Talk:Commodity Futures Modernization Act of 2000

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Exemption from what?[edit]

Exempts commodity traders from what ...disclosure? (talk) 04:56, 20 June 2008 (UTC)

This bill did not exempt traditional commodity traders from anything. What it did was to place the regulation of "swaps" and "single stock trades" in the hands of SEC as opposed to the futures markets where they actually belong. The net result was to allow financial institutions (acting as banks absent the controls of Glass-Steagall) to leverage futures positions with money created from thin air. summary.--The Trucker (talk) 06:41, 17 September 2008 (UTC)

Bill references?[edit]

I'm not sure those are correct. When I looked up HR 5660 in govtrack it came out with "H.R. 5660: To amend the Internal Revenue Code of 1986 to allow a nonrefundable credit for mentoring and housing young adults." I don't think that's what we're talking about here. What I DID find was H.R. 4541. EDIT: Never mind. I was looking at the wrong session.KartoumHero (talk) 14:53, 24 September 2008 (UTC)

Any attempts to modify...?[edit]

"The legislation also provided certainty that products offered by banking institutions would not be regulated as futures contracts." Were there any legislative attempts made to modify this portion of the law, after it passed; as there were to close the Enron loophole? Pmb72 (talk) 17:45, 7 October 2008 (UTC)

Signed into law?[edit]

I'm a little confused about the section that says it was signed into law in December 2000. The reference on the page ( clearly says that never became law. Is this reference incorrect? Or is there something I'm not getting? Is it out of the question to include a section explaining this if the information is correct? —Preceding unsigned comment added by (talk) 20:01, 15 October 2008 (UTC)

H.R. 5660 was never enacted as a stand alone bill. The text of H.R. 5660 was incorporated into H.R. 4577, which is what Pres. Clinton signed. Bond Head (talk) 14:53, 20 July 2009 (UTC)

Political significance?[edit]

To, the stuff you added on 28 October under the heading "Current Political Significance" is unreferrenced and erroneous. The CFMA didn't "deregulate" "financial derivatives"; it was a bipartisan bill signed into law by President Clinton; and you don't provide any relevant context for the discussion of Phil Gramm and John McCain. Unless you can reference it and clean it up, I propose deleting what you have added. This whole article contains lots of unsupported and erroneous material--no encyclopedia should ever include a sentence that begins with "It would appear that..."--and deleting the 28 October addition by an unregistered user is a good start at cleaning it up. Bond Head (talk) 20:32, 28 October 2008 (UTC)

I thought I remember references to Phil Graham in this article but they aren't any there now. Also looks like his own page has been edited to make him look better and his link removed from his wife's page.

Fixed erroneous suggestions[edit]

The article as previously written suggested that the CFMA was slammed through Congress with no debate in the final day of a congressional session. Anybody who was paying attention to the legislation at the time knows that the issues covered by the CFMA were the subject of years of deliberation, congressional hearings, public debate, etc. The final version was adopted without discussion because by the time the legislation got to that stage, it was essentially non controversial. It had the full support of key Republicans and Democrats in Congress and the support of President Clinton. I have fixed the misrepresentation. Bond Head (talk) 15:01, 20 July 2009 (UTC)

HR 4577[edit]

If no one objects, I'm going to remove the section on HR 4577 that lists all the sections of the omnibus bill. The article already makes clear that the CFMA was in that bill, and listing all the other sections is not relevant to the article. Bond Head (talk) 10:07, 21 July 2009 (UTC)

"Bona Fide Hedging" exemption???[edit]

I am going to revert back the edits by an anonymous editor regarding "Bona Fide Hedging" exemption." It refers to unexplained information, is unsourced, and doesn't say anything. Bond Head (talk) 22:58, 12 August 2009 (UTC)

September 2, 2009 Edit[edit]

Thank you to Mdeckerz who greatly improved this article by adding the PWG Report. That should have alerted everyone to the fact there was a background to this legislation. I've filled in the details. If it's too much, that's because I wanted to give plenty of sources so people could make their own judgments. EAFAAT (talk) 21:01, 2 September 2009 (UTC)

P.S. I realize this means the Enron Loophole article needs to be updated. EAFAAT (talk) 21:02, 2 September 2009 (UTC)

Wow. This is an epic edit. From a quick skim, it is clear you worked hard on this. I am looking forward to reading it in detail. Bond Head (talk) 16:13, 3 September 2009 (UTC)

Thanks. I meant it that your July edit greatly improved the article by bringing in the PWG report. That should have tipped off any reader that there was more to the CFMA than some mysterious act by a single Senator. Not sure how anyone ever believed the CFMA was "sneaked in" or even "slipped in on the Senate floor" when it was included in a conference report. Variations on that story, though, sure were repeated by a lot of people and (like all urban legends) kept being embellished. I think the article makes clear a lot of people knew about the CFMA and that a lot of people were quite enthusiastic in their support. I hope it also explains what the CFMA did in the context of the law that existed at that time. EAFAAT (talk) 21:28, 4 September 2009 (UTC)

This article is terrific. EAFAAT, you have done a great job of capturing all the dynamics at play leading to the enactment of the CFMA, and the article is a great resource for anybody interested in the issue. The citations are outstanding.
I remember all the talk at the time about "legal certainty" and protecting the US as a center of "financial innovation." How silly that all seems now. The CFMA is the best example I can think of of a public policy initiative undertaken with the best intentions that in hindsight couldn't have been more misguided. Well done. Bond Head (talk) 14:00, 2 October 2009 (UTC)

It seems kind of excessive to me to have 70% of the article taken up by references. Is there any way we could abbreviate the references section? johnpseudo 19:00, 2 October 2009 (UTC)

The references could be put in a more Wikipedia-like format and that would shorten the section some, but I would be opposed to deleting any of the content from the references section. There's a lot of informational value there, and removing any of that content would detract from the article. Bond Head (talk) 12:33, 3 October 2009 (UTC)

Edit of 16 November 2009[edit]

I appreciate the citation to the Brooksley Born interview as a source for "removong government oversight" from the OTC derivatives market. But it isn't clear that the CFTC ever had that authority to begin with, despite what Born said and did at the time and sunsequently. I am going to clarify this. Bond Head (talk) 03:12, 17 November 2009 (UTC)

December 13, 2009, edit[edit]

In my September 2 major edit to the article I relegated LTCM to a footnote because the article was already very long. The Frontline episode on Brooksley Born seems to have created interest in those events. The new section 1.2.3 gives details missing from the Frontline episode and adds the 1997 “professional markets” fight during which Born spoke of the OTC derivatives market in much the same manner as the later PWG Report. While the Markham/Johnson/Coffee narrations of the events leading to the CFMA describe the SEC BD Lite proposal, the CFTC response, and the CFTC concept release as leading to the CFTC moratorium, the PWG Report, and the CFMA, a possible additional motivation for the concept release was the fight against the professional markets legislation. The concept release could be viewed as a response to the exchange member complaint that the OTC derivatives market was “unfair competition.” Whatever the motivation, the net result was that the exchanges were unhappy to be denied “regulatory relief” and the OTC derivatives dealers were even more unhappy (which gave only limited solace to the exchanges).

I’ve also elaborated on pre-CFMA regulation of OTC derivatives dealers. The Frontline episode suggested there was no regulation. It’s silly to imagine (as Frontline did) that in 1998 someone looked around and suddenly “discovered” the large OTC derivatives market. It’s even sillier to portray (as Frontline did) swap contracts as “hidden in file cabinets.” Banking regulators had access to those contracts just as they did to loan and other bank contracts. Banking regulators reviewed and set standards for those contracts and all other bank activities. Whether those standards were adequate or intelligent are legitimate questions.

Brooksley Born knew about “entity level” regulation when she was CFTC Chairperson. In 1998 Born was suggesting overall regulation of the OTC derivatives market. The banking regulators, but also the SEC, wanted to leave the overall market outside the CEA with the bank regulators setting standards for bank activities and the SEC, on a more limited basis, monitoring the standards of securities firms. Despite Chairman Levitt’s efforts to portray himself as a misled pawn of Rubin and Greenspan, the SEC’s position on OTC derivatives was that “traditional swaps” were covered by the CEA only if executed on a “multilateral transaction execution facility.” That was the narrowest interpretation provided by any regulator.

Jim Leach (whom, as described in the article’s note 37, Professor Partnoy lauds as a sober “warner” of the dangers of the OTC derivatives market before Born) was perhaps the strongest Congressional supporter of the banking regulator view during the 1998 hearings and again in 2000 as a proponent of a broadly “deregulatory” CFMA. He did not think the CFTC was the proper body to regulate OTC derivatives.

I’m not aware of any reason to believe Leach was insincere in his position that swaps were bank products that should not be regulated under the CEA’s “one size fits all” treatment of “futures.” Born argued the “flexibility” provided by the FTPA’s exemption powers would allow the CFTC to tailor that regulation, but Leach (and many others) countered that the CFTC’s expertise was in exchange traded futures not in OTC financial derivatives that were much better understood by banking and securities regulators. Professor Partnoy does not mention Leach’s 1998 and 2000 positions in his book FIASCO even though he does mention both the Born episode and the CFMA. This permits him to maintain his campaign contribution argument referenced in note 37 of the article. It is possible that explanatory model (which Frontline seems to share) is not able to explain fully the actions of each member of Congress. EAFAAT (talk) 23:45, 13 December 2009 (UTC)

Article size[edit]

This article is very good, but it is also very long - 199 KB (mainly due to the extensive references). Perhaps some sections could be spun out into a separate article per WP:Summary style (e.g.: Background to the CFMA), to reduce it to a more reasonable length? Robofish (talk) 14:42, 10 January 2010 (UTC)

I think this page is excellent, and should be allowed to stand as is. --Mujokan (talk) 12:55, 1 May 2010 (UTC)

I agree that the article should not be shortened. This is one of the best, most comprehensive, most wonderful pieces of scholarship about a specific piece of legislation on this site. Legislative histories are complicated, but important. They need to be in depth in order to be meaningful. --Smorsini (talk) 15:13, 8 June 2010 (UTC)

Entire sections of this need to be split out into separate articles, like the 2009 reform stuff. You could even make an entire article on the relationship between LTCM and derivatives legislation, or the legislative history of the law itself. Considering how long this article is, it wouldn't hurt a bit. Also a lot of the writing could be cleaned up.

Also the references are really confusing, ie it has things like 'please see section 1.2.1 above', or 'see note 25', which make absolutely no sense on wikipedia, and will wind up eventually being entirely wrong as the article gets modified over the years. Another confusing thing is saying "PWG Report at 23", this lawyer-speak does not work on wikipedia and makes no sense whatsoever to the average reader,... what 'PWG Report'? where? which PWG report? oh the one 'in section 2.1, below'? Where is that?

lastly, it is just poorly written. the wecond paragraph, for example, has a bunch of sentences that have almost no apparent link to any central point that the paragraph is trying to make.

there is much room for improvement.

Decora (talk) 02:54, 21 January 2011 (UTC)


“Functional regulation” of derivatives products by the Commodity Futures Trading Commission (CFTC) was rejected for continued “entity-based supervision of OTC derivatives dealers."

I am just a simple caveman typer, but I'm pretty sure that grammar is unnecessarily confusing. I don't think that rewriting it would reduce the precision of the author, but I think it would improve the understanding for the reader. Decora (talk) 22:12, 17 April 2011 (UTC)

These are not references, they are... I don't even know. Whatever they are, they are overwrought and confusing. It's not clear which sources actually supports the content of the article and what parts of the notes are original research. Sadly, the person who added them is inactive and cannot accept their trout. My instinct is to burn the notes altogether and start over, unless someone can figure out the tangle. --Danger (talk) 03:42, 20 August 2011 (UTC)
There is definitely room for clarification and streamlining, but the article shouldn't be gutted. It is much better than the version that existed before EAFAAT's edits two years ago. In my view, the biggest problem with the references is that they sometimes refer to each other, i.e., "See note 20" or something like that, and when the footnotes get renumbered, they no longer make sense. The footnotes definitely shouldn't be "burned" because they include lots of explanatory references to original sources.
By the way, "entity-based regulation" refers to a system where companies are regulated based on how they organize themselves. If you're a bank, you're regulated by the bank regulator; if you're a securities firm, you're regulated by the securities regulator, etc. "Functional regulation" refers to regulating companies by the kinds of activities they're engaged in, regardless of how they're organized. If you trade stocks, you're regulated by the securities regulator regardless of whether you're a bank, securities firm, hedge fund or whatever. Bond Head (talk) 15:19, 21 August 2011 (UTC)

Tie to crisis[edit]

Can someone explain - here and/or in the article - exactly how the CFMA tied to the current crisis? Credit default swaps were legal before the CFMA, so what exactly was done (by whom) in 2008 that could not have happened before the CFMA? Wknight94 talk 17:42, 3 October 2011 (UTC)

As I understand it, they could be sold to function as insurance but they didn't have to be regulated like insurance due to the CFMA. (AIG didn't have to hold capital on all the credit default swaps they sold.) Here's one story.[1] Jesanj (talk) 18:17, 3 October 2011 (UTC)
Interesting link, but doesn't mention the word "regulation" at all. Did credit default swaps previously require a certain amount of capital on hand, but some part of the CFMA specifically removed such a requirement? What I'd love to see in this article - properly sourced of course - would be something along the lines of "In 2008, AIG (and others?) engaged in the selling of credit default swaps. Prior to the CFMA, AIG could not have {insert nasty thing here}, but the {insert clause here} clause of the CFMA allowed AIG to {insert nasty thing here}, greatly contributing to the financial crisis," where the nasty thing may be "hold capital on all of the credit default swaps they sold" and maybe even with exact numbers showing how far in trouble they were. And I assume the nasty things from that sentence are still possible, right? The only portion that I've heard was ever undone was the Enron loophole (an article that also seems lacking in specifics - but I'll bring that up on the talk page there). Thanks. Wknight94 talk 18:45, 3 October 2011 (UTC)
In the 4th minute of this show some of your questions should be addressed: [2] Jesanj (talk) 19:10, 3 October 2011 (UTC)
FYI, 2008 is just when the bubble burst. AIG sold a bunch of credit default swaps in preceding years. Jesanj (talk) 19:11, 3 October 2011 (UTC)


I apologize if I am violating any of Wikipedia's guidelines, but I want to flag that some portions of this article appear to be lifted verbatim from a book, "US Commodity Futures Trading Handbook Strategic Information and Regulations". [3]

For example, "As described in Section 1.2.1 above, legal uncertainty for security-based swaps was an important issue in the events that led to the PWG Report."

Meiselface (talk) 00:42, 6 May 2014 (UTC)

Actually, the book dates from 2013 (long after the text was available here), and includes instances of "[edit]" that give away that the book is reusing Wikipedia text, and in a very sloppy and amateurish way, I might add. As far as I can see, the book does not credit Wikipedia as a source, in which case it would be guilty of plagiarism. --Stemonitis (talk) 10:05, 16 November 2015 (UTC)

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