For Immediate Release: July 21, 2011
Media Contact: Liz Friedlander, 202-225-1564
liz.friedlander@mail.house.gov
Derivatives Reform: The View from Main Street
–As Prepared for Delivery–
“Thank you Mr. Chairman. Today is the sixth oversight hearing this Committee has held to review the Dodd-Frank Act. I want to welcome CFTC Chairman Gensler back for his third appearance before members of the Committee this year.
“As we begin today’s oversight hearing, I want to express my concern that the Committee is ignoring some of its important oversight responsibilities. Two and a half months ago, the General Farm Commodities and Risk Management Subcommittee Ranking Member, Mr. Boswell, along with several other members, requested a hearing on rising energy prices, stressing the importance of making sure that prices are based on market forces and not excessive speculation.
“While some dismiss the idea of speculation affecting prices, Goldman Sachs has said that speculators are boosting crude oil prices by as much as $27 a barrel. I don’t see how anyone can dismiss that statement out of hand. The Committee should act on Mr. Boswell’s request and hold a hearing on energy prices.
“Additionally, the Committee has not brought in any of the prudential regulators to testify so members can address their concerns directly with them. People forget that the CFTC is not the only responsible party in implementing the derivatives title. Last April, the prudential regulators put forth their proposed rule on margin requirements for swaps with dealers they regulate.
“As we will hear today, this proposal has caused some consternation among end users who see in that proposal the threat of possible margin requirements on end users. When are we bringing the prudential regulators in to answer questions about this proposed rule?
“Additionally, we have not had the Federal Reserve appear to update the Committee on implementation of Title 8 of Dodd-Frank, which gave the Federal Reserve authority over clearinghouses and which, I remind the Chairman, remains within our Committee’s jurisdiction.
“We have also heard concerns regarding the consistency of rules between regulators, particularly the CFTC and SEC. I believe we should hear from all of the regulators charged with implementing the derivatives title, not just the CFTC. Many of the definitions that today’s witnesses are concerned about must be developed jointly between the SEC and the CFTC.
“I believe the joint rulemaking requirements, which were added to the conference report at the end, are one of the reasons why proposed rules regarding important definitions came later in the process. Unfortunately, the Committee has not brought in the SEC so members can ask about this. I do hope that we can hear directly from these other regulatory agencies in the near future.
“I believe there is a rush to judgment by members and by market participants with regard to the CFTC. The Commission has put forth about 50 proposed rules – only proposals. Some people believe that based solely on these proposals, we need to rewrite Dodd-Frank or repeal it. I think that is premature. So far, the Commission has finalized a handful of rules and all of them were approved unanimously by the Commission.
“As I have said at every Dodd-Frank oversight hearing we have had, if regulators don’t implement the law as we intended, if they screw things up, I stand ready to help with legislative fixes. However, we need to give the regulators the opportunity to get things right.
“Dodd-Frank is not a perfect law, particularly if you look at some of the provisions outside of the derivatives title. People seem to forget that I opposed Title 8. I thought the Consumer Protection Bureau was ideology run amuck. I ultimately voted for the bill because we needed to respond the economic crisis of 2008 and I had to accept compromises.
“If Congress is going to act on legislation to change Dodd-Frank, it should meet some tests.
“First, regarding the CFTC, it should address something they actually have done, not something they might do. I don’t want to waste time working on a solution to a problem that could disappear in the coming months when the regulators get the rule right.
“Secondly, it shouldn’t be done in a piece-meal approach. If we truly need to fix Dodd-Frank because of how all the regulators are implementing it, then we should take a comprehensive approach that addresses all our problems, not just those in one title or one small provision.
“And finally, it should be developed in a bipartisan, cooperative fashion, not handed down in a take it or leave it approach. When I was Chairman and drafting the derivatives title, I worked with Mr. Lucas and his staff to develop a package that won bipartisan support. There were things I thought should have been included, but sacrificed to preserve bipartisan support for our primary objective – bringing greater transparency and accountability to these opaque markets.
“Ultimately, I believe the CFTC is taking their time to get this right. And perhaps that is what some people are afraid of, that a regulator can listen to the public and respond appropriately. Maybe that is why many still seem dedicated to a total repeal of Dodd-Frank. They are afraid it could succeed. Time will ultimately tell, but I’m holding out hope.
“Chairman Gensler, again welcome back to the Committee. I know you will provide a thorough and candid update as you have in the past. With that Mr. Chairman, I yield back.”