Wall Street lobbyists are undermining key legislative efforts to reform federal regulation for the financial industry, which could make the nation vulnerable to another financial crisis, CalPERS CIO Joseph Dear said in Washington today.
“If we don't end up with real reform, we're going to think we're protected but when we have trouble again we're going to find out it's an illusion,” Mr. Dear said at a National Press Club news conference.
As one example, Mr. Dear said that House legislation originally intended to beef up regulation of over-the-counter derivatives would instead create a “gigantic loophole” allowing end users to have customized derivatives.
“This loophole will be big enough to drive a huge amount of (derivatives that) should be exchange traded, and thus visible trading, into the shadows,” Mr. Dear said.
Mr. Dear, who is chairman of the Council of Institutional Investors as well as investment chief of the $201.1 billion California Public Employees' Retirement System, Sacramento, said he was concerned that other pending reform bills would be subjected to similar “watering down” as they move through the legislative process.
“Even big pension funds like CalPERS lack the lobbying clout of Wall Street,” Mr. Dear added.
“Wall Street sometimes pleads passionately on behalf of America's investors,” Mr. Dear continued. “Somehow, I keep hearing sharks pleading on behalf of the swimmers.”
