Subject: File No. S7-27-10
From: Pat Washington, Ph.D.
Affiliation: President, San Diego Democratic Women's Club

November 17, 2010

Reforming Wall Street will make a difference for this generation, and for generations to come. As such, it is important that this legislation is implemented as strongly and effectively as possible. To do so, we need your commission to eliminate the 5% Rule.

This rule would govern the ownership of clearinghouses. While it appears to be an extension of the 20/40 Rule that goes further by limiting the percent of ownership any individual entity can hold in a clearinghouse to an even greater degree, the 5% Rule fails to limit the total percent of ownership that can be held by large banks. These large banks have previously shown they cannot be trusted to make responsible trades, but if they group together to gain a controlling influence in a clearinghouse, that clearinghouse will not be able to reliably assess the responsibility of any trade they process for those banks.

In order to achieve meaningful Wall Street reform, the process must be structured to prevent large banks from disproportionately influencing it. The 5% Rule fails to achieve this, so it must be removed in favor of the 20/40 Rule, which effectively prevents such influence.