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house Bill H.R. 1317

Increasing Regulations on Financial Institution Transactions

Argument in favor

Requiring financial institutions to hedge transactions with their affiliates reduces risk and makes financial markets more stable. Stability in U.S. financial markets means stability everywhere.

BarackObama's Opinion
···
10/26/2015
"Reform will constrain the growth of the largest financial firms, restrict the riskiest financial activities, and create a mechanism for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook." [whitehouse.gov]
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10/26/2015
“to reduce risks to the financial system by limiting banks’ ability to engage in activities other than socially valuable core banking activities.” [nytimes.com]
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10/26/2015
“stand up to the bullies on Wall Street.” [washingtonpost.com]
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Argument opposed

Increasing regulation on transactions between financial institutions and their affiliates will slow the mobility of capital. Hedging risks is something they can do on their own without regulation.

DonaldTrump's Opinion
···
10/26/2015
"Right now, government regulations cost us annually $1.75 trillion. They constitute a stealth tax that is larger than the amount the Internal Revenue Service collects every year from corporations and individuals combined." [washingtontimes.com]
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Curmudgeon's Opinion
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07/02/2015
Nothing devised by Democrats in the way of regulation can be trusted to allow the free market to function and grow. I would need to know specifics to even begin to have an opinion. Much more transparent in fosterwould be re establishing more players than Goldman and the three dwarfs as tho only remaining banks when compared to the 44 independents that in thirty years had merged into the oligopoly we now see.
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ahandel's Opinion
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01/28/2016
Increased regulation of financial markets not only hurts liquidity and risk-taking (a necessary component of economic growth), but disincentives financial institutions from fully engaging in the market.
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What is House Bill H.R. 1317?

This bill changes the process by which exemptions are granted to rules that prevent financial institutions from making transactions with their affiliates.

Such an exemption would only be allowed if the affiliate enters into an exchange to mitigate the risk of the parties who aren’t considered financial entities. This requirement aims to protect shareholders and owners of the affiliate institution.

The requirement that an affiliate enters into a swap would apply if the mitigation of risk — or hedge — can be addressed by entering to a swap with either:

  • A swap dealer or major swap participant.

  • A security-based swap with a security-based swap dealer, or a major security-based swap participants.

Per the Congressional Budget Office, a swap is:
"a contract that calls for an exchange of cash between two participants, based on an underlying rate or index or the performance of an asset."

Impact

Financial Institutions and their affiliates.

Cost of House Bill H.R. 1317

$1.00 Million
The CBO estimates that this bill would cost $1 million — assuming the funds are available.

More Information

In-Depth: The two pieces of existing legislation that are amended by this act are the Commodity Exchange Act and the Securities Exchange Act of 1934. The Commodity Exchange Act regulates the trading of commodities — like gold, silver, corn, wheat, or oil — and futures, which are a type of security that set the price and sale date of a commodity in the future.

The Securities Exchange Act of 1934 regulates the trade of securities (like stocks or bonds) on the secondary market where the securities are traded between brokers and individuals. Compare this to the primary market where securities are purchased directly from the companies issuing them.

This legislation requires that financial institutions that are trying to make a transaction with one of their affiliates enter into a swap to reduce the risk that financial institutions expose themselves to. Swaps can be used to change the maturity of a financial contract, in this case with respect to a commodity or futures which in turn reduces the risk to the owner of the security.

There are already some regulations on the types of transactions that financial entities can engage in with their affiliates, like Regulation W. Regulation W restricts the amount of an institution’s capital that can be transacted with one or more affiliates, and requires that credit extended to affiliates is secured.


Media:

(Photo Credit: Flickr user PingNews)

Official Title

To amend the Commodity Exchange Act and the Securities Exchange Act of 1934 to specify how clearing requirements apply to certain affiliate transactions, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Agriculture, Nutrition, and Forestry
  • The house Passed November 17th, 2015
    Passed by Voice Vote
      house Committees
      Committee on Agriculture
      Commodity Exchanges, Energy, and Credit
      Committee on Financial Services
      Investor Protection, Entrepreneurship, and Capital Markets
    IntroducedMarch 4th, 2015

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    "Reform will constrain the growth of the largest financial firms, restrict the riskiest financial activities, and create a mechanism for the government to shut down failing financial companies without precipitating a financial panic that leaves taxpayers and small businesses on the hook." [whitehouse.gov]
    Like (40)
    Follow
    Share
    "Right now, government regulations cost us annually $1.75 trillion. They constitute a stealth tax that is larger than the amount the Internal Revenue Service collects every year from corporations and individuals combined." [washingtontimes.com]
    Like (31)
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    Share
    "Congress doesn't regulate Wall Street. Wall Street regulates Congress." [huffingtonpost.com]
    Like (84)
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    “to reduce risks to the financial system by limiting banks’ ability to engage in activities other than socially valuable core banking activities.” [nytimes.com]
    Like (27)
    Follow
    Share
    “stand up to the bullies on Wall Street.” [washingtonpost.com]
    Like (5)
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    They can't be trusted. It needs to be guaranteed that 2008 can't happen again
    Like (3)
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    Increased regulation of financial markets not only hurts liquidity and risk-taking (a necessary component of economic growth), but disincentives financial institutions from fully engaging in the market.
    Like (3)
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    Banks need more regulation, we don't want to have 2008 start all over again.
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    Nothing devised by Democrats in the way of regulation can be trusted to allow the free market to function and grow. I would need to know specifics to even begin to have an opinion. Much more transparent in fosterwould be re establishing more players than Goldman and the three dwarfs as tho only remaining banks when compared to the 44 independents that in thirty years had merged into the oligopoly we now see.
    Like (3)
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    The deregulation of the financial industry is exactly what caused the financial crisis of 2008 to begin with. Deregulation allowed huge Wall Street banks to gamble away money that wasn't theirs, pushing all the risk onto us, and when they failed, we were forced to clean up their mess. For single-handedly destabilizing the world's economy, Wall Street executives should've been hanging from lampposts, rather than given golden parachutes. Wall Street has a crippling gambling addiction, and we've been nothing but enablers to them for the past 30 years.
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    The government should have minimum regulation on the market.
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    Federal Regulations were part of the reason 2008 happened. Government should not be in the business of regulating anything but itself.
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    I'm rarely in favor of increasing Federal regulations of anything.
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    Hasn't government done enough? More over reach and regs is not the solution.
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    Yes it make the market more stable
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    Ditz the regulations.
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    Yes!
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    After what happened in 2008, the banks obviously need more regulation
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    Banks have proven over and over again that they ignore risks that jeopardize US economic stability. 2008 was only one of the latest examples. They need more not less regulation. GLASS-STEAGELL should be reinstated.
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    Perhaps enforcing the ones we already have would work? And ending the Wall Street/regulatory agency pipeline! Capitalism, in it's most predatory form, has become America's religion. If you question it, you don't love Jesus! If we don't reign in the greed & control of big business, we will end up self-destructing which is obviously underway now.
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