frank and Colleagues Present Outline of Legislation to Regulate Derivatives
July 30, 2009

WASHINGTON, DC – Congressman Barney Frank, Chairman of the House Financial Services Committee, Congressman Collin Peterson, Chairman of the House Agriculture Committee, and other House members met with reporters today to announce the broad outlines of planned legislation to regulate complex financial instruments known as derivatives.  The legislation would provide mechanisms to limit rampant speculation in financial derivatives, one of the major causes of the economic crisis.

“The fundamental purpose here is to improve the regulation of derivatives so that they continue to perform their important market function but are less likely to contribute to a kind of irresponsibility that can cause a crisis,” said Congressman Frank.

During the press conference, Chairman Frank and Chairman Peterson introduced principles which will guide the development of the new legislation.  Among these are:

• Strong incentives to encourage trading of derivatives on established exchanges
• Oversight of derivatives by the Securities and Exchange Commission and the Commodity Futures Trading Commission
• Increased capital requirements
• A possible ban on speculating on derivatives for which the buyer does not own the underlying security or commodity
• Confidential reporting requirements for “short” purchases in derivative contracts
• Coordination with other countries to harmonize rules and thus prevent financial institutions from moving assets to countries with less regulation

For additional information about the proposed legislation, see concept paper from the House Committee on Financial Services.