Subject: File No. S7-27-10
From: Laurie McBride
Affiliation: Chair, California Democratic Party LGBT Caucus (North)

November 16, 2010

As Im sure you are aware, Congress recently passed the Wall Street Reform and Consumer Protection Act (HR4173). This piece of legislation was intended to create future market stability and transparency.
HR4173 requires over the counter derivatives to be assessed and processed through independent clearinghouses. These transactions will include credit and mortgage default swaps, some of the very exchanges that helped weaken the financial market and lead us to recession.
Before you now are two regulations which apply to this law, but could have very different outcomes. One regulation, the 20/40 Rule, would place a limit on the total percentage of a clearinghouse that banks could own. This limit would be 40%. The second regulation, the 5% Rule, has no such limit. This could allow large banks to attain controlling ownership of the very clearinghouses established to independently review and process their transactions. Essentially, we would be allowing the fox to guard the hen house.
As we make our way out of recession, it is imperative we do not repeat the very mistakes that got us into this mess. Big banks cannot be trusted and consumers and homeowners need to know there is a true independent agency committed to making sound decisions. I urge you to throw out the 5% Rule and support the 20/40 Rule when it comes before you. Thank you for your time.