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Agricultural News


Senate Ag Committee Begins to Markup The Wall Street Transparency and Accountability Act of 2010

Wed, 21 Apr 2010 9:50:20 CDT

Senate Ag Committee Begins to Markup The Wall Street Transparency and Accountability Act of 2010 The Senate Ag Committee is now marking up their bill on Financial Reform and we have the two opening statements that we can share with you from Chairman Blanche Lincoln of Arkansas- and top Republican Saxby Chambliss of Georgia.


Here is Senator Lincoln's Opening Statement:
"The Senate Committee on Agriculture, Nutrition and Forestry will now come to order. Thank you Senator Chambliss and all the members of the Committee for being here today. Thank you to our special witnesses and to the public at large who understand how important the issue of financial reform is to our country. I also want to thank the staff at the Commodity Futures Trading Commission, the Banking Committee, our House counterparts and the administration for all of their input and hard work on this bill and the broader reform package that our bill is about to join.

"I cannot overstate the significance of what we are about to do here today. As I've said before, financial market oversight reform is the single most important factor in our long-term economic recovery; it will be the foundation for our nation's financial future. We must reaffirm the integrity and soundness of our financial system. This stability is the only thing that will maintain our nation's preeminence as a global leader in worldwide financial markets. Reform will also give comfort to consumers and businesses so they can trust our markets to determine fair prices and manage risk.

"Every member here at the table recognizes the importance of the task at hand. In 2008, our nation's economy was on the brink of collapse. The greed and excess on Wall Street spiraled out of control and families and small businesses were left to pay the price. America was held captive by a financial system that was so interconnected, so large and so irresponsible that its failure almost destroyed our economy and our way of life.

"I recently had the honor and solemn responsibility of taking over the gavel of a committee tasked with putting an end to the reckless behavior that got us into this mess. I intend to use that gavel to change the way our financial system does business. At the heart of financial regulatory reform is reforming the over-the-counter derivatives market. Within a decade, this market exploded to $600 trillion dollars in notional value. We must bring transparency and accountability to these markets.

"This is not a partisan issue. I believe every Republican and Democrat in this body is committed to doing what is right to put our economy back on track. All of us are committed to creating jobs, to protecting America's preeminence as the center of the global financial world, and to restoring a free market system that does not rely on the backstop of the U.S. Treasury. My good friend Senator Chambliss and I and our staffs worked tirelessly for months to solve these problems - in good faith and good company, and came so close in the end. He will recognize the lion's share of what we have here and I want to thank him and his staff personally for making this a better product. Whatever happens today, Senator Chambliss, I want everyone to know how deeply committed you are to reform and doing what is right. You are a good friend and, though we may have had our differences, you have contributed very positively to this product.

"Despite our differences, we must move forward. We Senators have a solemn obligation to protect our nation. This is no time for small fixes or tweaking around the edges. This is the time for bold change and big decisions about the future of our country and the global financial system. We all sit here today knowing what went wrong and to contemplate inaction is unacceptable.

"This reform is historic. This bill will bring 100% transparency to a currently unregulated, dark market. It will lower systemic risk through clearing and exchange trading and real-time price transparency. It will close loopholes and make sure that regulators forever have the authority to go after those entities that would evade the law. It protects jobs on Main Street by encouraging hedging and risk management by commercial end users. It protects municipalities and pensions and any governmental agency from gross profiteering. It will give greater enforcement authority to regulators to crack down on fraud and abuse.

"This is real reform. This is strong reform. But it is important to point out this is not regulation for regulation's sake. This bill is surgical in its approach. We have an important but narrow end user exemption, appropriate restraints on the regulator where necessary, and provisions that recognize we are competing in a global financial world. This is a robust package that balances the needs of strong, meaningful reform and recognizes the importance of these markets.

"Americans are demanding transparency and accountability from their government and from their financial system. We are here on their behalf and I take that responsibility seriously. We are not here to make easy choices. We are here to take on tough problems. America's consumers and businesses deserve strong derivatives reform that will ensure that the U.S. financial oversight system promotes and fosters the most honest, open and reliable financial markets in the world. I look forward to working with my colleagues here today to reach this goal."


***********************************************************

The following statement is from Ranking Member Saxby Chambliss:

"Chairman Lincoln, thank you for holding this markup today. This is yet another example of your dedication to carrying out your responsibilities as chairman of this committee. Since you became chairman just over six months ago we have held hearings on many topics and this will be your second markup in less than a month. People sometimes forget that this committee deals with much more than just mainstream agricultural issues. This committee is responsible for oversight of the Commodity Futures Trading Commission, derivatives regulation is an area that we constantly monitor. As the Senate continues to work on financial regulation reform, we all know that appropriate regulation of derivatives, and specifically the swaps market, is a critical component of such legislation.

"I have always enjoyed serving on the Agriculture Committee because of our long tradition of working across party lines to advance bipartisan bills that can be defended on the floor of the Senate from both sides of the aisle. Our committee has historically had a high success rate of seeing our bills enacted into law while other committees report many bills only to watch them fall apart or stall for months on the floor of the Senate due to partisan politics. This committee has historically not fallen subject to partisan influence. The most recent example is the 2008 farm bill - we reported a bill and we moved it through the Senate despite a veto threat from the White House, and a Republican president I might add. We then conferenced the bill without any support from the White House and overrode their veto, not once, but twice. Again, I point out that very few other committees are able to do this. Why? Because members of this committee check their partisan politics at the door in an effort to reach consensus so that both Republicans and Democrats can support the bill on the floor.

"Less than two weeks ago we had worked out a good bipartisan product. I wish that the other members of the committee, both Republicans and Democrats, would have had the opportunity to help further refine that agreement.

"It required clearing of swaps by those entities contributing to systemic risk a substantial change from current law; provided the Securities Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) with the authority to establish capital and margin requirements an authority they currently do not have; allowed the CFTC to impose aggregate position limits another new authority; and provided the much needed transparency that has been absent from the swaps market. This represents a 180-degree shift from current law.

"Just as important as the new regulation included in the compromise, was the recognition that we needed to preserve the ability of businesses to legitimately hedge risk without additional costs, and it did this for all businesses, whether they are manufacturers, processors, or even financial in nature. When I say businesses that are financial in nature, I am not referring to large dealers like Bank of America, Goldman Sachs or JP Morgan they would not get an exemption from clearing. I am talking about entities like those in each of our states that actually use derivatives to hedge their interest rate risk. For instance, Farm Credit System institutions despite attempts to ensure that they are not subjected to all of these new mandates, I understand that the chairman's mark may have in fact not exempted them. This is exactly what I fear unintended consequences resulting from applying complicated regulations too broadly. If we subject these financial institutions to the increased costs of clearing their interest rate swaps, they will likely be forced to raise interest rates they offer to their customers our constituents and farmers is that really the objective we are trying to achieve?

"Our bipartisan draft also sought to send a message to the CFTC that entities like Koch Industries who are hedging their risk and also engaged in developing products for their customers should not inadvertently be captured in a new regulatory category designed to apply to big financial dealers: Koch Industries and Goldman Sachs should not be regulated in the same way. Treating these entities like dealers may force them to stop offering these products to their customers in which case their customers will have no other options but to seek such products from the large dealers, like Goldman Sachs. This essentially drives all of the business to those that are most systemically risky. These are just two of the many unintended consequences that results from overreaching regulations on the businesses and financial entities that had nothing to do with the meltdown of our financial system.

"As I said earlier, the elements of the agreement that my staff had reached with Chairman Lincoln's staff represented a 180-degree shift for swaps regulation going from essentially unregulated to completely regulated. The handful of remaining issues, that now stand between us and a bipartisan bill, do not constitute some stark choice between Democrats supporting regulation while Republicans do not; we probably generally agree on 90 percent of the specifics. However, the remaining 10 percent of the issues involved here namely the extent of the end-user exemption; and whether there is a mandatory trading requirement on exchange for swaps instead of the more functional price reporting are very important because they involve real costs for businesses, and real implications for properly functioning derivatives markets.

"I will be offering a substitute amendment that, not surprisingly, consists of the language associated with our bipartisan discussion draft agreement that Chairman Lincoln's and my staffs had worked out over the course of the last five months. I had hoped that we would be working to perfect it today. I remain hopeful that as this process moves forward there will be opportunities for us to once again seek solutions that we can all support."


   

 

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