WASHINGTON, May 1 (UPI) -- The chairman of the Commodity Futures Trading Commission said regulators need jurisdiction over foreign bets made by U.S. banks to keep financial reform intact.
U.S. banks are lobbying hard to soften, or avoid altogether, rules proposed by Commissioner Gary Gensler that would put foreign derivatives trading involving U.S. customers, or guaranteed by a U.S. firm, under U.S. jurisdiction, The New York Times reported Wednesday.
The collapse of American International Group in 2008, which required $187 billion to bailout, was caused primarily by bets on credit default swaps, a type of derivative. JPMorgan Chase lost more than $6 billion on derivatives in one betting spree in London.
Gensler said in an interview regulators need more information from firms on their foreign derivatives positions.
"It would be letting down the American public if we said, we are just about to complete the task but now, let's retreat. If we don't do this right, we will blow a hole in the bottom of the boat of reform," he said.
Financial firms have poured tens of millions of dollars into lobbying to stop the commission from establishing the new rule, which they believe will harm a $700 trillion financial market.
Gensler has been labeled "reckless" and "stubborn," by financial industry lobbyists, the Times said.
"We should all care, because that cost (of the new rule) will have to be passed on, in the form of higher prices for products sold to consumers or a lower return for investors," said Kenneth Bentsen Jr., a financial industry lobbyist, who is working to prevent the proposal on cross-border rules from taking effect.
In a joint letter to Treasury Secretary Jacob Lew, regulators from Britain, Russia, Japan and Germany said financial firms would "not be able to function under such burdensome regulatory conditions."