Banks that are active swap dealers got a shot in the arm this week from Gerald Corrigan, president of the Federal Reserve Bank of New York.

In a letter Tuesday to Rep. Dan Glickman, D-Kan., chairman of the subcommittee on wheat, soybeans, and feed grains of the House Agriculture Committee, Mr. Corrigan took the banks' side on swaps regulation.

He argued that swaps cannot be regulated as exchanges are and, thus, should not be subject to regulation by the Commodity Futures Trading Commission.

"It is exceedingly difficult for me to see how swaps could be traded on organized exchanges," he wrote, "given that so many swaps are custom tailored for specific purposes and uses."

'An Attempt to Clarify'

Mr. Corrigan has spoken out on the potential risks of derivatives, and his comments have dismayed many bankers.

But his letter to Rep. Glickman makes it clear that he shares bankers' dim view of swaps regulation by the trading commission.

"Mr. Corrigan's letter is an attempt to clarify that the concerns he expressed earlier regarding derivatives activity should not be construed as support of swaps regulation under the Commodity Exchange Act," said Edward Rosen, a partner at the law firm of Cleary, Gottlieb, Steen & Hamilton, New York.

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