Published On: Sun, Dec 21st, 2014

U.S. Treasury Secretary Jack Lew Slams Changes to Financial Reform Law

Jack Lew

American Treasury Secretary Jacob Lew criticized Congress Thursday for approving a change to part of the 2010 Dodd-Frank Wall Street reform law, MarketWatch said on December 18.

Speaking at the beginning of a meeting for the Financial Stability Oversight Council (FSOC), Lew said the Obama Administration opposed Congress’ inclusion of a provision that repealed a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that forced bank holding companies to conduct derivatives activities in non-bank subsidiaries to reduce the risk of a taxpayer bailout, the report said.

“It was a step in the wrong direction, ” Lew said, but added that much of the architecture of the law remained intact, and was already changing the derivatives market. President Barack Obama has said he’s still committed to fully implementing Dodd-Frank, the regulations passed in 2010 in order to prevent a recurrence of the events that led to the 2008 financial crisis.

The provision was included in Congress’ spending bill passed over the weekend to keep the government open, but was actively opposed by Democrats like Sen. Elizabeth Warren of Massachusetts and Sen. Sherrod Brown of Ohio, who will be the top Democrat on the Senate Banking Committee next session, according to the report.

Meanwhile, the U.S. financial risk council took new steps on Thursday to bolster its ongoing review of the asset management industry, announcing it is requesting information to understand how certain activities and products could threaten the markets, Reuters said.

Treasury Secretary Lew, who chairs the FSOC, said regulators will focus their data request on four key areas: liquidity and redemption risk, leverage, operational functions and how asset managers can be resolved if they fail, the report said.

“I believe this engagement should give us greater insight into whether and how asset management products and activities could create risks to U.S. financial stability, ” Lew said during a meeting of the council on Thursday.

Regulators have been scrutinizing the industry since the 2007-2009 financial crisis.

Securities and Exchange Commission Chair Mary Jo White, whose agency directly oversees asset managers such as BlackRock , last week laid out a plan to tighten supervision.

White, an FSOC member, said Thursday that the risk council’s work could help inform the SEC’s rules. She said the FSOC is involved because potential systemic threats to the financial system could not be solved by just one agency, according to the report.

 

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