The battle between regulators and the corporate world inside the EU over new proposals to regulate complex financial instruments known as derivatives for the first time is being mirrored across the Atlantic. Lead US regulator Gary Gensler, chairman of the US Commodity Futures Trading Commission, warned, on 12 January, “Wall Street has been more successful on Capitol Hill to moderate” US lawmakers’ proposals. He looked to the EU for support in his regulatory push, telling an audience at the Atlantic Council think tank in Washington “if Europe is with us, we will bring this together”. The EU and the US account for 85% of the over-the-counter derivatives market.

The US House of Representatives passed a bill in December 2009 with numerous exemptions. The Senate is considering legislation. Welcoming the European Commission’s October 2009 announcement of new proposals, Gensler said he hoped the European Parliament would address the issue in summer 2010. “It would be good” if the EU and the US had something by the end of 2010, he said. There was a strong international mandate, he noted, as world leaders at the G20 summit in Pittsburgh, in September 2009, mandated new regulations on derivatives, which Gensler said “were among the root” of the 2008 financial crisis. He wanted “between two thirds and three quarters” of the derivatives market traded on exchanges and to limit “end-user exemptions”.

Aware of Wall Street’s effective lobbying, Gensler appealed directly to the US citizen, noting each one had coughed up US$600 to bail out AIG, the key player in the credit default swaps (CDS) market, which received US$180 billion from the US government. Credit default swaps allow companies to effectively bet against another firm defaulting.