For Immediate Release: May 4, 2011
Media Contact: Liz Friedlander, 202-225-1564
Opening Statement by Agriculture Committee Ranking Member Collin C. Peterson
Business Meeting to Consider H.R. 1573
--As Prepared for Delivery--
“Thank you Mr. Chairman. Today begins part two of Republican efforts to see that the important financial reforms enacted last year never see the light of day.
“It’s curious that a bill, which supposedly corrects the perceived notion of rushing the rules, is now being rushed. H.R. 1573 was introduced the day before the past two week recess and now, only three days after Congress has reconvened, we are going to vote on it. This Committee has held several hearings to review Dodd-Frank where the CFTC has testified on its plans to:
- take the time to review all the comments it has received on its proposed rules and shape the rules to address the comments;
- hold public hearings and roundtables to garner additional input from industry, including hearings this week on a schedule for implementation; and
- extend comment periods so market participants can provide additional input as new information and new rule proposals come to light.
“CFTC Chairman Gensler and SEC Chairwoman Shapiro have been very open about the likelihood of not meeting Dodd-Frank’s statutory deadlines. They are not rushing to meet a fixed deadline; they are taking the time to do this right. When asked if they need additional time, they have said no. When asked if they need additional authority or flexibility given the prospect of missing deadlines, they have said no. If the regulators were to ask for more time or authority to ensure the right result is achieved, I would be happy to work to make it happen.
“H.R. 1573 only adds uncertainty to the rule-making process. It seems we are only here because the financial community, and even some in the end-user community, have forgotten about the financial crisis in 2008 and want to see nothing get done. I have even heard that banks are still lobbying EU regulators to water down their rules with the promise that they will move to Europe; then they turn around to lobby U.S. regulators with the same promises. They are trying to pit foreign regulators against each other and now they have found common cause with Republicans who want to halt the Dodd-Frank Wall Street Reform and Consumer Protection Act in its tracks.
“Republicans first tried to stop Dodd-Frank by using the FY11 continuing resolution to defund the agencies responsible for its implementation. Since that effort failed, Republicans now turn to this bill, H.R. 1573, legislation designed to push implementation of the derivatives title of Dodd-Frank so far down the line as to run out the clock in the hopes that a Republican is elected President and a new administration can water down the rules or sign the Republicans’ Dodd-Frank repeal legislation.
“Now, we have all heard the concerns coming from the financial community and the derivative end-user community about the pace, order and scope of the regulators’ proposed rulemaking. They argue that these rules are being rushed without time for thoughtful consideration or an examination of the consequences.
“What is the Republican answer? Ironically, instead of a careful, considered and thoughtful response to these concerns, this Committee is rushing to consider a bill that was introduced just 20 days ago. We are not provided sufficient time to look at the consequences of delaying most of Dodd-Frank’s derivatives rules to 2013. While we have had hearings on Dodd-Frank, we have not held a hearing on the impact of this specific legislation.
“What are some of the potential consequences of H.R. 1573? Let’s start with position limits. Dodd-Frank’s position limit authority directs the CFTC to establish limits so speculators do not dominate and overrun markets used for price discovery or hedging price risk for physical commodities.
“With gas prices at more than $4 a gallon and when even Goldman Sachs says that speculators are boosting crude oil prices by as much as $27 a barrel, Republicans want to wait until 2013 for rules that could restore balance between hedgers and speculators. Michael J. Fox, of the Gasoline & Automotive Service Dealers of America, testified before the House Natural Resources Committee on March 31, 2011, that “the fastest way to $6 gasoline is to cut the funding to the CFTC.” What would delaying position limit rules until 2013 mean for gas prices?
“Then there is Section 716, the Prohibition Against Federal Government Bailouts of Swaps Entities. This is the only provision in Dodd-Frank that specifically prevents another AIG-like bailout. Voting for H.R. 1573 means you are voting to let the federal government continue to bail out troubled swap firms. And, because this provision is already delayed by two years under Dodd-Frank, H.R. 1573 pushes Section 716’s effective date to 2015 adding more than two years for a permissible government bailout.
“Next, let’s look at clearing. In his testimony before this Committee, CME Chairman Terry Duffy, who has expressed support for some kind of delay, advocated for mandatory clearing to be implemented early. For clearing, he believes, “the regulatory framework for reducing systemic risk in OTC derivatives was the central focus of DFA and therefore should have the highest priority.” He also testified that 30 buy-side firms were testing with the CME to prepare for clearing by July of this year with 80 additional firms in the pipeline. Will they still be so eager to clear if we delay until 2013?
“As for reporting, all the reporting authority allowed under H.R. 1573 is to regulators only. Public reporting would be delayed, denying market participants the benefit of finally seeing what is occurring in these opaque markets. Large trader reporting by the CFTC, one of the cornerstones to help futures market participants, would also be put on hold for swap markets.
“These aren’t the only Dodd-Frank provisions that H.R. 1573 would delay.
- New powers to help the CFTC fight manipulation of derivatives markets – delayed;
- New authorities to combat fraud and market disruptions like the flash crash last year – delayed; and
- Insider trading provisions to keep members of Congress and their staffs from using their positions to profit from derivatives trading – delayed.
“In the Republican vision for financial reform, all we need is reporting of swaps to regulators. If this sounds familiar, it is because this is what we heard from financial players and their associations in the last Congress. With H.R. 1573, the big swap dealers are finally getting their wish.
“For the derivative end-users who want some delay, I understand your frustration. Without final definitions of key terms, it is difficult to judge how Dodd-Frank will affect your business or know when to comment on a proposed rule. And, as I have said repeatedly, if the regulators get things wrong - if they finalize an unreasonable rule, if they establish an overly broad definition, if they put forth an implementation schedule that does not make sense for end-users, I will work with any member to rectify it. The important thing is getting this right. I believe we need to let the regulators move forward so we can find out if they get it right and fix it if they do not.
“I have noticed there are several companies and end-user associations who advocate for some kind of delay, but have not officially expressed support for H.R. 1573. I hope they, like me, are uncomfortable with this bill’s all or nothing approach to their concerns. For those end-user groups supporting H.R. 1573, I’m afraid I now have newfound questions regarding your motivations. I wonder if there is something more going on here and am beginning to wonder about the end-user exemptions being considered by the regulators; whether there are loopholes being created that we don’t understand. Where there’s smoke there’s usually fire.
“Today, the Republicans are engaging in the same conduct they criticize the regulators of doing – rushing without looking more seriously at consequences. This shows me this is not a serious legislative effort but a partisan game to score political points. The American people deserve better than a political stunt.
“I urge my colleagues to oppose H.R. 1573, and I yield back.”