From a Bernie supporter to everyone who isn't one:

[PufPuf23]

55. Look up of CFMA - Good point.

https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured modernized regulation[1] of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so that most over-the-counter (OTC) derivatives transactions between "sophisticated parties" would not be regulated as "futures" under the Commodity Exchange Act of 1936 (CEA) or as "securities" under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general "safety and soundness" standards. The Commodity Futures Trading Commission's (CFTC) desire to have "Functional regulation" of the market was also rejected. Instead, the CFTC would continue to do "entity-based supervision of OTC derivatives dealers."[2] These derivatives, including the credit default swap, are a few of the many causes of the financial crisis of 2008 and the subsequent 2008–2012 global recession.[3]

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Before and after the CFMA, federal banking regulators imposed capital and other requirements on banks that entered into OTC derivatives.[4] The United States Securities and Exchange Commission (SEC) and CFTC had limited "risk assessment" authority over OTC derivatives dealers affiliated with securities or commodities brokers and also jointly administered a voluntary program under which the largest securities and commodities firms reported additional information about derivative activities, management controls, risk and capital management, and counterparty exposure policies that were similar to, but more limited than, the requirements for banks.[5] Banks and securities firms were the dominant dealers in the market, with commercial bank dealers holding by far the largest share.[6] To the extent insurance company affiliates acted as dealers of OTC derivatives rather than as counterparties to transactions with banks or security firm affiliates, they had no such federal "safety and soundness" regulation of those activities and typically conducted the activities through London-based affiliates.[7]

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CFTC/SEC dispute and PWG Report as basis for the CFMA

Dispute

In 1997 and 1998 a conflict developed between the CFTC and the SEC over an SEC proposal to ease its broker-dealer regulations for securities firm affiliates that engaged in OTC derivatives activities. The SEC had long been frustrated that those activities were conducted outside the regulated broker-dealer affiliates of securities firms, often outside the United States in London or elsewhere. To bring the activities into broker-dealer supervision, the SEC proposed relaxed net capital and other rules (known as "Broker-Dealer Lite&quot for OTC derivatives dealers. The CFTC objected that some activities that would be authorized by this proposal were not permitted under the CEA. The CFTC also issued a "concept release" requesting comments on whether the OTC derivatives market was properly regulated under the existing CEA exemptions and on whether market developments required regulatory changes.[24]

The CFTC's actions were widely viewed as a response to the SEC's Broker-Dealer Lite proposal and, at least by Professor John C. Coffee, as perhaps an attempt to force the SEC to withdraw the proposal. The CFTC expressed dismay over the Broker-Dealer Lite proposal and the manner in which it was issued, but also noted it was 18 months into a "comprehensive regulatory reform effort." The same day the CFTC issued its "concept release" Treasury Secretary Robert Rubin, Federal Reserve Board Chair Alan Greenspan, and SEC Chair Arthur Levitt (who, along with CFTC Chair Brooksley Born, were the members of the PWG) issued a letter asking Congress to prevent the CFTC from changing its existing treatment of OTC derivatives. They argued that, by calling into question whether swaps and other OTC derivatives were "futures", the CFTC was calling into question the legality of security related OTC derivatives for which the CFTC could not grant exemptions (as described in Section 1.1.2 above) and, more broadly, undermining an "implicit agreement" not to raise the question of the CEA's coverage of swaps and other established OTC derivatives.[25] In the ensuing Congressional hearings, the three members of the PWG dissenting from the CFTC's "unilateral" actions argued the CFTC was not the proper body, and the CEA was not the proper statute, to regulate OTC derivatives activities. Banks and securities firms dominated the OTC derivatives market. Their regulators needed to be involved in any regulation of the market. Bank regulators and the SEC already monitored and regulated bank and broker-dealer OTC Derivatives activities. The dissenting PWG members explained that any effort to regulate those activities through the CEA would only lead to the activities moving outside the United States. In the 1980s banks had used offshore branches to book transactions potentially covered by the CEA. Securities firms were still using London and other foreign offices to book at least securities related derivatives transactions. Any change in regulation of OTC derivatives should only occur after a full study of the issue by the entire PWG.[26]

CFTC Chair Brooksley Born replied that the CFTC had exclusive authority over "futures" under the CEA and could not allow the other PWG members to dictate the CFTC's authority under that statute. She pointed out the "concept release" did not propose, nor presuppose the need for, any change in the regulatory treatment of OTC derivatives. She noted, however, that changes in the OTC derivatives market had made that market more similar to futures markets.[27]