Reuters is running a pretty shocking exclusive right now. Apparently the Federal Bureau of Investigation, of all agencies, is investigating the claim that derivative traders are front running swaps orders from Fannie Mae andFreddie Mac.
The article itself goes into the unethical, if technically legal, nature of these trades. So I won’t. Still the contents are disturbing in implication.
The first is that the government-sponsored enterprises didn’t even look to monitor shifts in markets BEFORE placing these huge orders. Clearly, they were getting played, but aren’t even wide awake enough to take notice.
Second, this is proof Dodd-Frank isn’t working. The financial reform made plenty to do with how it would regulate derivatives and how this was going to happen: “The Dodd-Frank Act divides regulatory authority over swap agreements between the CFTC and SEC.”