Financial Regulation in the U.S. vs Overseas | C-SPAN

As global markets and economies continue to integrate, the regulatory framework in which businesses operate will also have to evolve. The Dodd-Frank Act passed by Congress last year, is set to introduce some 400 new regulations to the US economy. Given where our economy was three years ago and the current circumstances, will this Act put U.S. companies at an international disadvantage? Will it cause capital flight...? The hearing held by the Financial Services Committee brings forth these issues.  

The House Financial Services Committee holds a hearing on the differences in financial regulatory approaches in the U.S. and abroad, and whether those disparities could affect U.S. companies and the economy at large. Last year Congress passed a set of rule changes known as the Dodd-Frank Act, the most sweeping change to the U.S. financial system in a generation, and some members of Congress and the Administration worry the new rules put U.S. companies at a disadvantage against their foreign competition.

Witnesses at the hearing included the heads of the FDIC, Securities and Exchange Commission, and Commodity Futures Trading Commission. The committee also heard from officials in the banking and financial industry. Witness Barry Zubrow with J.P. Morgan Chase said the "pendulum has swung too far" in the direction favoring regulation. 

Treasury Secretary Timothy Geithner has expressed concerns that the disparity in financial rules between countries will allow banks and other companies to play nations against one other by threatening to take their business somewhere else. "We don’t want to see another race to the bottom around the world," he said. "As we act to contain risk in the U.S., we want to minimize the chances that it simply moves to other markets around the world." Geithner also suggested that other countries need to enact tighter regulations and avoid benefiting from tougher financial market rules in the United States

Committee Chairman Spencer Bachus (R-AL) has said that there is a “widespread concern that the Dodd-Frank Act with its 400 new regulations will lead to industry, capital and jobs leaving the United States.”   The chairman plans to examine the differences in rules on derivatives trading, capital and liquidity requirements, regulation of financial institutions, and proprietary trading.

The House Financial Services and Agriculture committees recently approved legislation that would delay the implementation of new U.S. rules for the derivatives market from July until at least September 2012.

On Tuesday, the FDIC approved a rule under Dodd-Frank requiring that large U.S. banks be subject to the same minimum standards as community banks for how much money they must have on hand. Previously these banks followed an international standard known as Basel II, named after the Swiss city where past agreements have been reached, that allowed them to use their own “internal management assumption” models to calculate how much capital they needed to hold.