What law did the U.S. Congress pass and the president sign in December 2000?

In December 2000, the U.S. Congress passed and President Bill Clinton signed into law the Commodity Futures Modernization Act of 2000 (CFMA). The CFMA's purpose was to update and modernize the regulation of futures and other derivative financial instruments. One of its significant impacts was to create a legal certainty for swap agreements and exempt certain derivatives from regulation by the Commodity Futures Trading Commission (CFTC).

The Commodity Futures Modernization Act of 2000 marked significant deregulation of financial markets. This law was a culmination of efforts to integrate modern financial practices with the regulatory frameworks that were deemed obsolete due to technological advancements and the invention of complex financial instruments like swaps and over-the-counter derivatives.

One of the key outcomes of the CFMA was the ability for banks and financial institutions to engage in swap transactions without fear that those instruments would be considered futures contracts and thus regulated by the CFTC. This had a profound effect on the financial markets by increasing the number of derivatives transactions and contributing to the growth of the market for 'over-the-counter' derivatives.

The legislation is often discussed in the context of the 2008 financial crisis. Some critics argue that the CFMA contributed to the crisis by reducing oversight of complex financial products, which made it possible for risk to build up in the financial system unchecked. The crisis later led to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which, in sharp contrast, imposed stricter regulations on the financial markets.