Many have suggested the government's financial regulatory zeal has waned. One need only look at the decision last week to exempt the $4 trillion-a-daily transactions forex market from the same sort of treatment that is in the works for OTC derivatives. The move comes at a time when the CFTC and SEC are working to hammer down more regulatory details concerning OTC derivatives, like the clearing and settling of CDS trades.

This forex decision is a big win for Wall Street dealers and for corporate hedgers, who will not have to post as much in collateral as they might have under more stringent rules. So you can rack up another victory for the Wall Street lobby.

The decision has already come under fire. "The Treasury Department has asserted that the exempted market is not as risky as other derivatives markets, and therefore does not need full regulation. That claim has been disputed by research, but even if it were true, it would be a weak argumen," the New York Times editorialized.

"For instruments to be relatively safer than the derivatives that blew up in the crisis, necessitating huge bailouts, hardly makes them safe. Worse, dealers could probably find ways to manipulate the exempted transactions so as to hedge and speculate in ways that the law is intended to regulate."

The proposed exemption is out for comment for 30 days.

For more:
- here's the article from MarketWatch

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