Mendelowitz said he was delighted with the reconciled bill,
adding: "It’s a small provision in the bill.
It’s almost gone unnoticed. There are a lot of
easy flashpoints that have hooked the press.
There’s about 90% of what was in the Reid [Senate]
bill. It’s not perfect, [but] it’s
still an incredible achievement."
The most important proposal – the creation of a
national database to store transaction data, accessible by
regulators monitoring the build up of systemic risk –
has made it into the bill. "All of that’s in
there," said Mendelowitz. "It’s mandatory for all
financial institutions and instruments."
Mendelowitz helped found Ce-Nif after the crisis, in
February 2009. The group called for a new, independent body to
collect and manage all transaction and position data for US
financial entities and their affiliates.
The project was lent heavyweight backing by six Nobel Prize
winners in economics, including Myron Scholes and Robert
Mendelowitz had previously called mandatory data monitoring
"more important than anything else in the bill", adding that he
thought "the other provisions are worthless if your regulators
are flying blind".
"Anyone who looked at what happened in the crisis came to
the unavoidable conclusion that the government lacked the data
to know what was going on," Mendelowitz said during the
bill’s passage. "This is the key to understanding
The new entity will be known as the Office of Financial
Research, rather than the National Institute of Finance. It
will spell huge changes for the over-the-counter derivatives
market, which at present is under no uniform obligation for
Asked which provisions he thought were most important,
Mendelowitz said that a lack of blanket corporate exemptions
was welcome. "A director [of the OFR] can’t decide
on who they want to collect data from," he said. "Once you move
out of the financial world, the Federal Reserve has to decide
Mendelowitz, a former chairman of the Federal Housing
Finance Board (the agency responsible for regulating the
Federal Home Loan Bank System), said the power of the
association’s head was significant, adding: "The
Treasury secretary can’t testify before Congress
without Treasury approval. Our director can. Everything about
this was structured to guarantee [independence]."
The head of the monitoring agency will be appointed by the
president and approved by the Senate, Mendelowitz said. Its
budget would be "what’s needed", he added,
something which was now being discussed with the Treasury.
"It’s going to be of the order of a national
regulator," he confirmed.
Throughout the legislative debate, Mendelowitz stressed that
the body ought to be strongly independent and non-regulatory.
He voiced concerns that the Treasury would attempt to weaken
the legislation as the bill entered its final
"It’s going to take a few years to work
through," he concluded. "But once standardised provisions are
up and running, you’ll see huge changes. Banks
know they’ll have to maintain their own separate
databases. Traders won’t risk billions on broken
trades owing to using different databases. They’ll
be the beneficiaries of this once it’s up and
running. It’ll lead to a stabilising of the
And Mendelowitz said he did not think the industry would put
up too much of a fight in response, saying: "I
don’t foresee a problem with backlash. But the
Office does have the power to enforce [data monitoring] if
there is. Subpoena power cannot be underestimated!"
Tom Osborn +44 207 779 8361