.Geithner gives some companies pass on new rules

[democracy1st]

WASHINGTON – Treasury Secretary Timothy Geithner has decided to let companies continue to trade certain contracts used to guard against swings in currency values outside regulators' view.

New rules require that many such trades happen more transparently, on exchanges where regulators can see them. But Geithner is exempting certain contracts used by companies to hedge currency rates.

The new financial overhaul law authorized Geithner to carve out such an exemption to stricter regulation.

Business groups argue that tighter oversight of such contracts would be costly and unnecessary. But critics, including some regulators, counter that the whole market for financial contracts called over-the-counter derivatives should face stricter supervision.

The value of derivatives hinges on an underlying investment, such as currencies, stocks or mortgages. Speculators who used over-the-counter derivatives helped fuel the 2008 financial crisis.

Sen. Carl Levin, who pushed for tighter regulation after the crisis, said Geithner's decision might open the door for lax oversight in the future.

Treasury's top markets official said the contracts already include many of the safeguards the new rules impose. Investors can find information on the price for each contract, for example. Some of the contracts are traded on electronic platforms, which are less likely to freeze up after an unexpected financial shock.

Imposing new rules would mean "introducing an additional process into what is a very well-functioning market today, and you would be putting more steps into the settlement process," said Mary Miller, assistant Treasury secretary for financial markets.

Miller argued that even with the exemption, the market will become more transparent. Companies will have to report the contracts in real time, after they make a trade. The information will go to central databanks that regulators can see.

Still, the contracts, called foreign-exchange swaps, wouldn't be subject to other requirements that experts say would make them more transparent.

http://news.yahoo.com/s/ap/20110429/ap_on_bi_ge/us_geithner_financial_overhaul

[DCKit]

1. Oh, Timmeh. nt