Representative Josh Harder (CA-10) introduced the Financial Watchdog Support Act on Monday, Sept. 9. The legislation would help improve oversight of financial transactions between big banks and other financial institutions. The bill will fix part of a 2010 law which was designed to prevent another financial catastrophe but has proven to be inefficient.
“The recession cost people their homes, their retirements, and their jobs – we can never let a collapse like that happen again,” said Rep. Harder. “Before 2010, the financial industry ran like the Wild West – we have important new protections that insulate regular people from another meltdown, but they’re not always the most efficient. My bill will help us sharpen one of the most important tools in the toolbox to help protect our economy and keep our families’ savings safe.”
An organization called the Commodity Futures Trading Commission (CFTC) regulates all kinds of financial transactions between banks and relies on information databases called “Swap Data Repositories” (SDRs) to obtain records of financial deals. The CFTC monitors transactions including “credit default swaps,” which many economists have blamed for the unraveling of financial markets in 2008. SDRs ensure that federal regulators have the data they need to track such transactions and monitor potential risks to the economy.
Currently, database operators have to reach out to both parties involved in a transaction for duplicate sets of records. Only the seller is legally required to provide this information, meaning SDRs waste time and resources trying to track down the same records from the buyers, who are not legally required to provide such data. SDR personnel could better spend their time conducting more proactive work than trying to chase down duplicative information that a second party is not legally required to provide.
Harder’s bill would eliminate the redundant requirement and free-up SDR staff to conduct other important work protecting the financial system.