Derivatives Bill: It’s Less Bad, but Still Bad

Dave Mason / October 26, 2009

Two House committees this week approved derivatives legislation that composes a significant part of the Obama Administration’s Financial Services reform plan. Remarkably, for a plan crafted significantly by uber-liberal Barney Frank (Chairman of the House Financial Services Committee), the bill is notably less bad than the Administration’s original proposal, but still is flawed. The House Agriculture Committee also added amendments to the bill.

Heritage noted before that derivatives market participants are rapidly changing their business practices and structures in a voluntary, cooperative effort, albeit under government sponsorship. The biggest danger in cranking up regulation is that well-intentioned directives from bureaucrats will disrupt productive markets self-corrective processes and result in unintended consequences. This danger is greatly reduced when market participants have responsibility for designing fixes to the problems government identifies. (more…)