To extend the temporary suspension of duty on certain manufacturing equipment.

Madam Speaker, today I am re-introducing the ``Derivatives Market Reform Act.'' This bill is largely based on legislation that I first introduced on July 14, 1994 as H.R. 4745, and then subsequently reintroduced in 1995 (as H.R. 1063), and introduced again in 1999, as H.R. 3483.

I am reintroducing the bill again today, on the same day that Congress is passing emergency legislation to respond to the crisis caused by Wall Street's irresponsible and risky use of derivatives, because I believe that if Congress had adopted this type of legislation, we might have been able to avoid some of the turmoil that has recently affected our Nation's financial markets.

In 1992, as Chairman of the House Telecommunications and Finance Subcommittee, I asked the General Accounting Office to undertake an investigation into the derivatives markets, including the size of the markets for these financial instruments, their economic rationale, and associated risks. In 1994, the GAO submitted its report to the Subcommittee, entitled ``Financial Derivatives: Actions Needed to Protect the Financial System.'' This report contained a number of important recommendations for the financial services industry, Federal financial regulators, and for the Congress. The GAO suggested that Congress needed to extend Federal authority to currently unregulated derivatives dealers, improve coordination among Federal regulators with responsibilities over key participants in this market, and restructure the regulations applicable to the derivatives markets.

My legislation was aimed at responding to the GAO's recommendations by providing a framework for improved supervision and regulation of previously unregulated derivatives dealers, assuring appropriate protections for their customers, and establishing certain reporting requirements for hedge funds. During the 103rd Congress, the Subcommittee held five oversight hearing on key issues relating to the derivatives market. As Chairman of the legislative Subcommittee with jurisdiction over the Securities and Exchange Commission, it was my intention to move forward with derivatives legislation in the 104th Congress.

Unfortunately, the Democrats lost control of the House of Representatives in the 2004 elections, and the new Republican Majority that took control of the House in January of2005 had little interest in increasing financial regulation. Indeed, one of the first bills that the House passed as part of Speaker Newt Gingrich's ``Contract with America'' was H.R. 1058, the Private Securities Litigation Reform Act. This legislation was ostensibly aimed at curbing ``frivolous'' securities class action lawsuits, but in fact was drafted in such a way to make it more difficult for defrauded investors to sue those whose fraud or recklessness had caused them harm. During House floor consideration of that bill, I offered an amendment (House Amendment 270), which would have exempted securities fraud cases involving derivatives from the bill's harsh restrictions. Unfortunately, my amendment was defeated by a voted of 162-261.

Following the derivatives-related collapse of the hedge fund Long- Term Capital Management, I joined with Senator Byron Dorgan to ask the GAO to undertake another investigation into the derivatives markets, focusing this time on the role that derivatives played in the collapse of the hedge fund, Long-Term Capital Management. The GAO's report on this matter, entitled, ``Long-Term Capital Management: Regulators Need to Focus Greater Attention on System Risk,'' identified a need for Federal financial regulators to better coordinate their efforts to identify and respond to risks across markets and industries, and has called for Federal oversight over currently unregulated derivatives dealers who may have significant risk exposure to hedge funds and other highly leveraged entities. These recommendations came in addition to those made by the President's Working Group on Financial Markets earlier in 1999 that legislation be adopted which would require some public reporting by hedge funds regarding their investments.

The ``Derivatives Dealers and Hedge Fund Disclosure Act of 1999'' that Senator Dorgan and I are introduced back then responded to GAO's and the regulators' recommendations for reforms in the aftermath of the LTCM affair.

Again, the Republican-controlled Congress took no action to strengthen derivatives regulation. Instead, Congress passed two bills that made the situation worse. First, the Gramm-Leach-Bliley Act of 1999 effectively tied the SEC's hands when it came to overseeing the derivatives activities of banks. Second, the Commodities Futures Modernization Act of 2000 largely exempted derivatives from any effective oversight or regulation by the Commodities Futures Trading Commission.

And so, with no action on legislation to strengthen derivatives regulation, with Congress instead taking steps to make it more difficult for federal financial regulators to oversee these markets, the foundation was set for our current crisis.

This crisis was, of course, exacerbated by the failure of the financial regulators to effectively use the tools that they still had at their disposal to avert a meltdown. In recent weeks we have read how the Federal Reserve turned a blind eye to the growing systemic threat facing our financial system. We have read how the SEC failed to use its broker-dealer holding company risk authority to oversee and respond to this crisis. We have read about how they weakened capital rules that allowed securities firms to take on far too much leverage. And in the weeks and months to come, we will all learn a lot more about the causes and consequences of this crisis.

The bill that I am reintroducing today is aimed at opening a dialogue on solutions. I have made some modifications in the text to try to address some of the harmful deregulatory provisions enacted into law in recent years. But I know that the bill may need further refinement. I offer it as a baseline for how we might begin thinking about fixing the mess on Wall Street. There may be additional ideas that could improve the bill. There may be changes needed to ensure that these provisions are fully effective. I look forward to talking with my colleagues, and with outside stakeholders, about how we can begin to address this problem. Because we do need to act.

I urge my colleagues to support this important legislation.