Yesterday I wrote about how Wall Street is starting to move away from lobbying against Dodd-Frank, to actually implementing it. Today, I find myself writing about another sign that Wall Street is losing its battle against Dodd-Frank, and this time it comes from a federal judge. For Wall Street, used to winning in court, this must be particularly painful and maybe a little surprising. But as a litigator, I’m not surprised. As much as Wall Street would like to think that they can simply buy a favorable court ruling, this proves that theory wrong.
Plaintiffs Investment Company Institute and the Chamber of Commerce of the United State of America (one of the biggest pro-business lobbying group around and a member of Take Justice Back’s infamous list of Five Corporate Front Groups) sued the CFTC about rules they promulgated to enforce Dodd-Frank. The rules at issue regard Commodity Pool Operators, a fancy way of saying that the CFTC wanted mutual funds and other investment companies to register with them – a method to increase oversight and transparency.
So the US Chamber of Commerce claimed in their suit that the CFTC did not follow the proper procedure and made the change without the proper explanation to the public. The Chamber did NOT dispute that the CFTC had the authority to implement the regulation, or that the CFTC has the broad discretionary power to set eligibility that includes registration. In other words, it appears to be a desperate attempt to delay a regulation that the Chamber knows very well that the CFTC has the power to enforce.
Federal Judge Howell of the United States District Court for the District of Columbia soundly rejected their claims in a well researched 93 page opinion. Not only did Judge Howell reject the Chamber’s claims, but she also seemed hip to the Chamber’s nefarious motives. Judge Howell points out that the rule the Chamber is challenging is similar to a generally similar rule that was repealed in 2003 as part of a deregulation effort:
“Within five years of the 2003 [deregulation] amendments  the financial crises of 2007-2008 surfaced and began an ‘unraveling of this country’s financial sector,’ which led to a ‘crises that nearly crippled the U.S. economy beginning in 2008.”
See the Opinion at pg 11. In other words: nice try Chamber. These rules and regulations are in place for a reason. Your profits are not as important as the financial stability of our entire country. Judge Howell leaves no room for doubt about her opinion on the Chamber’s “myopic” view of the CFTC’s rule:
“The plaintiffs have thrown everything in the proverbial kitchen sink at the CFTC in their effort to stop the Final Rule[.] … Clearly, the plaintiffs disagree with the CFTC’s conclusion that the costs of the Final Rule – even if acknowledged to be substantial – pale in comparison to its benefits for the integrity, transparency, and stability of the financial markets, and the concomitant protections for consumers and market players.
See the Opinion at pg 91.
So what exactly does Wall Street want to hide? As far as I’m concerned the only reason someone would so adamantly object to being required to register (that’s it, just registration, as in filling out some forms) is if they wanted to continue flying under the radar, avoiding the rules, and getting away with profits that may not exactly be on the up-and-up. A lawsuit is a great way to delay something and even if you lose, you can delay even more by appealing. So nice job, Judge Howell, for not letting Wall Street get away with this one.
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