WASHINGTON – Sen. Carl Levin, D-Mich., said the following today regarding the CFTC staff advisory letter on cross border swaps, which is available here [PDF]:
“The CFTC is underfunded and understaffed, but it had the backbone to slam shut the latest loophole some swap dealers have concocted to circumvent U.S. rules requiring swaps to be traded in a transparent and fiscally responsible manner. Some foreign swap dealers operating in the United States, including some offshore affiliates of U.S. swap dealers, claimed that an obscure footnote in CFTC guidance excused them from complying with U.S. swap rules, so long as they booked their swaps through an offshore entity. The CFTC rejected that offshore gimmick and laid down a clear and sensible rule – if persons regularly arranging, negotiating, or executing swaps are located in the United States, they are subject to U.S. swap safeguards. The CFTC has it exactly right, since exempting offshore swap dealers operating in the U.S. from U.S. swap safeguards has no legal basis, would gut U.S. swaps laws, and would expose the U.S. financial system to unacceptable risks.”