Travel Restriction Reform and Export Enhancement Act

I thank the Chair. How much time do we have?

I'll yield myself 2 minutes.

The American public has stated, and I said so on the floor the other night, that it's looking for Congress to do three things: first, make sure that we have no more bailouts; secondly, make sure that whatever legislation we do does not create anymore impediments

to job creation; and thirdly, let's make sure that we don't lead to a bigger, more expensive, more expansive government.

Well, we have seen over the past several days now that the legislation before us would do the wrong thing on each point. It'll create more bailouts. It will hurt job creation. And it will create larger government. Now, to the underlying portion of this bill here dealing with credit rating agencies, we all know that it was bipartisan action taken by this Congress back in 2006 when we passed the bipartisan Credit Rating Agency Reform Act. And what did that do? That formalized the registration process of credit rating agencies to become nationally recognized statistical rating organizations.

What are we about to do here? Throw that out the window before it's fully implemented, before we fully have had the opportunity to see it roll out and be played out as Congress intended it to in a bipartisan manner. We're about to throw that out. To what end?

Well, as the gentleman from Texas just pointed out, to the end that you will allow for less competition in the CRAs, credit rating agencies, with, furthermore, unintended consequences that will be detrimental to the market and investors. What does that mean to people back at home? That means that it will be harder for them to make the evaluations that are necessary for the industry. That means it will be harder for credit to be obtained in the marketplaces, and what that means for businesses, of course, harder for them to get the credit they need to expand and create jobs.

This amendment here is necessary to counter all the aspects of this bill so that we can work hard to make sure that we create jobs in this country, make sure that businesses that need credit can get the credit they need, make sure that businesses that need to be able and want to expand are able to expand.

This amendment is a positive amendment. I support this amendment.

I reserve my time.

I still reserve.

I believe that it's our right to close. It's our amendment.

Then I will yield to the gentleman from Texas (Mr. Sessions) my remaining time.

I claim the time in opposition.

I yield myself 2 minutes.

Madam Chair, if there is anything that the last few months have taught us, it is the American people telling us that we don't need more government to overreach in big government solutions when targeted reforms are more appropriate and effective.

When thinking about how to draft a legislative response to the recent financial crisis in regards to this issue of derivatives, we must ask ourselves one seminal question: What are we actually trying to resolve here. The vast majority of the OTC derivative marketplace had absolutely nothing to do with the crisis. It provides critically important risk management tools for virtually all large companies and many small- and medium-sized companies as well.

When you think about the AIG situation, even the problem there with the derivatives had much more to do with the extremely bad bets on the housing market along with failed prudential regulators who were supposed to be overseeing them than they had anything specifically to do with the derivatives themselves.

So quite honestly, Madam Chair, we don't think it's appropriate to set up a truly cumbersome and Byzantine dual regulatory regime that would require the CFTC and the SEC, two entities that have not shown the ability to cooperate in the past, that they have two very different missions and reasons for being to approach very different marketplaces and derivatives and to do so now in the same manner.

The Democrats' underlying bill sets these two entities up to perform as prudential regulators, setting capital requirements, margins, and other prudential requirements when they were never envisioned to play this role. When you think about this, also, the SEC has failed miserably as a prudential regulator when it tried to do the consolidated regulator for investment banks.

The proposal contains in the underlying bill an overly broad definition, new capital and margin requirements and broad authority for regulators to determine which transactions are standardized and subject to mandatory clearing and exchange trading.

These are unnecessary government burdens that could impair the usefulness of derivatives as an innovative risk management tool, thereby increasing the exposure to the marketplace and the participants in them, which all gets to the last point.

I will yield myself 15 more seconds to make the final point.

All of these points in the underlying bill will lead to one thing: a loss of credit and therefore a loss of jobs in America today and in the future as well. The American people have spoken loud and strong: Do not pass any legislation that is going to create hardships for the creation of jobs in this country, and this underlying legislation with its language on derivatives would do just that.

With that, I yield such time as he may consume to the gentleman from Oklahoma (Mr. Lucas).

I yield myself 3 minutes.

I appreciate the underlying amendment that we're discussing here right now. Let me just point out that the Republicans have submitted a substitute to address this overall issue. Republicans, however, have done so in a targeted approach addressing actual problems, and it's really the more sensible approach to the whole derivative reform issue.

The centerpiece of the Republican alternative is something also found in the chairman's bill, which is a trade repository where all OTC trades would be required to be reported to. The repository then will provide valuable transparency, something we are all trying to achieve, to the entire OTC marketplace and will give the regulators the ability to analyze the appropriate data for their purposes as well as provide aggregated data to the broader marketplace.

We don't set up a Byzantine regulatory regime over the many market participants. While we don't do that because we don't preassume, without any relevant supporting data, that these entities needed to be micromanaged in this manner, we do require that the regulators review the data and regularly report back to Congress if an entity who is not already regulated by a prudential regulator, whether they should be more heavily regulated due to its size or its scope or its activities in the OTC marketplace.

So the Republican substitute does not have broad requirements for mandatory clearing, but it does codify the commitments that the private sector has already made. And they have done so working responsibly and cooperatively with the appropriate regulators, and they do so to engage in an ever more and greater amounts of central clearing now and into the future as well.

But when you think about it, these changes all take time. And they need to be done in a responsible manner. If you were going to force central clearing through some sort of central counterparties and have adequate counterparties for risk they are unfamiliar with, it could exacerbate the systemic risk.

So central clearing should be opened up over time to as many participants as possible, again, in a responsible manner so as not to do more harm than good, which is what we are all trying to achieve at the end of the day with the amendments and otherwise.

We also require margin requirements between dealers and major market participants, and that would address a major issue with the AIG-related problems that I discussed earlier.

In regards to the capital requirements, prudential regulators--look at them for a moment. Prudential regulators are really required by our substitute to take the swap activities of supervised entities into account when setting capital requirements for those entities. Let me step back for a minute and say that again.

What you're basically saying here in the AIG situation is what we should have had occur there is prudential regulators should have been looking at those swap requirements when they set the capital requirements over at AIG or other like situations. But again, it is not appropriate to set these bank-like cap requirements on nonfinancial entities, so our Republican substitute would not do so.

Finally, we generally agree with the overall chairman's regard to segregating----

I yield myself 30 additional seconds.

Finally, we agree with the chairman in regards to segregating margin for OTC swaps, although we exempt various margining for segregation requirements based on input from both the buy and the sell side.

Margins should be treated as such, especially if a dealer's counterparty wishes it to be so, and should not be commingled with the dealer's funds. Many of the problems associated with the Lehman bankruptcy, I am told and I understand, are related to this very issue. And so requiring margin segregation, we believe, would be an appropriate response to that issue and that problem and would solve it for the future.

I reserve the balance of my time.

Madam Chair, I yield myself 30 seconds.

I rise once again to point out that the underlying legislation was misdirected by setting up a Byzantine process and addressed a problem that really was not the underlying cause of the financial situation we have today.

I will also point out before I yield to the ranking member that the amendment that's before us today, it does one thing that's better than the underlying bill, which is to say that there should not be a margin requirement on end users, which is better in the sense that they will not have to post those, which will maybe address the issue of overall job creation in the future.

But I will close on this point: The underlying bill is still problematical to the larger issue of saying that if you create a system like this and address a problem of the OTC market in such a Byzantine manner and create additional burdens on it than are unnecessary, we will create fewer jobs in the future.

Madam Chair, I yield the balance of my time to the gentleman from Alabama (Mr. Bachus), the ranking member.

Madam Chair, I rise to claim time in opposition, although I am not opposed to the amendment.

I yield myself such time as I may consume.

I appreciate the work of the chairman with regard to clarifying some of the definitions here. I think this goes to the overall issue of the complexity of the issues that are before the House tonight on this matter and on the broader matter of the derivative regulations that we are discussing with the previous amendment and this amendment as well. It goes to the point that I raised just a moment ago in my previous remarks, that if we are going to try to answer to the American public to the three most important questions that they are asking of Congress--no more bailouts, no more legislation that destroys jobs, and no more expansive, larger and spending government--we have to look to what we're doing in the derivative area as well.

In the derivative area that we see in the underlying legislation, what we have done is create a Byzantine piece of regulation combining the two, working with two entities that have never worked together in the past before, setting in the underlying legislation margin requirements that potentially end users--although I recognize the previous amendment just addressed that point--margin requirements on them which basically, at the end of the day, if we think about it in basically simple terms, means it will be more costly in this country to do business. It will be more difficult for entities to hedge their risk. And if businesses can't hedge their risk, the other fundamental purpose of this legislation that we hear from the other side to end the idea of systemic risk will be thwarted as well.

So think about that. We will be thwarting one of the basic functions that they say is the underlying legislation to end systemic risk because we cause hardship on companies to hedge their risk on the one end, and not addressing one of the major problems this country is faced with today, high unemployment. We must do a better job than that.

As I stated before, Republicans have offered a better solution to all of those issues. We have offered a solution with regard to the bailouts, to end taxpayer-funded bailouts. We have offered a solution to end the prospects of less jobs in this country. And we offered a solution respectively to the whole derivative market, as I set forth before. The centerpiece of that solution is something that was actually found in the chairman's bill, and that was the repository idea. We can get all the transparency that we need right now through a trade repository where the OTC trades are reported. We can get the accountability and the transparency that the American public looks for as well through the initiatives that are in the Republican substitute. But we can do so in a manner, therefore, that will not impose additional risk or cumbersomeness or a Byzantine structure, and therefore not affect the hedging abilities or the cost of doing business of companies in this country. We can do so in a manner that will not hurt the creation of jobs.

When you think about it, we will have probably discussed three different areas, three different titles of this bill that actually will be hurting jobs. What are they? We haven't talked about the first one too much, CFPA, the Consumer Financial Products Agency. It has already been documented that that will cost literally a million jobs. The wind- down authority, we have already talked about that previously, that will also cost jobs. And here, if you do not handle the derivative situation correctly, that potentially can cause job loss in this country as well. We suggest that the Republican substitute should be considered in this area as in other areas as well.

With that, I reserve the balance of my time and commend the gentleman for his work on the underlying amendment that we have here before us today.

Madam Chair, I yield myself 1\1/2\ minutes, the balance of my time.

The American public, quite honestly, if they watch what goes on tonight and have watched in the days before and after, really are not looking for anyone to be pointing fingers of blame at this administration or at the last administration. This should not be a partisan issue. The other side always wants to point back several years to the Bush administration.

We could point back that it was the Democrat majority for 2007, 2008 and now 2009 that has been running this House and that, during that time, we have seen the catastrophe in the financial markets, and that it was during their tenure that we saw the catastrophe of unemployment soaring through the roof. Yet pointing fingers at the Democrats and at the fact that they have done the job that they have done and that we have seen the results of their legislation over the last 3 years will not solve the problem.

What we need to do, however, is pass legislation that will end the pattern of elimination of jobs, that will end the pattern of the bailout mentality, that will end the pattern of expansive government. That's why we come here tonight to offer Republican solutions to a lot of these things, and it's why we ask the majority party to consider some of those proposals as we go forward.

I yield back the balance of my time.

I rise and seek to claim the time in opposition.

Madam Chair, I yield 2 minutes to the gentleman from New York (Mr. McMahon).

At this time I would like to yield 1\1/2\ minutes to the gentleman from Georgia (Mr. Price).

I presume I am to close?

I thank the Chair.

The gentleman from Massachusetts says the government is not interposing or getting involved here. Of course they are, and that's what the whole fundamental purpose of the underlying bill is, is to set up this whole Byzantine arrangement of new regulations specifically in this area. Yes, I have read the amendment; and, yes, I recall it coming through committee and the problems that were raised there. When you centralize risk and clearing entities, as made mandatory by the underlying bill, it's important that we ensure that there is some independence in the clearinghouses from the dealers who play such a large role, like he says. But that's why in committee I offered an amendment that would have required that the majority of the directors of the derivatives of the clearing organization must not be associated with swap dealers. This goes much further than what's already on the books right now.

The SEC has a current policy of limiting a position of 20 percent ownership of a single broker dealer in an existing exchange. This amendment goes way farther than that, saying that that 20 percent applies in the aggregate. Yes, I read the amendment.

You have to remember that dealers are among the most likely sources of investment capital to establish these new clearinghouses. If you are going to come up tonight now with a really overly restrictive limit on ownership, as we have in this amendment, you are going to have potentially some negative consequences. Some of those will be in competition.

At the end of the day, what will you have? The amendment could very well exacerbate risk by forcing more derivative transactions that are out there, and who knows how many will be out there after this legislation passes, to fewer and to fewer and to fewer clearinghouses, basically concentrating risk and doing the opposite of what the American public wants, to avoid risk burdens and additional bailouts.

Madam Chair, I claim time in opposition.

I yield myself 1 minute.

This probably is the most critical amendment that we will consider today that addresses the derivative portion of the legislation to the chairman's question of whether we should say ``yes'' or ``no'' to the claim for more power to these entities.

I would say we should tell them ``no,'' and the reason is because neither the administration nor the majority nor the chairman has provided any substantial evidence whatsoever of any specific OTC derivatives, how they cause a financial crisis.

Derivatives are something that the companies use to try to hedge the risk. Clearly, we must make sure there's transparency and accountability--and I have already spoken about that--and we can do so in a way, however, that will not hamper their ability to control costs, not to manage risks, compete in the global marketplace. This would all hurt that.

And when you talk about the end users in this and what they're doing, remember it was the end users, large and small, the public and private American businesses, they, they were the victims, not the cause, of the financial crisis.

Derivative dealers and their customers, the end users, they're in the best position to determine what are the appropriate margin requirements, not giving more authority to the SEC or the CFTC or any other financial regulators.

I reserve my time.

I now yield 2 minutes to the gentleman who also distrusts regulations as we have seen and the SEC and their handling of the SEC situation and the OTS and the regulation of the AIG situation, the gentleman from Alabama (Mr. Bachus).

I yield the balance of my time to the gentleman from Minnesota (Mr. Peterson).

Madam Chair, I demand a recorded vote.

Madam Chair, I rise to claim the time in opposition.

Madam Chair, I yield myself 2 minutes.

I would like to begin by commending my colleague from South Jersey, Congressman John Adler, for his hard work on this very important issue. As all of our colleagues know in New Jersey and around the country, our Nation is in tough economic times right now and these tough times are compounded if you are a small business. And the last thing we need to do is put more burdens on them by imposing costly regulations.

I think we all agree that our Nation's small businesses are not the cause of our current financial situation, but they are the ones who are going to get us out of it. The language in the bill that would permanently exempt small businesses with a market capitalization of $75 million or less from section 404(b) of Sarbanes-Oxley was added during committee consideration by myself and Mr. Adler and was adopted by a broad bipartisan vote, with the backing of the White House as well.

Unlike some would like to have you believe, this exemption does not exempt institutions from all auditing requirements. As the Independent Community Bankers Association notes in a

letter on this matter, they say, ``The regulatory burden will be in addition to their other annual auditing fees, their regular safety and soundness and compliance examinations conducted by the banking agencies, and complying with other numerous Federal and State banking laws and regulations. It will also be in addition to complying with Sarbanes-Oxley section 404(a) which requires management to render an opinion concerning an issuer's internal controls.''

Basically all that means is there is a plethora of other regulations providing for transparency for these companies.

Let me give you a quick example about one company in my district, and that is Dewey Electronics. They are located in Oakland, New Jersey, a small company, 35 employees, capitalized $3.6 million, hardly a company that's going to cause panic in this country if they fail. The CEO, the CFO and other management, they are all located in the same hallway, in the same building. There is constant communication between all the board of directors. They are a perfect example of a small business in which the government should not force new and now highly expensive regulatory requirements in order to have them check off some boxes on some form.

Think about it. The hundreds of thousands of dollars that it will cost them to comply with section 404(b) would be much better spent in developing new and more efficient generators, which is what the company does to support our troops overseas to be used on the battlefield or to be used to hire new employees, which is what we talked about a number of times before on this floor, to make sure that we can provide more jobs as we see the joblessness rate rise.

I reserve the balance of my time.

Madam Chair, I now yield 1\1/2\ minutes to my friend and colleague from South Jersey, Congressman Adler.

We should be closing. Are there speakers on the other side?

I will reserve the balance of my time.

I am going to close, yes.

And now, I shall yield my remaining 1\1/2\ minutes to my friend and colleague from the State of Texas.

Madam Chair, I would enter into the Record at this time just the letters of support of the Adler-Garrett amendment from the New York Stock Exchange Euronext, Property Casualty Insurers, ICBA, Biotechnology, and the Center for Investors and Entrepreneurs.

NYSE Euronext,

December 8, 2009.

Hon. John Adler,

House of Representatives,

Washington, DC.

Hon. Scott Garrett,

House of Representatives,

Washington, DC.

Dear Representatives Adler and Garrett: NYSE Euronext

supports your provision in the Investor Protection Act that

would permanently exempt smaller public companies, with a

market capitalization of less than $75 million, from Section

404(b) of the Sarbanes Oxley Act of 2002.

We urge Congress to retain this provision in H.R. 4173, The

Wall Street Reform and Consumer Protection Act of 2009.

This provision will help promote the ability of smaller

companies to compete and create jobs without sacrificing the

important benefits of strong auditor oversight and robust

financial reporting requirements. The SEC's current exemption

for companies with less than $75 million in market value

represents a measured approach to balancing investor

protection and SME competitiveness, as these companies

continue to be audited and subject to SEC rules regarding

financial reporting and disclosure requirements.

NYSE Euronext looks forward to continuing to work with the

Congress to strengthen the growth, competitiveness and job-

creation of U.S. public companies.

Sincerely,

Clarke D. Camper,

Senior Vice President, Head of

Government Affairs and Public Advocacy.

Madam Chairman, I demand a recorded vote.

Madam Chair, I have an amendment at the desk.

Madam Chair, Chairman Frank and Chairman Peterson have provided the framework for regulation of the swaps markets in H.R. 4173, but I believe Congress can improve this bill by requiring additional transparency. We could pass the most comprehensive and thorough regulation of the financial sector imaginable, but it would be meaningless if we continue to leave loopholes in place to evade regulation. As we saw in the oil markets of 2008, leaving loopholes in place for speculators costs consumers more of their hard-earned money.

Swaps are financial contracts that allow a company to lock in prices on everything from currency to oil to pork bellies. In 2008, roughly $80 trillion was traded on regulated exchanges worldwide. And as astonishing as that figure is, it pales in comparison to the more than $600 trillion traded over-the-counter, or in unregulated dark markets. This is seven-and-a-half times what was traded on regulated markets. To put that into perspective, the total gross domestic product of the United States is $14.4 trillion or 41 times smaller than the unregulated swaps

market. These unregulated markets create a systemic risk across the financial system and helped bring Lehman Brothers, Bear Stearns and AIG into bankruptcy and our economy to the verge of disaster.

The best way to address this problem is to require Wall Street financial houses to post collateral and clear their swaps contracts on regulated exchanges. If we can't guarantee that Wall Street will post collateral, have some skin in the game, we should at least require that these trades be made in the open, transparent markets.

My amendment establishes a simple requirement: Swaps by end dealers that could clear will remain exempt from clearing because one of the parties in that contract is a bona fide hedger. However, the swaps still should be reported on an exchange. Much of the concern over the dark swaps markets is the lack of information that ensure a competitive, transparent market. By adopting this amendment, the marketplace will become more open, and end users and other important swap users can accurately determine fair prices.

Nothing, and let me repeat, nothing in this amendment requires a new clearing requirement. It's all about transparency and nothing more. Our amendment specifically includes a provision stating that the amendment ``shall not be interpreted as requiring any swap to be cleared.''

CFPC Chairman Gary Gensler originally proposed the concept for required reporting on specific swaps, and supports our amendment that requires transparency in swaps markets. I would like to submit his letter of support in the Record.

As Chairman Gensler told the House Energy and Commerce Committee last week, ``Economists have for decades recognized transparency benefits the marketplace'' and that ``lack of regulation in these markets has created significant information deficits.''

There are a number of groups who support this legislation and this amendment, including Americans for Financial Reform, which includes United Food and Commercial Workers, AFL-CIO, a number of groups.

Without our amendment, a significant portion of the swaps market will remain in the dark, and unscrupulous traders will remain out of reach of regulators.

I urge Members to adopt this amendment and bring these swap contracts out of the dark markets.

U.S. Commodity Futures

Trading Commission,

Washington, DC, December 10, 2009.

Hon. Bart Stupak,

House of Representatives,

Washington, DC.

Hon. Chris Van Hollen,

House of Representatives,

Washington, DC.

Dear Congressmen Stupak and Van Hollen: I am writing in

support of your amendment to H.R. 4173, the Wall Street

Reform and Consumer Protection Act of 2009, which would

require transparency in swaps contracts by requiring all

standardized non-cleared swaps be executed on a registered

swap execution facility. This requirement would apply only to

those contracts listed for trading while still fully allowing

hedgers to enter into customized transactions off-exchange.

In addition, the amendment explicitly states that it ``shall

not be interpreted to require any swap to be cleared.'' Your

amendment would be an important addition to a very strong

bill.

In the past few months, Congress has taken historic steps

to bring comprehensive regulation to the over-the-counter

derivatives markets. H.R. 4173 fully regulates swap dealers

and requires that all standardized trades between these Wall

Street swap dealers be brought into clearinghouses and

transparent trading facilities. Your amendment strengthens

the bill by broadening the transparency requirement to

include all standardized derivatives transactions. Under H.R.

4173, while big Wall Street banks would be subject to the

requirement when trading with each other, those same Wall

Street banks would be exempt when trading with many of their

customers. Your amendment would close this exemption and

increase the amount of information available to the public

and market participants.

Economists have for decades recognized that market

transparency benefits the public by lowering costs. If

derivatives users knew what others were paying to enter into

similar contracts, they would receive better pricing on their

transactions. A municipality could better decide whether or

not to hedge an interest rate risk based upon the reported

pricing from the broader market. As a nation, we do not stand

for this lack of transparency in other markets. For example,

one would not purchase 100 shares of his or her favorite

stock without knowing the last price at which those shares

sold. Similarly, one would not buy an apple at the

supermarket if the price was kept private. Transparency in

the over-the-counter derivatives marketplace would shift the

information advantage from Wall Street to the businesses,

municipalities and nonprofit organizations that you represent

in Congress. This would lower the cost of hedging and thus

the costs to customers and promote economic growth in every

sector of the economy.

Your amendment accomplishes the critical goal of promoting

transparency without imposing any additional costs on

business as it does not require these end-user trades to be

cleared by central counterparties. Your amendment separates

mandatory trading on transparent trading venues from a

central clearing requirement that would require businesses to

post margin. The two should not be confused. Transparency can

be required while leaving the clearing decision up to the

parties involved in particular transactions.

I commend you for your efforts to bring greater

transparency to the currently opaque over-the-counter

derivatives marketplace.

Sincerely,

Gary Gensler,

Chairman.

I reserve the balance of my time.

Madam Chair, I yield 2 minutes to the co-author of this amendment, Mr. Van Hollen from Maryland, who is a champion on this issue.

Madam Chair, this amendment was crafted with the help of Representatives DeLauro, Larson, and Van Hollen. We worked and reached an agreement with Chairman Frank and Chairman Peterson to enhance regulation of the over-the-counter derivatives market. I want to thank my colleagues and both chairmen for their work.

Our amendment provides additional assurances that the swaps market will be policed and prevents speculative financial companies from evading regulations or otherwise ignoring the law. Under this amendment, the CFTC and the SEC will be granted authority to prohibit swap transactions that pose a risk to the financial marketplace. Certain swaps, such as naked credit default swaps, are pure speculative bets that a company will fail and should be banned. As we learned in 2008, credit default swaps and other swap transactions pose a systemic risk to our economy and accelerated the economic collapse.

This amendment also narrows the definition of determining which companies are and are not bona fide hedging end users. Commercial companies that use commodities and securities to lock in prices and hedge the risk of their products, such as airlines, trucking companies, and electric utilities, did not create the current financial crisis. H.R. 4173 reflects this reality, but its exception for clearing swaps on an exchange is written so broadly that financial speculators and private pools of capital can be treated as bona fide hedgers.

To maintain strong standards for financial companies, we must ensure illegal swap transactions do not remain a valid contract in a court of law. Our amendment prevents a company that enters into a swap contract to remain liable for payment under the swap contract if the counterparty has acted illegally in creating, executing, or reporting the swap.

This amendment is the result of hard work between Chairman Frank, Chairman Peterson, and my colleagues and me to reach an agreement. This amendment will preserve the ability of bona

fide end users to hedge commercial risk with strong standards for Wall Street financial companies.

I urge adoption of this amendment.

December 8, 2009.

Re support H.R. 4173, ``Wall Street Reform and Consumer

Protection Act of 2009''.

House of Representatives,

Washington, DC.

Dear Representative: The undersigned organizations strongly

urge you to support H.R. 4173, the ``Wall Street Reform and

Consumer Protection Act of 2009,'' when it comes to the House

floor this week. We write individually and also on behalf of

Americans for Financial Reform, a coalition of more than 200

national, state and local consumer, labor, retiree, investor,

community, business and civil rights organizations who are

campaigning for real reform in our nation's financial system.

The need for this legislation could not be more obvious.

Years of deregulation have produced a financial system that

is a threat to our economy. Rampant abuses in consumer

lending practices, combined with a casino mentality on Wall

Street and the willful blindness of federal regulators, have

plunged our economy into its worst economic crisis since the

Great Depression--and it is clear that Wall Street has not

learned its lessons. While H.R. 4173 needs to be

strengthened, it contains vital reforms for our country and

must be passed.

A number of amendments will be offered which will

fundamentally affect the shape of this legislation. In order

to ensure meaningful financial reform, we strongly urge you

to:

Oppose the Minnick amendment to eliminate a new Consumer

Financial Protection Agency (CFPA) from the bill. It would

leave enforcement of consumer protection and civil rights

laws in the hands of the same existing regulatory bodies that

resoundingly failed to use them.

Support the Stupak/DeLauro/Larson/Van Hollen amendment on

derivatives. Regulators must have the authority to ban

abusive derivatives instruments rather than simply reporting

them to Congress, transactions which violate the law should

be considered invalid, and loopholes which leave too many

trades to continue in the shadows must be closed.

At the same time, we believe that as the legislative

process moves forward, H.R. 4173 must be improved in

important respects including:

The bill provides systemic regulatory authority to the

Board of Governors of the Federal Reserve without reforming

the Federal Reserve System to remove the banks themselves

from a role in overseeing the Federal Reserve's regulatory

staff. We need a fully public systemic risk regulator, either

in the form of a separate agency as detailed in Chairman

Dodd's proposal, or a reformed Federal Reserve.

The proposed CFPA needs to have jurisdiction over the

Community Reinvestment Act (CRA), as it does in Chairman

Dodd's proposal. The CRA is vital to fighting discriminatory,

deceptive, and unsustainable lending practices in minority

communities. But as is the case with other consumer

protection and civil rights laws, CRA enforcement in recent

years has been extremely weak, allowing a wide range of

under-regulated, non-bank-- and often predatory--lenders to

fill the void.

The legislation should also be changed to give the SEC

authority to make the exemption from registration under the

1940 Act for private investment funds contingent upon such

funds fulfilling requirements established by the SEC.

Despite the need for these improvements, passage of H.R.

4173 would represent dramatic progress towards a financial

system that works for all Americans. By voting for it, you

will send an important message to the American public that

you intend to change the way that Wall Street works for the

better.

Thank you for your consideration of our views. If you have

any questions, please contact Rob Randhava, Leadership

Conference on Civil Rights, and Lisa Donner, Americans for

Financial Reform.

Sincerely,

Americans for Financial Reform.

Following are the partners of Americans for Financial

Reform. All the organizations support the overall principles

of AFR and are working for an accountable, fair and secure

financial system. Not all of these organizations work on all

of the issues covered by the coalition or have signed on to

every statement.

A New Way Forward; AARP; ACORN; Adler and Colvin; AFL-CIO;

AFSCME; Alliance For Justice; Americans for Democratic

Action, Inc; American Income Life Insurance; Americans for

Fairness in Lending; Americans United for Change; Calvert

Asset Management Company, Inc.; Campaign for America's

Future; Campaign Money; Center for Digital Democracy; Center

for Economic and Policy Research; Center for Economic

Progress; Center for Responsible Lending; Center for Justice

and Democracy; Center of Concern; Change to Win; Clean Yield

Asset Management; Coastal Enterprises Inc.; Color of Change;

and Common Cause.

Communications Workers of America; Community Development

Transportation Lending Services; Consumer Action; Consumer

Association Council; Consumers for Auto Safety and

Reliability; Consumer Federation of America; Consumer

Watchdog; Consumers Union; Corporation for Enterprise

Development; CREDO Mobile; CTW Investment Group; Demos;

Economic Policy Institute; Essential Action; Greenlining

Institute; Good Business International; HNMA Funding Company;

Home Actions; Housing Counseling Services; Information Press;

Institute for Global Communications; Institute for Policy

Studies: Global Economy Project; International Brotherhood of

Teamsters; Institute of Women's Policy Research; and Krull &

Company.

Laborers' International Union of North America; Lake

Research Partners; Lawyers' Committee for Civil Rights Under

Law; Leadership Conference on Civil Rights; Move On; NASCAT;

National Association of Consumer Advocates; National

Association of Neighborhoods; National Coalition for Asian

Pacific American Community Development; National Community

Reinvestment Coalition; National Consumer Law Center (on

behalf of its low-income clients); National Consumers League;

National Council of La Raza; National Fair Housing Alliance;

National Federation of Community Development Credit Unions;

National Housing Institute; National Housing Trust; National

Housing Trust Community Development Fund; National

NeighborWorks Association; National Training and Information

Center/National People's Action; National Council of Women's

Organizations; Next Step; OMB Watch; Opportunity Finance

Network; and Partners for the Common Good.

PICO; Progress Now Action; Progressive States Network;

Poverty and Race Research Action Council; Public Citizen;

Sargent Shriver Center on Poverty Law; SEIU; State Voices;

Taxpayer's for Common Sense; The Association for Housing and

Neighborhood Development; the Fuel Savers Club; The Seminal;

U.S. Public Interest Research Group; Union Plus; United Food

and Commercial Workers; United States Student Association;

USAction; Veris Wealth Partners; Veterans Chamber of

Commerce; Western States Center; We the People Now; Woodstock

Institute; World Privacy Forum; UNET; Union Plus; and

Unitarian Universalist for a Just Economic Community.

Partial list of State and Local Signers

Alaska PIRG; Arizona PIRG; Arizona Advocacy Network;

Arizonans For Responsible Lending; Association for

Neighborhood and Housing Development NY; Audubon Partnership

for Economic Development LDC, New York NY; BAC Funding

Consortium Inc., Miami FL; Beech Capital Venture Corporation,

Philadelphia PA; California PIRG; California Reinvestment

Coalition; Century Housing Corporation, Culver City CA;

Center of Concern; Center for Media and Democracy; CHANGER

NY; Chautauqua Home Rehabilitation and Improvement

Corporation (NY); Chicago Community Loan Fund, Chicago IL;

Chicago Community Ventures, Chicago IL; Chicago Consumer

Coalition; Citizen Potawatomi CDC, Shawnee OK; Colorado PIRG;

Coalition on Homeless Housing in Ohio; Community Capital

Fund, Bridgeport CT; Community Capital of Maryland, Baltimore

MD; Community Development Financial Institution of the Tohono

O'odham Nation, Sells AZ; and Community Redevelopment Loan

and Investment Fund, Atlanta GA.

Community Reinvestment Association of North Carolina;

Community Resource Group, Fayetteville A; Connecticut PIRG;

Connecticut Association for Human Services; Consumer

Assistance Council; Cooper Square Committee (NYC);

Cooperative Fund of New England, Wilmington NC; Corporacion

de Desarrollo Economico de Ceiba, Ceiba PR; Delta Foundation,

Inc., Greenville MS; Economic Opportunity Fund (EOF),

Philadelphia PA; Empire Justice Center NY; Enterprises, Inc.,

Berea KY; Fair Housing Contact Service OH; Federation of

Appalachian Housing; Fitness and Praise Youth Development,

Inc., Baton Rouge LA; Forward Community Investment (Madison,

WI); Florida Consumer Action Network; Florida PIRG; Funding

Partners for Housing Solutions, Ft. Collins CO; Georgia PIRG;

Green America; Grow Iowa Foundation, Greenfield IA; Homewise,

Inc., Santa Fe NM; Idaho Nevada CDFI, Pocatello ID; and Idaho

Chapter, National Association of Social Workers.

Idaho Community Action Network; Illinois PIRG; Impact

Capital, Seattle WA; Information Press CA; Indiana PIRG; Iowa

PIRG; Iowa Citizens for Community Improvement; JobStart

Chautauqua, Inc., Mayville NY; Keystone Research Center; La

Casa Federal Credit Union, Newark NJ; Low Income Investment

Fund, San Francisco CA; Long Island Housing Services NY;

MaineStream Finance, Bangor ME; Maryland PIRG; Massachusetts

Consumers' Coalition; MASSPIRG; Massachusetts Fair Housing

Center; Michigan PIRG; Midland Community Development

Corporation, Midland TX; Midwest Minnesota Community

Development Corporation, Detroit Lakes MN; Mile High

Community Loan Fund, Denver CO; Missouri PIRG; Mortgage

Recovery Service Center of L.A.; Montana Community

Development Corporation, Missoula MT; and Montana PIRG.

National Housing Institute; Neighborhood Economic

Development Advocacy Project; New Hampshire PIRG; New Jersey

Community Capital, Trenton NJ; New Jersey Citizen Action; New

Jersey PIRG; New Mexico PIRG; New York PIRG; New York City

Aids Housing Network; Next Step MN; NOAH Community

Development Fund, Inc., Boston MA; Nonprofit Finance Fund,

New York NY; Nonprofits Assistance Fund, Minneapolis MN;

Northern Community Investment Corporation (St. Johnsbury,

VT); North Carolina Association of Community Development

Corporations; North Carolina PIRG;

Northside Community Development Fund, Pittsburgh PA; Ohio

Capital Corporation for Housing, Columbus OH; Ohio PIRG;

Oregon State PIRG; Our Oregon; PennPIRG; Piedmont Housing

Alliance, Charlottesville VA; Rocky Mountain Peace and

Justice Center, CO; Rhode Island PIRG; Rural Community

Assistance Corporation, West Sacramento CA; and Rural

Organizing Project OR.

San Francisco Municipal Transportation Authority; Seattle

Economic Development Fund; Siouxland Economic Development

Corporation (Sioux City, IA); Southern Bancorp (Arkadelphia

AR); Community Capital Development; TexPIRG; The Association

for Housing and Neighborhood Development; The Fair Housing

Council of Central New York; The Help Network; The Loan Fund,

Albuquerque NM; Third Reconstruction Institute NC; Vermont

PIRG; Village Capital Corporation, Cleveland OH; Virginia

Citizens Consumer Council; Virginia Poverty Law Center; War

on Poverty--Florida; WashPIRG; Westchester Residential

Opportunities Inc.; Wigamig Owners Loan Fund, Inc., Lac du

Flambeau WI; and WISPIRG.

Madam Chair, I yield 2 minutes to the to the gentlewoman from Connecticut (Ms. DeLauro), the co-author of this amendment.

I yield the balance of my time to the co-author of this amendment, Mr. Van Hollen.

Madam Chair, I rise to offer amendment No. 1.

Madam Chair, I yield 30 seconds to my colleague from Massachusetts (Ms. Tsongas).

I will now yield 2\1/2\ minutes to the gentlewoman from New York (Mrs. McCarthy).

If the gentlewoman will yield, as the gentlewoman knows, there was a clerical glitch at the last minute so that we missed by a very narrow margin a submission time for the Rules Committee. And what I am glad to have the chance to do now is to agree with the gentlewoman, who has been working diligently on this, that this language will go if we have anything to say about it, as we will, into the conference report.

So the answer is yes.

Madam Chair, I reserve the balance of my time.

I thank the gentleman for yielding.

We are trying here to prevent fraud in the various programs. In the subprime mortgage bill, which we are reenacting here, which the House voted on, we put in some very strict restrictions against people who had a pattern or a history of fraud. But the gentleman from Maryland pointed out quite correctly that it was overly rigid, that it excluded, in the case of someone he knew, someone who many, many years ago had been involved in an unrelated situation where culpability was uncertain, there was a criminal conviction, and what this does is to provide some needed flexibility for minor offenses that were long ago.

I thank the gentleman for calling it to our attention. We were pleased to be able to make this change.

Madam Chair, I yield 2\1/2\ minutes to the gentleman from North Carolina (Mr. Miller), who is an important author of much of this bill.

Madam Chair, I yield 2\1/2\ minutes to the gentleman from North Carolina (Mr. Watt), a major shaper of the best parts of this bill.

Madam Chair, I now yield 2\1/2\ minutes to one of the strongest advocates of fairness and equity, and critics of lack of action to stop the foreclosure process, the gentlewoman from California, the Chair of the Housing Subcommittee, Ms. Waters.

What is the time remaining on both sides, please, Madam Chair?

I yield 2 minutes to the gentleman from Colorado (Mr. Perlmutter), who hasn't had enough floor time this week.

If the gentleman would yield, with regard to the permanent audit team, they may be the largest institutions, and that is a somewhat separate question, but for those who don't have a permanent audit team, not only would it be better for the regulated entity, it would be better for the CFPA. As any agency, they will have limited resources. If you have a bank that has $13-, $14-, $17 billion in assets and has had a good record, as most of those banks have had in consumer affairs, it would be a great waste of regulatory resources to be doing that when they would have the option, instead, of simply sending a CFPA member to join the other team.

So, yes, I would hope that the CFPA would take full advantage of this authority with those banks.

Madam Chair, I yield myself just 10 seconds to say that one of the Members whose business experience and general good judgment has been a very major asset for us is that of the gentlewoman from Illinois (Ms. Bean). She has had a very significant and positive impact on this bill.

I will now yield her 2 minutes.

I yield the gentlewoman an additional 15 seconds.

I will yield myself my remaining time.

How much is that?

I sympathize with the loss my Republican colleagues feel that we don't give a bailout for them, but this bill clearly repudiates it. First, they just today, as they did yesterday, made an issue out of the fact that we do include some bankruptcy, but their whole issue was bankruptcy. As the gentleman from Colorado said, there is nothing in their bill that prevents this from being extended ad infinitum under bankruptcy. Technically, we do have some time limitations, but that's part of bankruptcy.

Here is what we do say. If, in fact, the FDIC would decide with a failed institution to keep it going, it would do it without any funds. On page 397, there is established a separate fund to facilitate and provide for the orderly and complete dissolution of any failed financial company that poses a taxpayer threat.

Page 399, the fund shall be available to cover the costs incurred by the corporation as a receiver, repay such funds, cover the cost of systematic stabilization actions, not for the entity.

Then in 288, the corporation, such action--they shall only get involved if they think it's--they can only spend the money if it is necessary for the purpose of financial stability and not for the purpose of preserving the covered financial company. Yes, we are saying that in some cases, in a very

complex institution, you may not be able to wipe it out in a year. That's what was pointed it to us. If you wiped it out prematurely, you may find yourself costing more money, not to the institution, in severance pay and other things for employees. This is very clear.

By the way, as to the permanence of this, the authority to borrow here is sunsetted in 2013. Yes, there will be a fund of assessment from private financial institutions. I know the Republicans do not want us to discommode the major financial institutions for this.

We levy on them for money that can be used. If a major institution fails, then the money can be used to manage that failure in a reasonable way. The biggest difference is that we try to stop the failure and they do nothing to try to stop it.

Parliamentary inquiry.

Well, when a Member says he is reserving his time to close, is it permissible to split it? I just, for the future of the bill, want to know that. I had assumed the gentleman was closing, and I thought only one Member closes.

Thank you, Madam Chair.

Madam Chair, I offer this statement to indicate that I agree with the interpretation of the Gentleman from North Carolina regarding his interpretation of the secured creditor haircut portion of the Manager's Amendment. Apparently, there are some people who feel that, even with the improvements to this provision in the Manager's Amendment, there are some who might interpret this incorrectly, and I would agree with the Gentleman that very explicit language reaffirming this interpretation could usefully be added at conference time.

Madam Chair, working with the chairman of the Agriculture Committee has been very constructive, and we have enjoyed that working relationship, and I am very proud that our committees have avoided the kind of jurisdictional disputes that too often plague this place.

We have a couple of issues here: One, should there be an end user exemption, et cetera? Two, whether you agree or not, it certainly shouldn't be one that could be manipulated. So this is to make sure that this is there.

Finally, I do want to respond to the gentleman from New Jersey. Apparently, they discovered that jobs are being lost. In fact, the reason that jobs are being lost now and were being lost at an even greater rate last year is the economic disaster that came from a lack of regulation. So the argument that by putting in place regulations that will prevent the enormous economic disaster, which officially began with the recession in 2007, will somehow cause job loss is bizarre-o-world. Job loss was brought about by the lack of regulation, which we are trying to correct.

It is true that the Republican position is: Leave business alone. Let them continue to do whatever they think is right. Don't have any regulation.

That's how we got into this mess.

Madam Chair, I disagree with the premise that the large financial investment houses and large financial institutions have earned the degree of trust that our voting against this amendment would require.

We were fairly careful, and there were many who were critical because we were too willing to separate out end users, legitimate end users, and not sweep them all in; but for that to be justified, there has to be integrity in the administration of the process. That is what the last amendment by the gentleman of Minnesota did, and that is what this amendment does.

If you let people who have a financial interest in there not being clearing be in charge of clearing, it would take an extraordinarily selfless group of people not to give in to temptation.

While people on Wall Street have been giving varying descriptions, some good and some bad, no one has yet compared any of them to Mother Teresa. The fact is that if you reject this amendment, you are giving people who have an incentive to make these things not work well control over them.

Madam Chair, I rise to take the time in opposition to the amendment.

The gentleman from New Jersey has fairly laid this out. Here is the difference: We have agreed that end users should have an exemption from these requirements, but there is an exemption to the exemption.

If an end user is engaged in an activity that can cause financial problems, then we want them not to be exempt from regulation, but here is the difference. The bill that is in there now, and it differs from the Agriculture bill, says if the end user is causing financial losses and problems at a particular counterparty, then you should not have the exemption.

The alternative is to say no, let's not step in if this or that or many counterparties are in problems until it could become a systemic risk. We don't want to wait for systemic risk. I don't want to wait until people are at the edge of the cliff to start to pull them back.

It is clear to many of us that a lack of regulation of derivatives was the problem. I support an end user exemption. But when an end user is employing that exemption in a way that puts counterparties at risk, I don't want to have to wait until a cataclysm impends. I would like there to be the ability to step in and stop it at that point.

For the end user, it is very simple. They can avoid this regulation by being careful about what they do with the counterparties. This does not take it away; it simply says to the end user, please be careful and use some prudence before you engage in a transaction with a counterparty who will be at risk and could begin the kind of chain that we hope would not happen.

I reserve the balance of my time.

Madam Chairman, I have only one more speaker, and I have the right to close, so I reserve.

Madam Chairman, I apologize to the body. I do have an additional speaker, so I now yield 2 minutes to the gentleman from Minnesota (Mr. Peterson).

Now I am going to close. I reserve.

Madam Chairman, how much time have I remaining?

I'm afraid my friend from New York has greatly overstated the case. There is no debate here--there is elsewhere--about whether or not there should be an end user exemption.

As he knows, our bill gives an end user exemption. The gentleman from Minnesota and I worked hard to do that, and we are not trying to take it away. In fact, both versions of this say that an end user exemption can be forfeited for certain economic circumstances.

So the question is not whether there should be an end user exemption. Yes, there should be. It is what should trigger that not to be there. The amendment says a systemic risk. We say, given the volatility of this instrument, derivatives, given the uncertainty, that waits too long to say no. That allows caution to be absent for too long a time. We should not wait until the car's about to go over the cliff to test the brakes. We say let's stop a good ways back. And it's entirely within the control of the end user.

What this says is, if you are an end user, do not impose on your counterparty the likelihood of significant loss, because a loss here and a loss there and a loss in another place cumulates to a problem. And if they say, well, it's too hard to tell, that's exactly our point. Don't make it hard to tell. Know who you're dealing with. Don't engage in transactions with counterparties when you aren't in a position to gauge their financial responsibility. Don't use the exemption you have from our regulation that applies to the financial speculators to engage in imprudent transactions, not just imprudent for you, but imprudent for the other guy, because what we've learned is it is important these are mutual events, and that's precisely the issue. Yes, there should be an end user exemption, but end users who disregard prudence and engage in transactions with people who don't have the money to back that up are potentially inflicting a harm on the system.

Now, the proponents of the amendment agree that we should take away that exemption if the system is harmed, but they wait too late to avert disaster.

I offer amendment No. 7.

Madam Chair, this amendment was something that was requested very much by the regulators who administer this approach, and it would allow them, but not mandate, that margin or collateral requirements be set.

Once again, we have accepted here an exemption for end users over the objection of many who think we have gone too far. But we are dealing here with an inexact science, and we would have the regulators be able--under this amendment, not required, but able--to set margin requirements. It would allow them to be set, margin or collateral requirements, in noncash. That's very important. It would not require people who are using this to hedge commercial risks to sell things to come up with the cash. And if, in fact, they were doing this in a prudent way and they posted noncash collateral, there would be no great problem because this noncash collateral could be still used for its other purposes.

So the question is should we say that the regulators, the CFTC and the SEC, should be denied what they have asked for, which is the right to impose the margin or collateral requirements in those cases of lighter regulation where they think this is important to avoid the kind of imbalances we had before.

The purpose is, of course, to prevent again the situation where one party or the other makes commitments it is unable to live up to. And this is a requirement--this is an empowerment of the regulators to act where they think there's a problem to prevent this from happening.

I reserve the balance of my time.

I will yield myself 1 minute to say I'll accept the way the gentleman from New Jersey put it. Should we give the regulators more power? That is the constant theme dividing us.

We look, many of us, at what happened over the past 15 years and say there was too little regulatory action, partly because some regulators who had the power wouldn't use it, like Mr. Greenspan at the Federal Reserve and some in the SEC, but partly because there was not sufficient regulatory powers. This is discretionary with the CFTC and

Again, the question is whether we should decide now that there will never be such a requirement. As to it costing a lot of money, the amendment specifically says that they should be allowed to use noncash collateral. That means they could pledge certain of their own assets, which could mean no cost.

It also says that the regulators shall impose the requirements commensurate with the risk involved in the transaction. Once again, we give incentives here for people to minimize risk, and I think that's the appropriate market approach.

We are, as I said, mandating these to be imposed. We are allowing them to be a noncash collateral, and we said they should be commensurate with risk.

The opposition argument is never. There will never be such a thing. There are no imprudent end users. There is no need ever to have them. The failure of trades in an individual case can be a problem for an individual company. They can cumulate. And that is the question: Do we say that we are willing to go forward with this issue with no power in any regulator to say that particular trades are being conducted in an imprudent fashion?

Because if they are conducted in an imprudent fashion, there is no power here because any margin requirement must be commensurate with risk. We have stricken the notion. The gentleman from Minnesota raised that point. There was at some point some language that we had that said it had to be greater than zero. We said, no, it does not have to be greater than zero, it is commensurate with risk.

And that is the issue. We are being asked to say we have complete confidence that there will never be the kind of imprudent trades that could begin to cause trouble in the system, and therefore, we will deny the regulators the power even to consider this.

I yield back the balance of my time.

Madam Chair, I demand a recorded vote.

Madam Chair, pursuant to section 4 of House Resolution 964, I request that amendment No. 11 be considered out of order. If I may elaborate, it is for the purpose of en blocing some amendments.

I support the amendment, but I do have to comment on this job issue.

Once again, it is clear that January 21, 2009, saw a mass disease outbreak--prolonged, profound Republican amnesia. The gentleman from Texas says, under this administration, we've lost jobs. Yes. The Obama recovery from the Bush recession has been slower than we had hoped, but it has begun.

According to the official National Bureau of Economic Research, the Bush recession began in 2007. Large job losses happened under the Bush administration and as a continuation of the Bush policies. We have finally begun to slow down the job loss.

The notion that it is because our economic recovery plan was passed that job loss has continued is, of course, economic illiteracy of the highest sort. The problem is that you do not immediately turn things around. Most economic analysts agree that the economic recovery program has slowed down the rate of job loss, and we have begun to turn it around.

When the gentleman from Texas and other Republicans blame Obama for the Bush mistakes, it's not going to be allowed to go unrebutted.

Madam Chair, the SEC has recognized the potential problems for people under $75 million. They are not now subjected to this. The question is not whether they should be immediately put under this, but whether they should be given a permanent exemption without giving us a chance to have the SEC continue its development of more appropriate rules. The notion that no such requirement should apply, there is an absolutism here that seems to me in error.

Yes, the SEC should treat companies at $75 million and below differently than people that are at a billion dollars and above, et cetera. But they are in the process of doing this. This is an exemption that is unnecessary at this time. If and when the SEC decides that it is ready to cover them and Members here think that they haven't done an adequate job of providing for it, a motion like this might be in order.

I understand the desire of people to help smaller businesses. But at this point it is a license for people who might want to be abusive by guaranteeing them that they will never be audited despite any effort to make an appropriate audit.

Parliamentary inquiry, Madam Chairman.

Is it not in order for the gentleman from California to offer his amendment now?

Madam Chair, I have an amendment at the desk.

Madam Chair, I yield myself such time as I may consume.

I rise today in support of the Peterson-Frank amendment to H.R. 4173, The Wall Street Reform and Consumer Protection Act of 2009.

Madam Chair, while much of the attention of this financial reform package is focused on the mortgage and credit crisis of last year, this amendment is the product of years of public debate about the regulation of derivatives markets in the United States.

It began with the price volatility we saw in energy futures markets, first with natural gas, then for crude oil. We examined in our committee the influx of new kinds of traders in these markets, like hedge funds and index funds. We looked at the relationship between what was occurring on the regulated markets and the even larger unregulated, over-the-counter market. More aptly, this probably should have been called the under-the-counter market because trillions of dollars in transactions affecting commodity prices were being conducted out of sight and out of reach of market regulators.

Last year, the House of Representatives responded, approving bipartisan legislation to give the Commodity Futures Trading Commission greater authority over these ``dark markets'' in an attempt to restore the price discovery and hedging utility of unregulated markets. Unfortunately, it was only after the House passed this bill that we learned the real consequences of what can happen in unregulated markets with the near collapse of our financial system.

As Warren Buffett correctly pointed out in his 2003 annual letter to shareholders, the large amount of credit risk concentrated in the hands of the relatively few meant that ``the troubles of one could quickly infect the others.'' Last year's collapse proved him right.

Madam Chair, the House Agriculture Committee acted very early on this year to get a handle on these swaps and minimize the very real systemic risk to the economy that they posed. A key part of that legislation was a requirement that swap contracts be cleared.

The clearing requirement has served the futures market well for decades. It increases transparency and effectively manages risk, not just for the public, but for all participants in the market.

Equally important, Madam Chair, our committee said that exemptions to the clearing requirement should be available because not every swap is appropriate for clearing and not every market participant should have to bear the burdens of clearing.

These two key principles of required clearing and exemptions are carried over from that previous work from our committee and are expanded upon in the Peterson-Frank amendment.

Madam Chair, our target for greater regulation and oversight is not the end user but their swap dealer or major swap participant counterparty. End users did not get a bailout of billions of dollars. End users are not responsible for what happened in the markets last year.

Under this amendment, swaps will be centrally cleared if a clearinghouse will accept the transaction and when regulators determine clearing is necessary. Cleared, listed swaps must be traded on an exchange or registered swap execution facility. And all swap trades must be reported, with counterparties adhering to recordkeeping and reporting requirements.

This amendment will hold swap dealers like large financial institutions accountable to new standards for capital, margin, business conduct and other requirements to reduce their ability to again place our financial system in such dire straits.

In addition, Madam Chair, this amendment contains many strong provisions regarding market transparency and makes progress solving some of the jurisdictional issues that have plagued financial regulation in the past. The amendment strengthens confidence in trader position limits on physically deliverable commodities as a way to prevent excessive speculation trading. And it will call for international harmonization by requiring foreign boards of trade to share trading data and adopt speculative position limits on contracts that trade U.S. commodities similar to U.S.-regulated exchanges.

Madam Chair, we have come a long way to get here. The situation I described earlier with AIG might make you wonder if we could have ever allowed such a reckless trading environment to have existed and that those involved would have learned their lesson. But believe it or not, the big banks on

Wall Street don't think that they did anything wrong. In fact, they'd like to keep doing what they've been doing. They already got their bailout, and they wouldn't mind topping it off by avoiding any new regulation or oversight. To me, that is an unacceptable outcome.

I urge my colleagues to approve the Peterson-Frank amendment to finally bring real accountability and oversight to the over-the-counter derivatives market.

Could I ask how much time I have remaining?

I reserve the balance of my time.

Madam Chair, I'm now pleased to recognize the gentleman from Iowa, the chairman of the General Farm Commodities and Risk Management Subcommittee that deals with this issue and is a leader on this issue for us on the Agriculture Committee, Mr. Boswell, for 3 minutes.

(Mr. BOSWELL asked and was given permission to revise and extend his remarks.)

Madam Chair, I'm pleased to yield 2 minutes to the gentlewoman from Illinois (Ms. Bean).

Madam Chair, I yield 3 minutes to the gentleman from Connecticut (Mr. Himes).

Madam Chair, our committee has spent a lot of time on this, and I want to thank all the Members for the many, many hours that they put in working on this, also the members of the banking committee. I also want to especially thank my ranking member, Mr. Lucas, and his staff, Kevin Kramp, Bill O'Conner, and Josh Mathis, for engaging with us in a cooperative process to bring this together.

I want to thank Chairman Frank and his staff, Peter Roberson and Luranne Stewart, for working with us in a spirit of compromise that allowed us to reach an agreement in a relatively short amount of time. And I want to thank Ranking Member Bachus and his staff, Kevin Edgar and Jason Spence, who, despite their concerns with the legislation, were willing to thoughtfully contribute to our discussions. So we appreciate that.

Finally, I want to thank my own staff, Andy Baker, Rebekah Solem, Matt Forbes, and Clark Ogilvie, for their hard work and long hours to bring this amendment to fruition.

This is a good amendment and I encourage Members to adopt it.

Madam Chair, I yield back the balance of my time.

Madam Chair, I yield myself such time as I may consume.

This amendment puts forth a process where we can obtain some clarity regarding limited exception to clearing requirements. Specifically, it requires the CFTC to define the terms ``commercial risk,'' ``operating risk,'' and ``balance sheet risk,'' which are used in the statute to define what types of risk a company may hedge and remain eligible for limited exception to clearing.

I understand how some could be concerned that balance sheet risk could be interpreted more broadly to encompass financial risk, but not commercial risk. That is why I introduced this amendment directing the regulator to define these terms.

By providing for the agency to define these terms, the burden will be placed upon them to ensure the companies seeking the limited exception to the clearing requirement do not abuse that exception. And if we think the CFTC gets it wrong, between the Agriculture Committee and the Agriculture appropriations subcommittee, we have lots of opportunities to haul them up here and show them the error of their ways.

This amendment is supported by the Commodity Markets Oversight Coalition and many other groups. I urge my colleagues to adopt the amendment.

Madam Chair, I reserve the balance of my time.

Madam Chair, I yield 1 minute to the distinguished chairman of the Financial Services Committee, the gentleman from Massachusetts (Mr. Frank).

Madam Chair, I have no further speakers, so I yield back the balance of my time.

Madam Chairman, I rise in opposition to this amendment, and I do so reluctantly because what the gentleman from New York is trying to accomplish is simply restore one piece of the bill to the way that it came out of the House Agriculture Committee.

Defining the term ``major swap participant'' has been one of the most significant challenges since Treasury first coined the term in its own derivatives reform proposal last August. We were trying to define it in ways that would generally exempt end users while ensuring we are capturing the financial players to whom we believe the new rules and regulations should apply.

We often heard from some in the end user community who wanted an absolute, guaranteed exemption that they never would be considered a major swap participant. We wouldn't do that because we don't know what the future will bring and because one of these end users could, one day, get so large with regard to their swap activity so as to have an impact on the financial system.

So, through painstaking work, we crafted the definition that is now in the Peterson-Frank amendment. Now, most end users feel that definition is adequate because they are supporting that amendment, but they would be more comfortable with the definition we had in the Ag Committee reported bill. I believe the new definition we crafted accomplishes our goal of protecting end users.

And so while I thank the gentleman for his appreciation for our work product in the Agriculture Committee, I most reluctantly oppose this amendment.

I thank the gentleman.

I rise in opposition to this amendment. This issue of authority for regulators to set margin requirements for end users was one issue that we could not agree upon during our negotiations, so I think it's appropriate that we resolve it here.

First, I want to remind Members that in the underlying Peterson-Frank amendment that we've adopted with regard to swap dealers and major swap participants and their security-based swap counterparties, regulators will have full authority to set margin requirements appropriate for the uncleared swaps that they hold. So that authority will be in place with regard to the banks.

Because swap dealers and major swap participants are so heavily involved in the swap market and are interconnected with potentially hundreds of different counterparties, we believe it's important that we regulate their margins for the protection of their end-user customers and the financial system as a whole.

However, I don't think that we need the regulators putting margin requirements on end users in order to protect the swap dealers and major swap participants. I think they can look out for themselves.

The so-called end user community of energy companies, manufacturers and on and on, did not, as has been said, cause the problem. They are concerned about potential impact of this amendment, and so I urge my colleagues to oppose the amendment.

I thank the gentleman for yielding.

Madam Chair, I rise in opposition to this amendment, and I do so reluctantly because I know the concept of what the gentleman is trying to accomplish has been endorsed by CFTC Chairman Gensler.

First, let me explain what's already in the Peterson-Frank amendment. If clearing mandate applies to a swap or class of swaps, then the swap dealers and major swap participants not only have to clear such trades but also have to execute them on or through a futures or securities exchange or a swap execution facility. Now, banks hate this because it will expose their trades among themselves to the light of day. It will provide greater price transparency and will narrow their spreads and cost them money, all to the benefit of the end user. For the end users, we provide an exemption from the clearing mandate and, consequently, from the execution mandate.

Mr. Stupak's amendment would preserve the clearing exemption but impose an execution mandate on end users, the idea being that the more swaps that can go through a swap execution facility, the greater price transparency you receive, the better deal an end user can make.

In theory, this all makes sense; however, the end user community doesn't buy it. They question whether the price information that will come out of the swap execution facility will actually be beneficial to them, and they also know that there will be costs to bear because the facilities won't perform this service for nothing. End users don't know whether the benefits will outweigh the costs. I have a real problem telling people that are in the business what's good for them when they don't believe it.

So I have here a letter from various groups who like the Peterson- Frank approach. Among them are the American Gas Association, the Public Gas Association, Public Power Association, Wind Energy, Edison Electric, Electric Power Supply Association, Independent Petroleum Association, Natural Gas Supply Association, NRECA, the Chamber of Commerce, 3M, Cargill, John Deere, Caterpillar, Medtronic, Zimmer, Ecolab, and others.

So I ask my colleagues to oppose the amendment.

I thank the gentleman.

I rise in opposition to the amendment, and I do so reluctantly because I know the sponsors of this amendment are sincere in their attempt to address potential problems that they fear could arise with the underlying bill. But I have to say that we have looked at these issues in great depth in the committee, and it is not that we haven't considered them.

In the first issue, banning of financial products, our concern there is that we believe that if we ban these products, they will simply move overseas and outside of our ability to regulate them. And if they are dangerous products and if they are something that shouldn't be done, I don't know if it makes any sense if we are just going to transfer that over to a foreign country. Our committee went to Europe. We recognize that most of the companies that do business in the United States also do business in Europe, and that is how we came down on that issue.

Another provision strikes the term ``balance sheet risk.'' We had considerable discussion about this. We think we have got the right terminology to get at the issue that some of the end users had. They felt that without that term, they might limit some of their transactions. And for those of us in agriculture, these things are very important to us because we are actually hedging physical risk. That is why I introduced an amendment directing the regulators to define the terms in explicit terms so that we would be clear about this. But as I said during that debate, the Agriculture Committee will definitely haul them up and straighten them out if they don't get the right answer to that.

Finally, the amendment limits the applicability of legal certainty of swaps. This amendment asks the question why illegal swaps should be enforceable. The answer is that otherwise you will encourage illegal behavior. If a swap dealer or an end user finds itself in a money- losing swap, it would be easy to engage in some illegal behavior to negate the swap and escape its financial liability.

The standard of illegality is not very high. You wouldn't have to commit fraud to invalidate a swap; you just don't have to follow the regulations. So do we really want businesses making the calculation between the costs associated with paying a fine to regulators for failing to dot the i's or cross the t's versus the costs associated with honoring their swap obligation? If the end user is harmed by the fraudulent action of its swap counterparty, the CFTC has the tools to seek restitution for the end user from the counterparty. Ending legal certainty causes more problems than it solves, in our opinion.

I know the sponsors of this amendment have good intentions, but I think that the amendment goes a little too far to address problems that it seeks to correct, and I would urge my colleagues to oppose the amendment.

Madam Chair, I rise to claim the time in opposition to the amendment.

Madam Chair, I yield 1\1/2\ minutes to the gentleman from Maryland (Mr. Bartlett).

Madam Chairman, I yield 3 minutes to the gentlelady from West Virginia (Mrs. Capito).

Madam Chair, I recognize the gentleman from Texas (Mr. Neugebauer) for 3 minutes.

Madam Chair, I yield myself such time as I may consume.

I rise in strong opposition to the manager's amendment. I think the manager's amendment illustrates the contradictions between the statements we've heard from the other side and the actual substance of the legislation. I just want to point out three or four conflicts between what it says and what they say it says.

The changes in the majority's $150 billion permanent bailout fund actually contradict the will of the majority of the Financial Services Committee by undermining the orderly and expedient resolution of failed firms. The body will recall, members of the Financial Services Committee, that we adopted an amendment in the committee that eliminated the conservatorship authority and limited the receivership to 1 year. Chairman Frank has basically said this is going to be a death panel; we're going to put these companies to death. And in committee, they were going to be given 1 year, but the manager's amendment comes back and extends the term limit for doing this to 3 years, 3 years in which these failed companies or counterparties or creditors won't be put to death, as the chairman said, but they will be subsidized out of this, I guess, $150 billion fund, or what could actually turn into another $50 billion if the Treasury asks the Congress to fund it with taxpayer money and adds an additional $50 billion.

This is another example of why we need the Republican substitute. Instead of picking which politically important firms we are going to let survive and which less connected firms we are going to let disappear and fail, in the Republican substitute, we utilize a fair, transparent, rules-based bankruptcy process to resolve and to liquidate these failed financial firms, not to keep them going at the expense of what could be billions of dollars. We think that the Republican alternative is the only real option for eliminating taxpayer bailouts.

The chairman of the Financial Services Committee is also fond of saying that this legislation puts an end to the too-big-to-fail policy, which led to the bailout of our GSEs, of AIG and of other financial firms. Despite this claim, the reality is quite different.

If you will look at page 45 of the manager's amendment, it specifically excludes Fannie Mae and Freddie Mac from the dissolution provisions of the underlying bill. In other words, if they fail, they are excluded. We don't wind them down. Why?

Well, these two companies were at the center of the subprime lending problems that caused the financial market meltdown. Taxpayers have already pumped more than $100 billion into these failed GSEs, and they are likely to lose $300 billion more. It is unconscionable that we are going to exempt these two firms--our GSEs--from this dissolution authority.

Finally, the last aspect I will mention--and this probably is as disturbing as anything--we are raiding this TARP program, rather than ending it, for another $4 billion. The manager's amendment diverts $4 billion from TARP to a number of other programs that the law was never intended to support. TARP was intended to be a temporary plan to restore the health of the credit markets and to protect the economy from systemic risk caused by the collapse of firms that the government, really, allowed to become too big to fail.

We heard promises all last fall that the money would go back to the taxpayers. Instead, now we are talking about surpluses. We are talking about money that hasn't been used. It is almost like this is a ``walking around'' fund, and we're just going to take money out of it and use it on this pet project or on that pet project or on this good idea or on that good idea. Here is the first of those things, and it is $4 billion. Again, we are not giving it back to the taxpayers, and those promises made last September are now being broken.

The President himself has said that he is extending TARP until October 10 of this year. What he is doing is turning it into a permanent bailout agency, into a kind of petty cash drawer for politically favored interests. Here we see

the first one of those things--$4 billion. Part of it is $4 billion to help move this legislation across the finish line.

Let me close by saying we need to end TARP. That's the solution. We need to end it now. We need to require all repayments to go directly towards paying down the debt. That's the bottom line. End TARP right now. Require that all payments be used to pay down the debt. There is no surplus. There are only deficits and debts.

Madam Chair, I urge my colleagues to oppose this irresponsible breach of trust and this attack on our promises that we made last year.

I reserve the balance of my time.

Madam Chair, I continue to reserve the balance of my time.

I yield myself the balance of the time.

Let me say with AIG, the counterparties and creditors of the largest financial institutions were paid off dollar for dollar. I think we have all read that in the paper.

What this legislation does, it allows, in, quote, resolving this, it allows once again the creditors and the counterparties to be paid off. That is a bailout.

In AIG, it was a bailout of creditors and counterparties. That's what is provided for here.

I yield the balance of my time to the gentleman from Texas (Mr. Hensarling).

Parliamentary Inquiry

Madam Chairman, I demand a recorded vote.

Madam Chair, although I'm not opposed to the amendment as such, I am opposed to what the underlying bill does.

Chairman Peterson and I think most on our side have a disagreement with that underlying regulation. Unfortunately, the amendment is a step in the right direction, but we feel like even with the amendment substituting the original language that we still have our objections, and it's those objections I wish to speak on. Although we don't, or at least I don't personally, plan to oppose the amendment itself, as the gentleman from Oklahoma said, we do believe that it is some improvement.

But the regulation of the derivatives market created in the underlying legislation we think creates unnecessarily burdensome requirements on thousands of American companies that have used derivatives to manage price fluctuations and hedge against business risk, and they've done that successfully and safely.

The underlying legislation, even with this amendment in it, is going to empower our government regulators to institute what appears to be a fairly complex and sweeping new regulatory regime to govern, as I said, a sector of the marketplace that has functioned well and I think helped most American companies and has not contributed to the financial crisis but actually helped moderate it. And I think the derivatives market has allowed companies in many cases to insulate themselves from uncertain market conditions.

Several in the majority have alluded to the failure of Lehman Brothers as a reason for the needed reform of the over-the-counter derivatives market. And we do propose some reform, and I'm going to discuss those in a minute. The gentleman from New Jersey also discussed them. So there are some points on which we do agree with Chairman Peterson and even Chairman Frank.

But Lehman, I don't believe, can be used as an excuse to inject the government into a derivatives market that is used primarily by thousands of small and medium size and even large companies to hedge against business risk, and as I've said, have done that safely.

The reality is that Lehman's portfolio, including its derivatives positions, without any government assistance was unwound with relative ease. It was unwound. The real problem with Lehman's derivative business was the lack of segregation of collateral, a problem that is addressed by our Republican substitute.

The comprehensive Republican substitute we plan to offer provides a commonsense approach to oversight of the over-the-counter derivatives marketplace without what we consider an excessive overreach by the Federal Government and its regulators into the capital market, a theme that, unfortunately, we think is being repeated many times in this legislation.

The substitute promotes strong transparency of over-the-counter derivatives activities conducted by all market participants. It also addresses the two derivative problems identified by the majority and the administration, and that was AIG and Lehman. The isolated behavior of these two large corporations and a few others like them was, as I said, an isolated behavior, and that type of behavior would be detected under the Republican substitute, the trading activity and positions they took.

The Republican substitute also holds dealers accountable to improve operational inefficiencies with the over-the-counter derivatives marketplace, provides vital transactional information to regulators on a real-time basis, and ensures the Treasury Department cannot become a de facto regulator. Additionally, our substitute does not punish those Main Street end users of derivatives.

Finally, in conclusion, our substitute addresses another need in the derivative marketplace, which is to provide timely and accurate information to market participants and regulators in order to ensure market transparency.

Madam Chair, we have to curb abuses of the past and promote responsible approaches to oversee the use of over-the-counter derivatives. We all agree on that. However, we believe the underlying bill, even with this amendment, is fundamentally the wrong approach and is a very expensive way to address the problem.

So I urge my colleagues, even though we don't oppose this amendment, to oppose the underlying legislation. And this is just one more reason, and that is that we increase the cost of any end user of derivatives. As we said last night, John Deere said it would cost them about $1 billion. Cargill said that they probably wouldn't complete a new facility in Kansas City if we impose these costs.

Madam Chairman, the end users of derivatives are the ones that utilize these derivatives. And these weren't large, national companies. They were small businesses. They set the collateral requirements. They set the margin requirements, and they did so safely. They didn't cause the financial meltdown. They were the victims of that meltdown. And they established those collateral requirements and the margins. They did so in an appropriate way. In fact, you know, what the chairman said, the SEC and the CFTC ought to do this. You know, actually, they didn't act in a very responsible manner leading up to this meltdown last September.

Let me simply say this: Requiring greater margin and capital requirements on companies that never got in trouble leads to fewer jobs. It's going to lead to greater volatility in food and energy prices, and a loss of capital investments.

I'm just going to give you two pieces of testimony before our committee.

Steve Holmes of Deere and Company said, ``We have a number of contracts that extend well into the future. If these existing contracts are not permitted an exemption from clearing and collateral requirements, we would have to terminate the transactions at a significant cost.'' That would cost John Deere workers their jobs.

John Hixson of Cargill, Inc., said, ``For us, we've estimated it (collateral

requirements) would cost approximately $1 billion depending on market conditions--an additional amount of money we'd have to borrow. We've built a brand new oil seed facility. Our largest in the U.S. is in Kansas City. So we have to choose: whether you put the money in margin, or do you continue and build that plant? That's the type of thing we'd have to decide,'' marginal requirements or jobs.