Big banks are exploiting a risky Dodd-Frank loophole that could cause a repeat of 2008

A decade ago, when the global economy crashed, many economists, financial regulators, investors, and so-called experts were caught by surprise. Not Michael Greenberger. The University of Maryland law professor had been warning for years about the risks posed by an unregulated derivatives market and over-leveraged banks. Years earlier, when he worked at the Commodity Futures Trading Commission (CFTC), he and then-chairperson Brooksley Born warned that the risky market could lead to a financial collapse, but their efforts to regulate it were stymied by other Clinton-era officials.

Now, Greenberger is back with a new warning about the same old financial toxins, alerting us that unregulated credit default swaps are poised to cause another financial crisis, unless we act now. He says that the biggest American banks have quietly moved their swaps overseas, avoiding the regulations designed in the wake of the recession that were intended to prevent another crisis. What’s worse, the Trump administration doesn’t seem interested in closing this loophole.

“We’re right back to how things were before the 2008 crash,” says Greenberger who just released a new study with the Institute for New Economic Thinking that details his argument.

Greenberger spoke with Fast Company about the risks posed by our failure to close this loophole.

Continue reading