Too Big to Fail — U.S. Banks’ Regulatory Alchemy: Converting an Obscure Agency Footnote into an “At Will” Nullification of Dodd-Frank’s Regulation of the Multi-Trillion Dollar Financial Swaps Market

The multi-trillion-dollar market for, what was at that time wholly unregulated, over-the-counter derivatives (“swaps”) is widely viewed as a principal cause of the 2008 worldwide financial meltdown. The Dodd-Frank Act, signed into law on July 21, 2010, was expressly considered by Congress to be a remedy for this troublesome deregulatory problem. The legislation required the swaps market to comply with a host of business conduct and anti-competitive protections, including that the swaps market be fully transparent to U.S. financial regulators, collateralized, and capitalized. The statute also expressly provides that it would cover foreign subsidiaries of big U.S. financial institutions if their swaps trading could adversely impact the U.S. economy or represent the use of extraterritorial trades as an attempt to “evade” Dodd-Frank. In July 2013, the CFTC promulgated an 80-page, triple-columned, and single-spaced “guidance” implementing Dodd-Frank’s extraterritorial reach, i.e., that manner in which Dodd-Frank would apply to swaps transactions executed outside the United States. The key point of that guidance was that swaps trading within the “guaranteed” foreign subsidiaries of U.S. bank holding company swaps dealers were subject to all of Dodd-Frank’s swaps regulations wherever in the world those subsidiaries’ swaps were executed. At that time, the standardized industry swaps agreement contemplated that, inter alia, U.S. bank holding company swaps dealers’ foreign subsidiaries would be “guaranteed” by their corporate parent, as was true since 1992. In August 2013, without notifying the CFTC, the principal U.S. bank holding company swaps dealer trade association privately circulated to its members standard contractual language that would, for the first time, “deguarantee” their foreign subsidiaries. By relying only on the obscure footnote 563 of the CFTC guidance’s 662 footnotes, the trade association assured its swaps dealer members that the newly deguaranteed foreign subsidiaries could (if they so chose) no longer be subject to Dodd-Frank. As a result, it has been reported (and it also has been understood by many experts within the swaps industry) that a substantial portion of the U.S. swaps market has shifted from the large U.S. bank holding companies swaps dealers and their U.S. affiliates to their newly deguaranteed “foreign” subsidiaries, with the attendant claim by these huge big U.S. bank swaps dealers that Dodd-Frank swaps regulation would not apply to these transactions. The CFTC also soon discovered that these huge U.S. bank holding company swaps dealers were “arranging, negotiating, and executing” (“ANE”) these swaps in the United States with U.S. bank personnel and, only after execution in the U.S., were these swaps formally “assigned” to the U.S. banks’ newly “deguaranteed” foreign subsidiaries with the accompanying claim that these swaps, even though executed in the U.S., were not covered by Dodd-Frank. In October 2016, the CFTC proposed a rule that would have closed the “deguarantee” and “ANE” loopholes completely. However, because it usually takes at least a year to finalize a “proposed” rule, this proposed rule closing the loopholes in question was not finalized prior to the inauguration of President Trump. All indications are that it will never be finalized during a Trump Administration. Thus, in the shadow of the recent tenth anniversary of the Lehman failure, there is an understanding among many market regulators and swaps trading experts that large portions of the swaps market have moved from U.S. bank holding company swaps dealers and their U.S. affiliates to their newly deguaranteed foreign affiliates where Dodd- Frank swaps regulation is not being followed. However, what has not moved abroad is the very real obligation of the lender of last resort to rescue these U.S. swaps dealer bank holding companies if they fail because of poorly regulated swaps in their deguaranteed foreign subsidiaries, i.e., the U.S. taxpayer. While relief is unlikely to be forthcoming from the Trump Administration or the Republican-controlled Senate, some other means will have to be found to avert another multi-trillion-dollar bank bailout and/or a financial calamity caused by poorly regulated swaps on the books of big U.S. banks. This paper notes that the relevant statutory framework affords state attorneys general and state financial regulators the right to bring so-called “parens patriae” actions in federal district court to enforce, inter alia, Dodd- Frank on behalf of a state’s citizens. That kind of litigation to enforce the statute’s extraterritorial provisions is now badly needed

Derivation of an endogenous small RNA from double-stranded Sox4 sense and natural antisense transcripts in the mouse brain

Natural antisense transcripts (NATs) are involved in cellular development and regulatory processes. Multiple NATs at the Sox4 gene locus are spatiotemporally regulated throughout murine cerebral corticogenesis. In the study, we evaluated the potential functional role of Sox4 NATs at Sox4 gene locus. We demonstrated Sox4 sense and NATs formed dsRNA aggregates in the cytoplasm of brain cells. Over expression of Sox4 NATs in NIH/3T3 cells generally did not alter the level of Sox4 mRNA expression or protein translation. Upregulation of a Sox4 NAT known as Sox4ot1 led to the production of a novel small RNA, Sox4_sir3. Its biogenesis is Dicer1-dependent and has characteristics resemble piRNA. Expression of Sox4_sir3 was observed in the marginal and germinative zones of the developing and postnatal brains suggesting a potential role in regulating neurogenesis. We proposed that Sox4 sense-NATs serve as Dicer1-dependent templates to produce a novel endo-siRNA- or piRNA-like Sox4_sir3

In depth analysis of the Sox4 gene locus that consists of sense and natural antisense transcripts

SRY (Sex Determining Region Y)-Box 4 or Sox4 is an important regulator of the pan-neuronal gene expression during post-mitotic cell differentiation within the mammalian brain. Sox4 gene locus has been previously characterized with multiple sense and overlapping natural antisense transcripts [1] and [2]. Here we provide accompanying data on various analyses performed and described in Ling et al. [2]. The data include a detail description of various features found at Sox4 gene locus, additional experimental data derived from RNA-Fluorescence in situ Hybridization (RNA-FISH), Western blotting, strand-specific reverse-transcription quantitative polymerase chain reaction (RT-qPCR), gain-of-function and in situ hybridization (ISH) experiments. All the additional data provided here support the existence of an endogenous small interfering- or PIWI interacting-like small RNA known as Sox4_sir3, which origin was found within the overlapping region consisting of a sense and a natural antisense transcript known as Sox4ot1