By Ian Swanson - 07/22/09 03:15 PM EDT
The centrist, pro-growth Democratic group unveiled legislation Wednesday that would set up a new office in the Treasury Department to oversee the registration of derivatives traders and help coordinate activities by two other agencies with jurisdiction, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
The author of the bill said giving Treasury that authority would ensure more accountability in the administration on rules for the trade of derivatives since Treasury is closer to the White House.
“We believe having an accountability in an agency where the administration will be accountable is more effective than more independent agencies,” Rep. Mike McMahon (D-N.Y.) said in a press call.
The bill would require the CFTC and SEC to impose new margin and collateral requirements on the buyers and sellers of derivatives, which are intended to hedge against the risk of an underlying asset, such as a stock.
AIG, the recipient of a $185 billion bailout from the government, fell apart after it could not pay back the buyers of derivatives it had sold. Its collapse threatened the wider financial system.
Rep. Jim Himes (D-Conn.) said imposing new capital requirements would “hopefully” prevent this from happening again. The legislation offered by the New Democrats does not say what these requirements should be, but calls for the SEC and CFTC to draw up minimum requirements.
McMahon said he and other New Democrats had spoken about the bill with House Financial Services Committee Chairman Barney Frank (D-Mass.) and hoped to win committee action in September.
Sixty-eight House members are in the New Democrat Coalition.