WASHINGTON — The dark and largely unregulated market of derivatives, which helped trigger the financial crisis, moved closer to federal oversight as a congressional committee voted to impose new rules on the products to try to limit the risk they can pose to the economy.
The 43-26 vote by the House Financial Services Committee was a key step for the Obama administration's plan to overhaul Washington's oversight of the financial system while shedding more light on complex investments.
Immediately after the vote Thursday, the committee took up the most contentious issue in the regulatory package: creation of the Consumer Financial Protection Agency. A vote on that provision, though, isn't expected until next week.
Thursday's largely partisan vote on derivatives supports bringing regulation for the first time to the private, over-the-counter securities, named derivatives because their value is derived from the price of an underlying asset such as interest rates or oil.
"This is a very important step forward in bringing these complex financial products under the regulatory umbrella and bringing transparency to this unregulated market," said Mary Schapiro, chairwoman of the Securities and Exchange Commission, which would share oversight of derivatives with another agency, the Commodity Futures Trading Commission.
But some critics said the new rules wouldn't be strong enough to prevent crises, in part because they would exempt too many derivatives deals from transparency requirements. The legislation still faces changes in the House and Senate, which are under pressure from banks and other businesses to limit the new oversight.
"There is progress on some important issues in this legislation, but it doesn't begin to fulfill the promise that was made that we're going to get comprehensive reform in the derivatives market," said Barbara Roper, director of investor protection for the Consumer Federation of America.
Gary Gensler, chairman of the Commodity Futures Trading Commission, has pushed for tougher regulations. He said Thursday's vote represented "historic progress" but added that he wanted to work with Congress "to complete legislation that covers the entire marketplace without exception."
Derivatives were at the heart of the failure of Lehman Bros. and the near-collapse of insurance giant American International Group Inc. The Federal Reserve bailed out AIG last fall when its failure threatened to send shock waves through the financial system because of the numerous companies AIG covered through derivatives known as credit default swaps.
