Despite the fact that the U.S. economy still continues to struggle with the consequences of the largest since the great depression of the financial crisis, the U.S. government is contrary to all common sense to pursue policies that puts the financial markets in a very risky position.
The government exerts considerable pressure on the Commission commodity futures trading (CFTC) and the securities Commission (SEC), thereby risking a repetition of the events of previous financial crisis.
A few years ago the U.S. Congress approved the Dodd-Frank in response to the financial crisis of 2008. However, key decisions on specific changes to legislation in the field of regulation of financial markets, have been shelved.
According to The Sunlight Foundation since the adoption of Dodd-Frank and to this day, lobbyists for wall Street and representatives of various financial institutions 1298 held meetings with various authorities on the application of this law. While public organizations have been able to meet only 242 of the meeting. The interests of wall Street clearly outweigh the interests of society.
But such anti-democratic bias resonates far beyond the United States, as the financial market of the USA still sets the tone for the global financial system.
The group of twenty (G-20) and the financial stability Board was assured that a large nation such as the U.S., will ensure that if changes in domestic legislation in account and global consequences. And here, despite the promise of the USA, it seems, decided to completely "neutralize" the Dodd-Frank, eliminating most of the key operations of U.S. banks from its scope.
The first step the US Treasury quietly while the Congress celebrated the Day of thanksgiving, was excluded from the list of transactions falling under the act, the FX swaps and forward transactions with currency.
It seems to be okay. When U.S. banks conduct foreign operations, for example, in South Korea, selling Forex derivatives to exporters, they are hedging themselves against risks of fluctuations in foreign currency exchange rates. But during the last financial crisis, when capital outflow from emerging markets back to the U.S., U.S. banks quickly turned these operations, causing enormous damage to the economies of these countries.
Immediately after the financial crisis, the operators of the Forex market-derivatives again began to actively carry out their operations. Hedge funds and big banks engaged in trade strategy “carry trade“. They take dollars at a very low rate, and then used it to buy foreign currency from various countries, including South Korea, Brazil, Chile, Colombia, Mexico, South Africa, Indonesia and Thailand. Then financial guru invented the derivatives that allowed to do short trades against the us dollar and long foreign currencies. This caused growth of courses of foreign currencies and the emergence of bubbles, which, in turn, is one of the reasons of the slowdown of emerging markets.
Now when the fed plans to phase out quantitative easing, capital is fleeing emerging markets, resulting in falling rates of foreign currency and increases the debt burden. Bank Citigroup could lose up to $ 7 billion in Forex derivatives if the dollar will start to rise as capital returns to the US.
The next step the U.S. government plans to exclude from the effect of Dodd-Frank for foreign branches or subsidiaries of hedge funds and large banks located in the U.S., most of those that flunked foreign markets for its derivatives.
We must pay tribute to South Korea and Brazil that have adopted their own legislation regulating transactions with Forex derivatives. But emerging markets are still unable to manage the market, the volume of which reaches 4 trillion dollars a day.
According to the former Goldman Sachs partner and now Chairman of the Commission on commodity futures trading Gary Gensler, if these changes will be made to the legislation, the hedge funds will be able to circumvent the rules, just "opening a shop in any offshore company, even if it's a mailbox of some tropical island". The Gensler must obtain a majority vote of the Commission until 12 July, not to let that happen. So what time he has left quite a bit.
Tags: financial center , USA , economy , crisis