Institute for New Economic Thinking: Too big to fail US banks’ regulatory alchemy

18 June 2018

As the tenth anniversary of the Lehman failure approaches, there is an understanding among many market regulators and swaps trading experts that large portions of the swaps market have moved from US bank holding company swaps dealers to their newly deguaranteed foreign affiliates, says INET.

With relief is unlikely to be forthcoming from either the Trump Administration or a Republican-controlled Congress, some other means will have to be found to avert another multi-trillion dollar bank bailout and/or financial calamity caused by poorly regulated swaps on the books of big U.S. banks. This paper notes that the relevant statutory framework affords state  attorneys general and state financial regulators the right to bring so-called “parens patriae” actions in federal district court to enforce, inter alia, Dodd-Frank on behalf of a state’s citizens. That kind of litigation to enforce the statute’s extraterritorial provisions is now badly needed.

Full paper

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