Public Power Risk Management Act of 2013

Mr. Chair, I have an amendment at the desk.

Mr. Chair, I thank the chairman very much. I thank the chairman and the ranking member of the committee and knowing how hard they have worked. I hope that this discussion today will emphasize a commitment to transparency and a commitment to consumers and a commitment to making the legislation responsive to consumers. So I thank you for the opportunity.

This legislation is to reauthorize and improve the operations of the Commodity Futures Trading Commission as well as address concerns from customers from another failure such as the MF Global and Peregrine Financial. It is a product of a multiyear process that included hearings and perspectives from market participants, end users, futures customers, and the CFTC.

The Jackson Lee amendment only seeks to improve this bill. If passed, it would require a study that will provide very basic information about firms regulated by the Commodity Futures Trading Commission. The amendment simply requires the CFTC to do a report examining the number of entities regulated by them, the entity's size, practice models, and assets under management.

We must be quick to acknowledge that the dramatic failures of not just MF Global but several other venerated firms, such Bear Stearns, speak loudly to requiring more information for the consumer.

This amendment would also provide more insight as to how the industry works. My amendment gives 2 years for the agency to complete the first study. That is a very long time. Again, the report provides more information for the very consumers that we are trying to protect. That is more than enough time for the staff of the CFTC to comply with the amendment.

In that span of 2 years, a lot of things can change, but the gist of the amendment is to provide more transparency for the investors, as many on this floor have already spoken of. It is critical that investors know what is going on, particularly small investors who are not privy to the information that many of the larger entities are made aware.

My amendment, again, basic information via an agency study, much of which the Commission already has, and I am merely seeking to have it.

Let me just share just one aspect of this and then conclude. More importantly, in my conclusion, many of the residents of the 18th Congressional District have invested in homes, stocks, and education, to see it all flittered away because someone on Wall Street--France or Houston, even--pushed the wrong button generating a contra-trade when they meant to bid in the other direction. This is not what Americans want to see. This is a regulated entity. Transparency is viable.

Let me show you a letter that was sent from the trustee of MF Global to some poor person who, after 5 years, got their few dollars after this major bankruptcy.

Enclosed with this mailing is a check from the trustee in

payment of your allowed customer claim.

They got it 5 years later.

With this check the full net equity value, as established

in the Bankruptcy Court, of your segregated property, the

amount related to your trading on domestic exchanges or

``4(d) Property,'' will have been distributed to you. Your

former account number at MF Global appears on the check.

Please cash this check as soon as possible.

That is another frightening thing. You better hurry up and get the $25 or $40 that came.

To ensure proper and prompt processing.

I will include the letter for the Record here.

Epiq Bankruptcy Solutions, LLC

FDR Station, New York, NY, April 28, 2014.

Re In re MF Global Inc., Case No. (MG) SIPA.

Dear Claimant: Enclosed with this mailing is a check from

James W. Giddens, Trustee for the SIPA liquidation of MF

Global Inc., in payment of your allowed customer claim in the

SIPA proceeding. With this check the full net equity value,

as established in the Bankruptcy Court, of your segregated

property (i.e., the amount related to your trading on

domestic exchanges or ``4d Property''), will have been

distributed to you. Your former account number at MF Global

Inc. appears on the check.

Please cash this check as promptly as possible. To ensure

proper and prompt processing, please be sure to properly

endorse the check by signing your name and/or account number

in the appropriate location on the reverse side of the check.

If you have any questions, please feel free to contact one of

my representatives at 1-888-236-0808 (inside the United

States) or 1-503-597-5173 (outside the United States).

Very truly yours,

James W. Giddens,

Trustee for the SIPA

Liquidation of MF Global Inc.

Mr. Chairman, and to my colleagues I believe that this is an important asset or aspect of helping to have more information for our consumers.

I reserve the balance of my time.

Mr. Chair, I thank you for this opportunity to briefly explain my amendment. It is simple and makes a significant improvement to the bill.

This bipartisan legislation to reauthorize and improve the operations of the Commodity Futures Trading Commission (CFTC), as well as address concerns relating to protecting customers from another failure such as MF Global and Peregrine Financial.

It is the product of a multi-year process that included hearing perspectives from market participants, end-users, futures customers, and the CFTC.

The Jackson Lee amendment only seeks to improve this bill. If passed it would require a study that will provide very basic information about firms regulated by the Commodity Futures Trading Commission.

The amendment simply requires the CFTC to do a report examining the number of entities regulated by them, the entity's size, practice models, and assets under management.

We must be quick to acknowledge the dramatic failures of not just MF Global and Peregrine but several other venerated firms such as Bear Stearns.

This amendment would also provide more insight as to how industry works.

The language of the Jackson Lee amendment gives two years for the agency to complete the first one.

That is more than enough time for the staff at the CFTC to comply with this amendment.

In that span of two years a lot of things could change but the gist of the amendment is to provide more transparency for investors.

It also asks that those firms rendered defunct like MF Global be included in the report.

It is critical that investors know what is going on--particularly smaller investors who are not privy to the information that many of the larger entities are made aware.

The MF Global bankruptcy hurt investors and potential investors. It is critical that firms increase their transparency and disclose information which consumers may use to make informed investment decisions.

The Jackson Lee amendment asks very basic information of these firms via an agency study--much of which the Commission may already keep account of--and I am merely seeking to have it in a report.

Again, the amendment simply requires the CFTC to do a report examining the number of entities regulated by them, the entity's size, practice models, and assets under management. It also asks that those firms rendered defunct like MF Global be included in the report.

And more importantly, many of the residents of the 18th District of Texas have invested in homes, stocks, and education--and to see it all flittered away because someone on Wall Street, France, or Houston even, pushed the wrong button, generating a contra-trade when they meant to bet in the other direction--is not what Americans want to see.

I urge my colleagues to vote for transparency, fairness and openness by supporting the Jackson Lee Amendment.

Mr. Chairman, I thank the gentleman, and I certainly thank the chairman for his comments.

Right now the Veterans' Affairs Committee is meeting to find out more information on the dastardly knowledge of so many veterans who may have died on a secret list. I would imagine that they would have wanted, some years back, to have investigated, studied, and gotten more information about how veterans are treated in the veterans hospital.

I respectfully disagree with my friend and colleague. I do not think that this is a waste of the energy of this agency and I don't think we have enough information. Anytime I can stand on this floor and err on the side of the customer, the consumer, and stand up here and show a letter that is the ultimate result of a bankruptcy because the consumers didn't have all the information that they needed--and all we

are asking is over a 2-year period give us the number of entities, the size, practice models, and the assets under the management--I don't believe that that is too much.

Investigating precise issues is not giving the consumer a portfolio of knowledge. I disagree with my good friend, and I ask my colleagues to support the Jackson Lee amendment.

Mr. Chair, I demand a recorded vote.

Mr. Chairman, I have an amendment at the desk.

Mr. Chairman, again, I thank the chairman and ranking member of the Financial Services Committee.

My amendment is simple. It would preserve existing law where a legal challenge to a CFTC regulation is reviewed first by the district court. And then, following an opinion by a district court judge, an appeal, if any, is taken to the court of appeals.

Let me, first of all, refer my colleagues to the joint report by the Agriculture Committee where specifically it says that the general review provisions of the APA would apply, requiring parties seeking to challenge CFTC rules to file a claim before a U.S. district court.

And it goes on to give those particular details. Then it goes on to indicate that to follow the review provisions of the APA--this going into a district court--the CFTC's general counsel indicated that he would not object to a change.

I would make the argument that it is not the general counsel but it is the individual consumer who should have the opportunity in a district court--either in their district or in the District of Columbia--to be able to make a record and to ensure that all of the facts of the issue dealing with the rule are fully vetted. And that will happen if you have the opportunity to go first to the district court.

Preserving existing law where a legal challenge to a CFTC regulation is reviewed first by the district court and then followed by an opinion by a district court judge gives the opportunity for a full briefing--a robust record that can be developed along the legal issue and fact issues, and also it reduces the ability of the industry to undermine important Dodd-Frank derivatives.

In my earlier statement on the floor, I indicated that many of the little guys are in the commodities. Dealing with that, they need the opportunities to have, in essence, the double-check on rules that may impact their business.

With respect to Dodd-Frank and this authorizing legislation, let us not throw the baby out with the bath water.

We all remember the dark days of September and October of 2008. The financial markets needed to be bailed out. I do not want to see that repeated.

So, again, the amendment is simple. It goes back to existing law. I cannot imagine that the general counsel would oppose existing law. The statement says he didn't mind. But, again, didn't mind closing down further opportunities for consumers to have a record made on something that they may be opposing?

So I would ask my colleagues to support the Jackson Lee amendment, and I reserve the balance of my time.

Mr. Chair, I wish to thank the Chair and Ranking Member for their work on this bill. We all know that the Agriculture Committee is one of the hardest working--and also has one of the most diverse missions in Congress. I thank you for this opportunity to briefly explain my amendment. It is simple and makes a significant improvement to the bill.

My amendment modifies Section 212 on judicial review that on page 19, lines 15 through 17 strikes ``United States Court of Appeals for the District of Columbia Circuit or the United States Court of Appeals for the circuit,'' and replaces with ``United States District Court for the District of Columbia or the United States Court for the district.

Doing so would preserve existing law, where a legal challenge to a CFTC regulation is reviewed first by the district court, and then following an opinion by a district court judge, an appeal, if any, is taken in the court of appeals.

This process provides for a more robust development of legal issues and a broader record in any appeal, reducing the ease of industry to undermine important Dodd-Frank derivatives rulemakings.

With respect to Dodd-Frank and this authorizing legislation, Mr. Chairman, let us not throw out the baby with the bath water. We all remember the dark days of September and October 2008 when the financial markets needed to be bailed out. I do not want to repeat that.

And more importantly, many of the residents of the 18th District of Texas have invested in homes, stocks, and education--and to see it all flittered away because someone on Wall Street, France, or Houston even, pushed the wrong button, generating a contra-trade when they meant to bet in the other direction--is not what Americans want to see.

I urge my colleagues to vote for fairness and judicial economy, and preserve existing law by supporting the Jackson Lee Amendment.

Mr. Chairman, how much time do I have remaining?

I appreciate the chairman's commentary about the SEC. I am well aware that the SEC has driven itself to utilizing the Court of Appeals.

I would make the argument that there is a smaller investor that tends to engage in commodities, and, therefore, transparency and the opportunity to create a record is far more important in commodities.

I would also make the point that my amendment is supported by the Commodity Markets Oversight Coalition, which is asking for us to continue with existing law.

They, of course, include Airlines for America, American Baker's Association, California Black Farmers, California Independent Oil Marketers Association, Colorado Petroleum Marketers Association, Florida Petroleum Market Marketers Association, Maine Energy Marketers Association, the National Association of Oil and Energy Service Professionals, National Family Farm Coalition, among others, which I will include in the Record.

National Grange, New Jersey Citizen Action Oil Group, New Mexico Petroleum Marketers Association, North Dakota Petroleum Marketers Association, Oil Heat Council of New Hampshire, Petroleum Marketers and Convenience Stores of Iowa, Public Citizen, Ranchers-Cattlemen Action Legal Fund, Wyoming Petroleum Marketers Association, to name just a few, who clearly just ask for a simple request: when there is a need to challenge the rules, allow a full record to be made at the district court level. Commodities is not in the same vain as the SEC.

I would argue that there is need for greater highlight in information, and that the Jackson Lee amendment should be accepted for that kind of transparency and treating small investors fairly and giving them the opportunity to fully pursue their position when it comes to a particular rule.

I would ask my colleagues to support the amendment, and I yield back the balance of my time.

commodity marketer overnight coalition

Supporting organizations: Airlines for America; American

Baker's Association; American Feed Industry Association;

American Public Power Association; American Trucking

Associations; California Black Farmers & Agriculturalists

Association; California Independent Oil Marketers

Association; California Service Station and Automotive Repair

Association; Colorado Petroleum Marketers Association;

Connecticut Energy Marketers Association; Consumer Federation

of America; Florida Petroleum Marketers Association; Fuel

Merchants Association of New Jersey; Gasoline & Automotive

Service Dealers of America; Institute for Agriculture and

Trade Policy; Louisiana Oil Marketers & Convenience Store

Association; Maine Energy Marketers Association; Montana

Petroleum Marketers & Convenience Store Association; NAFA

Fleet Management Association; National Association of Oil &

Energy Service Professionals.

National Association of Shell Marketers; National Family

Farm Coalition; National Farmers Union; National Grange;

National Latino Farmers & Ranchers Trade Association; New

England Fuel Institute; New Jersey Citizen Action Oil Group;

New Mexico Petroleum Marketers Association; New York Oil

Heating Association; North Dakota Petroleum Marketers

Association; North Dakota Retail Association; Ohio Petroleum

Marketers & Convenience Store Association; Oil Heat Council

of New Hampshire.

Oil Heat Institute of Long Island; Oil Heat Institute of

Rhode Island; Organization for Competitive Markets; Petroleum

Marketers & Convenience Store Association Kansas; Petroleum

Marketers & Convenience Stores of Iowa; Petroleum Marketers

Association of America; Public Citizen; Ranchers-Cattlemen

Action Legal Fund (R-CALF) USA; Utah Petroleum Marketers and

Retailers Association; Vermont Fuel Dealers Association; West

Virginia Oil Marketers and Grocers Association; Wyoming

Petroleum Marketers Association.

Mr. Chairman, I demand a recorded vote.

Mr. Chairman, I will include for the Record a document from the Institute for Agriculture and Trade Policy, and I rise in strong opposition to this bill. To cater to special interests, it deliberately weakens the essential regulatory and oversight functions of the Commodity Futures Trading Commission, and it fails to address the CFTC's biggest challenge--its flawed funding mechanism.

Simply put, this bill is a recipe for another disaster on Wall Street, like the one that caused the Great Recession. Americans want to see more accountability from big banks and oil speculators and fewer reckless transactions, market failures, and bailouts. That is what the CFTC's job is, to rein in gambling with risky derivatives on Wall Street and prevent undue speculation on oil.

Unfortunately, this bill goes in the wrong direction. It includes provisions that will make it harder for the CFTC to regulate derivatives transactions between the United States and foreign banks. It goes out of its way to impose new hurdles and litigation risks to prevent the Commission from doing its job. It fails to address the CFTC's flawed funding mechanism, hamstringing its ability to create fair and transparent derivatives and futures markets.

The CFTC is the only financial regulator that is completely dependent upon the general fund to provide for its operations. Every other financial regulator--SEC, FDIC, FHFA, the list goes on--collects user fees.

Fixing this structural flaw has been proposed by every President since Ronald Reagan. It is all the more important since Congress greatly expanded the CFTC's responsibilities 4 years ago in response to the bad behavior that precipitated a devastating financial crisis.

According to Acting Chairman Wetjen:

The unfortunate reality is that, at current funding levels,

the Commission is unable to adequately fulfill the mission

given to it by Congress.

I submitted an amendment that would have addressed this flaw, yet the House majority refused to allow it to be heard.

We should not undermine the CFTC's ability to oversee risky market behaviors, protect consumers, and enforce the law. I urge a ``no'' vote.

Institute for Agriculture

and Trade Policy,

June 16, 2014.

Representative,

House of Representatives, Washington, DC.

Dear Representative, I write on behalf of the Institute for

Agriculture and Trade Policy (IATP) a non-profit, non-

governmental organization based in Minneapolis, MN to urge

you to vote against H.R. 4413, ``Customer Protection and End

User Relief Act.'' A vote for H.R. 4413 annuls or amends

major portions of Title VII of the Dodd Frank Act Wall Street

Reform and Consumer Protection Act (DFA) and per Title 1V's

retro-active application to July 2010, makes regulations and

guidance issued under the DFA authorities vulnerable to legal

challenge by the regulated entities.

Furthermore, if enacted, H.R. 4413 would impede DFA Title

VI implementation by, among other measures:

1) preventing the cross-border application of DFA

authorized rules unless the Commodity Futures Trading

Commission and the Securities Exchange Commission jointly

determine that foreign jurisdiction rules are not ``broadly

equivalent'' to DFA rules (Section 359);

2) micro-managing the CFTC Division Directors, Chief

Economist and staff (Sections 204, 205 and 206);

3) micro-managing and possibly impeding CFTC enforcement

activities (Section 209);

4) imposing cost-benefit analysis of each CFTC rule prior

to implementation, and as

required of no other independent agency, under terms that

would paralyze CFTC rulemaking that did not conform to

industry demands (Section 203); and

5) by requiring that CFTC voluntary guidance to industry be

subject to the same Administrative Procedures Act (APA)

requirements as for legally binding rulemakings (Section

212).

IATP began to work on commodity derivatives issues in June

2008, when grain elevators stopped forward contracting with

farmers and rural banks stopped loaning to elevators, due to

extreme price volatility and price levels in commodity

derivatives markets, which resulted from excessive

speculation by financial institution. IATP has participated

in the Commodity Markets Oversight Coalition (CMOC) since

2009, and the Derivatives Task Force of Americans for

Financial Reform (AFR) since 2010. 1ATP has contributed to

and signed on to numerous CMOC and AFR letters in support of

Title VII of the DFA. IATP has submitted several comments on

CFTC rulemaking, and on consultation papers of the

International Organization of Securities Commissions, the

Financial Stability Board, the European Securities and

Markets Authority, and the European Commission's Directorate

General for Internal Markets.

H.R. 4413 offers terrible trade-offs that no member of

Congress should be forced to vote for. As H.R. 4413 is

constructed, you can only vote for the widely agreed customer

protections in Title 1, if, e.g. you also vote to require the

CFTC Commissioners to vote on the length of a subpoena, the

renewal of the subpoena and whether the Division of

Enforcement has a ``legitimate purpose'' for each

investigation it undertakes (Section 209). Title 1 could and

should be proposed as a separate bill, for which you should

be able to get sponsors from Republicans, as well as

Democrats.

IATP also requests that you propose and vote for deletion

or amendment of certain sections of the bill, because its

passage is very likely. It is crucial that there be recorded

votes on all amendments to or deletions of H.R. 4413. Here

are IATP's top five priorities for deletions, since

amendments may not be possible, given the short amount of

time before the amendment deadline of Tuesday at 3 p.m. ET.

1. Section 359: This section (paragraph a) first requires

the CFTC to issue rules jointly with the Securities Exchange

Commission on the cross-border application of DFA rules. The

CFTC has authority over about 96.5% of the gross notional

value of the U.S. derivatives market, whereas the SEC has

authority over 3.5% of this market. The SEC has authority

over just one asset class of derivatives, equity-based

derivatives. The House would give equal rulemaking authority

with the CFTC to an agency that has historic competence and

legal authority for only a small sliver of the derivatives

market. This section further seeks to impede the CFTC's

ability to apply DFA authorized rules to foreign affiliate

swaps of U.S. swaps dealers that have a ``direct and

significant'' impact on the U.S. economy (Sect. 722, DFA). It

does so first by requiring that the CFTC's international

memoranda of understanding (MoUs) with foreign market

regulators comply with APA requirements for binding

rulemaking (paragraph c). MoUs are not binding rules, but

diplomatic agreements whose implementation and enforcement

does not depend entirely on U.S. law or regulations. Here,

again, H.R. 4413 seeks to micro-manage the CFTC's work, this

time in negotiations with foreign governments.

Most perniciously, Section 359 grants a blanket exemption

from compliance with DFA authorized derivatives rules for

``Countries or Administrative Regions Having Nine Largest

Markets,'' [sic] unless the CFTC and SEC ``jointly determine

that the regulatory requirements'' of these countries and

regions are not ``broadly equivalent'' to U.S. regulatory

requirements (paragraph d). Given the aforementioned huge

disparity in the ``market share'' of the CFTC's and SEC's

authority over the swaps market, this co-determination

requirement is grotesque. Furthermore, taking into account

the markets in the 28 member states of the European Union,

plus the next eight largest market jurisdictions, Section 359

exempts more than 90 percent of the foreign swaps market from

compliance with the cross-border application of the DFA. The

seven largest U.S. bank holding companies have 4939 foreign

subsidiaries and thousands of more affiliates. Trading losses

by these subsidiaries and affiliates resulted in default

cascades by their U.S. parent companies, saved from

bankruptcy only by at least $19 trillion in emergency loans

from the Federal Reserve Bank, plus $10 trillion to foreign

central banks to bail out their banks with U.S.

affiliates from 2007-2010. The regulatory regimes of the

foreign jurisdictions to which the Fed loaned at ultra-low

interest rates had been judged to be ``broadly

equivalent'' during the Bush Administration.

2. Section 203: Cost Benefit Analysis. The CFTC, unlike

other independent regulatory agencies, is required to do a

cost-benefit analysis prior to each regulation it issues.

This section does not operate consistently with Executive

Order 13563, as House supporters claim, since 13563 applies

only to non-independent agencies.Paragraph H requires the

CFTC to tabulate the costs of compliance by ``all regulated

entities,'' in effect requiring the CFTC to accept as fact

the compliance costs claimed by the regulated entities. These

claimed compliance costs often have been shown to be wildly

overstated. Paragraph J requires that the CFTC demonstrate

prior to implementation that each of the agency's regulatory

approaches ``maximize net benefits.'' These two paragraphs

alone should ensure that DFA authorized rules are not

implemented unless they satisfy the cost-benefit demands of

the regulated entities. Ex-ante cost-benefit analyses

traditionally are done on the basis of econometric modeling,

and not by the peculiar dependence on regulated entity claims

featured in this section.

3. Section 209: Subpoena duration and renewal. This section

authorizes the Commissioners to determine the length of a

subpoena that the Division of Enforcement shall use to compel

testimony and production of documents relative to an

investigation. It will require the Commission to vote on

whether the Division of Enforcement has a ``legitimate

purpose'' for requesting the subpoena, what the duration of

the subpoena will be and whether to renew the subpoena. Well-

funded subjects of an investigation will be advised by their

lawyers to delay complying with any subpoena in the event

that a majority of Commissioners decides to override the

Division of Enforcement and not renew a subpoena. It is one

thing to disagree with an investigation. It is quite another

for the House to vote for a section that would impede

enforcement of the law.

4. Section 204: Division Directors. This section requires

that each Division Director report to and be reviewed

(``serve at the pleasure of'') by each Commissioner. In the

event that the Commissioners disagree about any activity of a

Division, the Division Director could be taking contradictory

instructions from the Commissioners. Disagreements among

Commissioners must be resolved among the Commissioners and

not transmitted to Division Directors in the form of

contradictory orders. This section offers a high degree of

opportunity for one Commissioner to paralyze the work of the

Commission. At best, the section ensures delay of DFA

implementation through Commission micro-management of

Division Directors and the staff (see also our Comments on

Section 205 and 206).

5. Section 353: While the title of this section indicates

that it would give ``relief'' from record-keeping to farmers

and grain elevator participants in the derivatives market,

the application in the exemption from record-keeping could

and almost certainly will be applied to much larger

participants in the derivatives markets. By requiring only a

written record of the final agreement of swaps for

participants in unregistered designated contract markets or

swaps execution facilities, this section precludes the CFTC

from seeking interim documentation of swaps transactions,

including cell phone records if needed. This section makes

constructing audit trails in investigations more difficult

and otherwise limits enforcement activities.

Other sections that IATP believes you should consider for

deletion from HR 4413 include:

Section 205: The Office of the Chief Economist. This

section requires that the Chief Economist report to and be

reviewed by each Commissioner. Our concerns are the same as

those of Section 204.

Section 206: This proposal to require a seven day advance

notice to review each and every staff letter and to allow the

Commission to delay, review and revise staff letters, puts

the Commission in charge of micro-managing the staff. Many of

the staff no action letters that are the subject of the

complaint in the House agricultural committee report on HR

4413 are the result of the need to reply to industry

questions and complaints, and to postpone compliance by

foreign affiliates of U.S. swaps dealers, as foreign

jurisdiction rulemaking is delayed by industry opposition. A

staff whose budget, personnel and computer infrastructure has

been severely constrained by the House has operated as

efficiently and effectively as their meager resources allow.

This section is not an attempt to improve CFTC transparency

and openness but another tactic to micro-manage the staff.

Section 211: Requires that CFTC voluntary guidance to

industry be subject to the same Administrative Procedures Act

(APA) requirements as legally binding rulemakings. This

section represents the plaintiff's position in a court case

involving the CFTC's guidance on the cross border application

of DFA rules and would pre-empt the result of that case. If

the House wishes to require that APA procedures for issuing

guidance are the same as for rulemaking, it should amend the

APA, rather than single out one agency for this peculiar pre-

emption of a court ruling and unique application of the APA

to one agency.

Section 212: This section allows plaintiffs to file a

lawsuit in the District of Columbia or ``in the circuit where

the party resides or has the principal place of business''

(paragraph a). If the CFTC were a self-financed regulatory

agency or had a budget corresponding to its greatly expanded

duties under the DFA, the extra costs of litigating outside

the District of Columbia might not be a financial burden for

agency. Given the House's budgetary expression of hostility

to the CFTC, this section represents another tactic to

increase the burden on the agency to defend the DFA in court.

Section 362: One of the advantages of trading Over the

Counter is the delay in reporting, relative to the near real

time reporting required of exchanges for futures and options

contracts. OTC traders take advantage of price, volatility

and other information provided by the public and regulated

markets while providing no information of their own, a huge

competitive advantage. This section would allow traders of

uncleared and ``illiquid swaps'' to delay reporting up to 30

days after a trade's execution, an eternity in financial

markets, to protect the identity of individual traders.

Because swaps can be structured to be illiquid, this section

does not consider that the exemption from reporting in near

real time could be part of a regulatory evasion strategy. If

the industry wishes to petition the CFTC for a reporting

exemption on illiquid swaps, let it do so. Legislators should

not be involved in designing reporting exemptions.

Section 355: The asset class indiscriminate de minimis of

$8 billion of swaps dealing before a swaps dealer is required

to register with the CFTC and be subject to CFTC rules may be

lowered only with a vote of the Commission. It is dangerous

to remove the CFTC's regulatory discretion in determining the

justification for a de minimis. Whereas $8 billion of

interest swaps is a low de minimis relative to the more than

$150 trillion annual gross notional value of interest rate

swaps, an $8 billion de minimis is a very, very high de

minimis for commodity swaps. Again, here is another section

where the House is acting to micro-manage the CFTC's

rulemaking discretion and authority.

In sum, notwithstanding Title I on customer protections and

some sections of Title II and III, HR 4413 is a bill that

reauthorizes the CFTC, only to impede it from carrying out

its statutory duties. IATP urges you to vote against this

bill and to vote to delete the aforementioned sections. I

would be pleased to work with your staff on any amendments or

deletions that you may wish to offer. Thank you for your

consideration of our views on HR 4413.

Respectfully,

Steve Suppan, Ph.D.,

Senior Policy Analyst.

I thank the gentleman from Minnesota for yielding.

Mr. Chairman, I rise in opposition to our H.R. 4413 legislation that would reauthorize the Commodity Futures Trading Commission. This measure addresses an important goal for this Congress: reauthorization of the CFTC, our regulator whose mission it is to ensure fair rules of the road for the majority of derivatives traded by U.S. firms.

I know that Representative Peterson and Representative Scott, the ranking members of the committee and subcommittee respectively, have worked in good faith to improve this legislation and that they care deeply about making the CFTC work for farmers, manufacturers, and other businesses that use futures and derivatives. I thank them for their efforts.

However, I am concerned about provisions in the bill unrelated to the reauthorization of the Commission that I believe would undermine the CFTC's authority and hamstring its ability to

regulate a complex and important marketplace. Mr. Chairman, this legislation imposes heavy administrative burdens that will prevent, delay, or weaken CFTC's efforts to implement important reforms called for by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

H.R. 4413 would also make it much more difficult for the CFTC and the SEC to regulate derivatives transactions involving foreign operations of U.S. banks. It does so by establishing hard-to-overturn exemptions that allow their operations to substitute Dodd-Frank rules in favor of more lenient foreign rules in foreign markets, despite the fact that the risks may come back to the United States.

These types of derivatives transactions contributed to the massive taxpayer bailout of AIG in 2008, created enormous losses to JPMorgan in the London Whale episode in 2012, and brought down the hedge fund Long- Term Capital Management in the 1990s. This bill makes the job of the CFTC and the SEC to police derivatives operations of large U.S. banks and their foreign affiliates much more difficult.

In addition, under the guise of cost-benefit analysis, the bill imposes heavy administrative hurdles and new litigation risk on the CFTC, significantly impairing the Commission's ability to do its job of regulating our derivatives markets.

Like other agencies, the CFTC already considers the costs and benefits pursuant to numerous existing laws, and unlike any other regulator, the CFTC goes even further, considering the protection of market participants and the public, the effect on futures markets, price discovery, sound risk management practices, and other public interest matters.

Even the courts have weighed in, finding that the CFTC has fulfilled its duty to consider the cost and benefits.

H.R. 4413 not only burdens an agency already facing limited funding with additional administrative burdens, but it also opens up new avenues for special interests to endlessly challenge the CFTC in court.

Former CFTC Chairman Gensler noted that, if this provision in H.R. 4413 is enacted, ``It may well be hard to get any rule out of the building.''

Together, these changes undermine the CFTC's ability to guard against some of the most complex and risky activities in our financial system, and it is all just part of a multifaceted Republican effort to undercut laws and regulations that protect consumers, investors, and the economy.

It also comes just a week after House Republicans proposed an appropriations measure that dangerously underfunds the CFTC at 22 percent below the President's request, a level which will lead to either agencywide closures or employee layoffs.

Mr. Chairman, we cannot continue to undercut and underfund Wall Street's top derivatives cop with the authority to ensure compliance with the law. This bill is widely opposed by the Obama administration, the AFL/CIO, broad coalition groups like Americans for Financial Reform and the Consumer Federation of America, as well as derivatives end users like the Petroleum Marketers Association of America.

So I would urge my colleagues to oppose this legislation. I insert in the Record the opposition, including the White House opposition to this legislation.

Public Citizen,

June 16, 2014.

Dear Representative: Public Citizen opposes H.R. 4413,

``The Customer Protection and End User Relief Act.'' Several

provisions will severely undermine financial reform. These

include:

Adding unworkable cost-benefit analysis requirements that

will only empower industry interests to bring litigation that

will delay or negate important rules and do nothing to

improve Commodity Futures Trading Commission (CFTC)

regulations.

Prohibiting the CFTC from supervising US swap operations

overseas, which will invite riskier activity and raise the

potential for more bailouts;

Eliminating the ability of the CFTC to require certain

safety rules for swaps.

New Cost-Benefit Requirements Don't Pass The Cost-Benefit Test

Wall Street has exploited the courts to delay, dilute and

even overturn needed reform laws intended to return the

financial industry to safer practices. Instead of making the

CFTC more effective and efficient by bolstering their

authority and improving their standing vis a vis the courts,

H.R. 4413 actually makes the CFTC even more vulnerable to

Wall Street lawsuits. The net effect will be weaker rules

that will take the CFTC longer to finalize and will be more

prone to reversal in court. In sum, this legislation will

significantly damage, not improve, the CFTC's ability to

adopt strong financial reforms that protect consumers and the

public.

H.R. 4413 patently ignores the fact that the CFTC takes

their cost-benefit requirements very seriously. In September

2010, the CFTC's General Counsel and Acting Chief Economist

directed staff to produce cost-benefit analyses in proposed

rulemakings and conceptual cost-benefit analyses in adopting

releases. This is above and beyond existing CFTC

requirements. In a follow-up memo, rule-making teams were

directed to ``incorporate the principles of Executive Order

13563'' when writing rules. This order applied cost-benefit

analysis requirements for departments overseen by the

President. In May 2012, the CFTC, in an unprecedented move,

entered into a memorandum of understanding with the Office of

Information and Regulatory Affairs (OIRA) where OIRA provides

``technical assistance'' to CFTC staff during implementation

of the Dodd-Frank Act, ``particularly with respect'' to cost-

benefit analysis.

Thus, the litany of additional cost-benefit analyses

imposed by H.R. 4413 in no way improves the existing and

extensive cost-benefit analysis practices at the CFTC. Rather

the direct effect will be to convert the cost-benefit

analyses the CFTC already conducts as a matter of best

practice into numerous new legal grounds for Wall Street to

challenge CFTC rules in court. Thus, the beneficiaries of

these changes will be big Wall Street banks and their high-

priced lawyers while the public pays the price of a far

slower CFTC that must jump through even more hoops before

putting common-sense Wall Street reforms in place.

Evading US Supervision

Some of the most dangerous financial practices by US firms

leading to the financial crisis of 2008 were conducted

overseas. AIG sold a form of bond insurance called credit

default swaps from its London office, out of view of American

supervisors. When AIG could not pay massive claims from bond

defaults, taxpayers bailed out AIG's clients with $160

billion. More recently, JP Morgan's ``Whale'' transactions

used US deposits for speculative derivatives trading in

London, leading to a loss of more than $6 billion.

Section 359 nullifies the CFTC's rubric for overseeing

American firms with foreign-based swaps business. Instead, it

permits US firms to establish foreign-incorporated affiliates

that would escape US supervision altogether. Already, certain

US firms have begun to exploit a loophole in the CFTC's

current rules to escape US supervision. This involves

removing the guarantee of the US parent for the foreign-

originated swap.

Permitting foreign supervision is misguided because foreign

supervisors won't have the same motivation as US supervisors

to enforce prudential rules since a failure would fall on US

taxpayers. In fact, foreign governments would be incentivized

to relax oversight so as to attract more traders and the

associated income tax revenue they would generate. The

financial sector provides more than 11 percent of total tax

revenue for the United Kingdom. Not only does this

legislation increase the chance for another US taxpayer

bailout, it would sacrifice US tax revenue by incentivizing

American firms to relocate their derivatives business abroad.

Safety margins prohibited

Unregulated swaps were at the heart of the financial crash,

as derivatives dealers who failed to back up their swaps with

adequate collateral spread financial contagion. This

legislation removes some of the tools that the CFTC could use

to promote safety. For example, H.R. 4413 prohibits the CFTC

from requiring that end-users post margin collateral. The

CFTC has declared that it would not require such margin, but

it is important for the agency to retain this power if the

market becomes unsafe in the future.

This is just one example of the flaws of this bill. There

are many other sections that limit the ability of the CFTC to

accomplish its mission of protecting investors and the public

from misconduct in the $700 trillion swaps market. We believe

Congress should be exploring ways to strengthen the agency,

such as with self-funding and a larger budget, rather than

working to undermine it.

We urge the House to reject H.R. 4413.

For more information, please contact Public Citizen's

Congress Watch Advocates: Amit Narang, Regulatory Policy

Advocate at anarang@citizen.org;, or Bartlett Naylor,

Financial Policy Advocate, at bnaylor@citizen.org.

Sincerely,

Amit Narang.

Bartlett Naylor.

Mr. Chair, I have an amendment at the desk.

Mr. Chairman, I urge support for this amendment to ensure that the Commodities Futures Trading Commission can adequately regulate our financial markets and address some of the very practices that so seriously harmed our economy just a few years ago.

This amendment modestly improves the onerous cost-benefit considerations included in this bill, a provision that would open the Commission up to expensive legal challenges.

It does so by adding in language from the President's executive order on cost-

benefit analysis that prohibits judicial review. The bill's sponsors cite this order as the model of good analysis and incorporate many provisions of that order in this legislation.

However, the measure before us today inconsistently omits the order's prohibition on judicial review, thereby subjecting the CFTC's most cost-benefit considerations to increase litigation risk--risk that no other agency complying with the executive order has faced.

My amendment would correct this oversight and prevent special interest groups from using the cost-benefit provision as a club to delay, weaken, or kill financial reform.

My colleagues--Representative DelBene, Representative Gibson, and Representative Vargas--share my concerns and have proposed an amendment that would establish a heightened standard of judicial review.

While I support this amendment, it does not go far enough, in my view, to fix the problem. I believe that judicial review with regard to the heightened cost-benefit provisions in the underlying bill should be prohibited entirely.

Make no mistake, even if the amendment offered previously by my colleagues on judicial review--or, for that matter, my amendment--is adopted, the bill would still impose heavy administrative hurdles on the CFTC.

The Commission is already required to consider the costs and benefits when promulgating rules and issuing orders pursuant to the Paperwork Reduction Act, the Congressional Review Act, and the Regulatory Flexibility Act, as other agencies do.

Unlike any other financial regulator, the CFTC is also already bound by the Commodity Exchange Act to consider the impact of their rules on the full range of market stakeholders.

The courts have weighed in as well, finding that the CFTC has fulfilled its duty to consider the costs and benefits, as in the rule related to commodity pool operators.

The CFTC will still have to expand resources to comply with this provision that Republicans are unwilling to provide. Instead, the CFTC will have to take funds from examinations and enforcement to pay for redundant economic analysis.

Mr. Chairman, this is a commonsense amendment that will simply prevent our Nation's top directives cop from spending excessive time and resources fighting off superfluous legal challenges and would make the underlying bill consistent with the President's executive order.

I urge my colleagues to support this amendment, and I reserve the balance of my time.

May I inquire as to how much time I have remaining on this amendment?

Thank you very much, Mr. Chairman.

I just want to make clear my opposition to anything other than preventing judicial review on cost-benefit analysis.

Again, I am very appreciative to my colleagues who also share my concerns and, again, have proposed an amendment that would establish a heightened standard of judicial review, and I support that amendment.

I do not want anyone to be confused that I believe that that amendment would solve the problem. I still think that, if that amendment is adopted, the bill would still impose heavy administrative hurdles on the CFTC.

This is not about simply reauthorization at any cost with anything in the bill. This is about having a CFTC that really works, that is not burdened with the kind of cost-benefit analysis that we have seen burdening other of our agencies that have tried to do their job, including the SEC.

I would ask my friends who are listening to differentiate between that amendment of my colleagues, who are addressing this concern in their way, and my amendment that would prevent judicial review altogether.

I yield back the balance of my time.

Mr. Chair, I demand a recorded vote.

Thank you very much for yielding additional time to me to talk about cost-benefit analysis.

I think the gentlelady has made a real case for what we are dealing with here.

First of all, we know--and I guess we all agree--that prior to the meltdown that we had that caused the recession in this country, we did not have the kind of oversight that we needed on derivatives.

We worked very hard to bring about transparency. We worked very hard to get a handle on the role that derivatives played in this meltdown we had that caused us almost to go into a depression. And here we are trying to implement the reforms, trying very hard to protect the American public and those ends users that have been talked about so much today.

Cost-benefit analysis is just another way that has been injected into this whole attempt to regulate that would place unreasonable burdens on the CFTC and basically prohibit them from doing their job.

In offering this amendment, the gentlelady has made it very clear, and she has added additional support to what we have been talking about today relative to cost-benefit analysis. And so I hope that not only the information we have presented, but the information that she has presented is enough to have people understand what we need to do in order to protect the CFTC's ability to do its job and to carry out its mission.

Mr. Speaker, I yield myself such time as I may consume.

I would like to try to clear up some of the misunderstandings of what this bill is about. The more we debate it, the better Members understand the impact of this bill on our economy.

The gentleman from Texas, the chairman, just talked about how generous they are in allowing this debate to take place. Members, let me tell you what really happened. The fact of the matter is there has been an attempt to hide H.R. 1256 in this DOD bill. What business does it have in this bill? Why is it the Rules Committee determined that it would be a closed rule?

The first reason is that they tried to get away without having amendments to the bill. I had an amendment that I offered in committee that was not accepted, an amendment that if there were an open rule, I would have been able to offer this amendment on the floor. But, no, they close-ruled this bill to keep any amendments from being heard, to be debated, to be voted on, because they know that if Members really discover what these derivatives are all about and how they could create such risk that we'll be put in the position of bailing out failed institutions all over again, that Members would not support this kind of bill.

This country has been through a terrible financial crisis. Part of the reason is that we allowed our banks and financial institutions to place unregulated bets on the mortgage markets. Remember AIG? What did AIG do? It made a really big bet that the mortgage market would go up, and it lost, and the taxpayer was put in the position of having to bail it out. The Dodd-Frank Act enabled us to put a stop to that kind of betting going on, hidden from the rest of us, finally dragging that activity out into the sunlight.

The CFTC and the SEC are finally putting in place rules of the road to

prevent any one institution from threatening our livelihood again, but this bill wants to drag some of that activity back into the shadows, allowing banks and others, once again, to enter into transactions without even our regulators being able to see them.

You may say that this bill just concerns the limits on how far U.S. law goes. So why is it so important that the CFTC and SEC have discretion over the rules on cross-border initiatives? Because the exposure that a foreign branch or subsidiary of a U.S. institution takes in foreign markets comes back home to the U.S. Moreover, U.S. banks and corporations may find that those they do business with have much more hidden exposure because of foreign transactions. This bill says that we will have to rely on the foreign regulators to protect us. We shouldn't have to rely on foreign regulators who don't even have regulatory regimes to protect us. We should protect ourselves by making sure that anybody our branches and our subsidiaries are doing business with have comparable rules. Those countries must have comparable rules to the U.S. rules in order to protect us.

To put it simply, this bill would delay the implementation of the Wall Street Reform Act's derivatives provisions by months, if not years, and would preserve the kind of opacity in our markets that led to taxpayers' bailing out AIG just 5 short years ago.

For example, while Europe has made considerable progress on its swaps' clearing and reporting rules, Europe's framework for implementing trading and internal business conduct standards have been caught up in delays. It is unclear at this point how strong those requirements ultimately will be. This bill increases the incentives for other jurisdictions to avoid making the tough decisions to put in a strong financial framework.

I reserve the balance of my time.

Announcement by the Speaker Pro Tempore

Mr. Speaker, at this time I enter into the Record three letters of opposition to this bill. One is from the Executive Office of the President of the United States Office of Management and Budget; Americans for Financial Reform; and American Federation of Labor and Congress of Industrial Organizations.

American Federation of Labor and Congress of Industrial

Organizations,

Washington, DC, June 11, 2013.

Dear Representative: The AFL-CIO opposes the ``Swaps

Jurisdiction Certainty Act'' (H.R. 1256) scheduled for floor

consideration this week. If passed, this bill would undermine

the framework Congress put in place in the Dodd-Frank Wall

Street Reform and Consumer Protection Act of 2010 to prevent

risky derivatives trading from contributing to another global

financial crisis. It would impose major new procedural

hurdles that would impede the Commodity Futures Trading

Commission's (CFTC) ability to move forward with effective

rules designed to prevent risks that arise from overseas

derivatives trading from impacting the U.S. economy.

The 2008 financial crisis provided vivid illustrations of

how derivatives transactions conducted by U.S. institutions

in overseas markets can wreak havoc on the U.S. economy--both

the AIG bailout and the Lehman Brothers failure were caused

to a large extent by offshore derivatives trades.

As we saw with AIG and Lehman Brothers, U.S. institutions

can easily conduct derivatives transactions outside U.S.

borders that put U.S. financial institutions at risk. With

this in mind, Congress granted the CFTC, which regulates

around 90 percent of U.S. derivatives markets, authority in

Section 722(d) of Dodd-Frank to oversee derivatives

transactions that ``have a direct and significant connection

with activities in, or effect on, commerce of the United

States.''

The CFTC has issued proposed guidance that strikes an

appropriate balance. It protects U.S. taxpayers and the U.S.

economy while allowing overseas subsidiaries of U.S. banks to

be regulated under `substituted compliance' by their local

regulator when the CFTC makes a specific determination that

the relevant foreign rules are as strong as the U.S. rules.

H.R. 1256 would seriously undermine the CFTC's ability to

protect U.S. taxpayers from risks that arise from overseas

derivatives trading by creating a presumption that these

transactions are exempt from U.S. regulation. To overcome

this presumption, the CFTC and the Securities and Exchange

Commission (SEC) would be required to determine that the

foreign country rules are not `broadly comparable' to U.S.

rules, issue joint rules, and make formal reports to

Congress.

The CFTC's ability to effectively oversee offshore

derivatives transactions that create risks to the U.S.

economy is central to whether Title VII is ultimately

successful in mitigating the risks in the derivatives markets

that nearly brought down the economy less than five years

ago.

Don't let another AIG or Lehman Brothers happen under your

watch. Vote against the ``Swaps Jurisdiction Certainty Act''

(H.R. 1256) and prevent a major loophole from undermining the

basic derivatives market protections that Congress so

sensibly put in place when it passed Dodd-Frank in 2010.

Sincerely,

William Samuel,

Director, Government Affairs Department.

Mr. Speaker, I will enter into the Record the amendment

that I would have offered had they not come up with a closed rule.

Page 5, strike line 1 and all that follows through page 7,

line 6, and insert the following:

(d) General Application to Foreign Jurisdictions.--

(1) General application.--In issuing rules under subsection

(b), the Commissions shall provide that persons in compliance

with the regulatory requirements of a country or

administrative region that has one of the nine largest

combined swap and security-based swap markets by notional

amount in the calendar year preceding issuance of such rules

or any other foreign jurisdiction as jointly determined by

the Commissions may satisfy the corresponding categories of

United States swaps requirements through such compliance upon

the making of a joint determination by the Commissions

pursuant to subsection (d)(2).

(2) Determinations.--The Commissions shall jointly

determine whether one or more categories of regulatory

requirements of a foreign jurisdiction as jointly determined

by the Commissions, are broadly equivalent to corresponding

United States swaps requirements, with such determinations

initially to be made as follows:

(A) Initial determinations regarding a country or

administrative region described under paragraph (1), or any

other foreign jurisdiction as jointly determined by the

Commissions, accounting for the five largest combined swap

and security-based swap markets by notional amount in the

calendar year preceding issuance of rules under subsection

(b) shall be made within 180 days after issuance of such

rules.

(B) Initial determinations regarding a country or

administrative region described under paragraph (1), or any

other foreign jurisdiction as jointly determined by the

Commissions, accounting for the next five largest combined

swap and security-based swap markets by notional amount in

the calendar year preceding issuance of rules under

subsection (b) shall be made within 360 days after issuance

of such rules.

(C) Initial determinations regarding a country or

administrative region described under paragraph (1), or any

other foreign jurisdiction as jointly determined by the

Commissions, shall be made within 540 days after issuance of

rules under subsection (b).

(3) Criteria.--In such rules, the Commissions shall jointly

establish criteria for determining that one or more

categories of regulatory requirements of a country or

administrative region described under paragraph (1) or other

foreign jurisdiction are broadly equivalent to corresponding

United States swaps requirements, and shall jointly determine

the appropriate application of certain United States swap

requirements to persons or transactions relating to or

involving such country or administrative region or other

foreign jurisdiction as jointly determined by the Commission

to the extent that the Commissions have determined that

certain regulatory requirements of such country or

administrative region or other foreign jurisdiction are

broadly equivalent to corresponding United States swaps

requirements.

(4) Right to petition.--A market participant or group of

market participants may request a determination with respect

to a particular category or categories of foreign regulatory

requirements with regard to a foreign jurisdiction or

jurisdictions. Any determination made regarding such a

request shall be available to all market participants.

Page 7, line 7, strike ``(4)'' and insert ``(5)''.

I yield 1\1/2\ minutes to the gentleman from Massachusetts (Mr. Capuano).

I yield 1\1/2\ minutes to the gentleman from Massachusetts (Mr. Lynch).

I yield 1\1/2\ minutes to the gentleman from Texas (Mr. Al Green).

I yield 1\1/2\ minutes to the gentleman from Minnesota (Mr. Ellison).

I yield 1\1/2\ minutes to the gentlewoman from Connecticut (Ms. DeLauro).

I yield an additional 1 minute to the gentleman from Massachusetts (Mr. Capuano).

I yield 1 minute to the gentleman from Massachusetts (Mr. Lynch.)

I yield myself as much time as I may consume to refute.

The gentleman from Texas keeps talking about we make the claim that we ended ``too big to fail.'' That's what we're trying to do. That's what we're standing up against, what you're attempting to do in this piece of legislation.

Derivatives are an important part of the reform of Dodd-Frank. It is important because we're trying to create transparency. The over-the- counter derivatives market that has been working for so long in the shadows we cannot continue to have.

I yield to the gentleman from Texas.

Reclaiming my time, the gentleman from Texas knows how it works. We have Dodd-Frank reform, and it has to be implemented. You know the living wills have to be done. You know that we have to put in place all that it takes to have the orderly liquidation procedure. And it is important that you understand, and that all of our Members understand, that derivatives are an important part of reform.

If we allow this bill that presumes that other countries are comparable to us in their regulatory regimes without even checking, without vetting, without asking any questions, without requiring anything, then we absolutely put our own country at risk, and we put at risk the American taxpayers who will have to bail out the major financial institutions if we allow you to pass a bill like this, presuming that they are okay, that these countries are okay.

The other thing is--I know and understand now. I understand very well that if we allow this presumption to take place, then you'll just go to court and you'll argue that you have the presumption, and you'll try and tie up the CFTC all over again.

I reserve the balance of my time.

I yield 1 minute to the gentleman from Texas (Mr. Al Green).

I yield myself the balance of my time.

Mr. Speaker and Members, I'm very disappointed and worried that this bill has been brought to the floor under a closed rule, as have more than one-third of the bills so far this Congress.

I believe there are important issues concerning the structure of this bill, particularly the bill's presumption that the rules of the nine largest foreign markets will be broadly equivalent to our own. The bill would require the SEC and the CFTC to act in order to allow U.S. rules to apply to transactions, even though the risk of the transactions will ultimately be imported back to the United States.

My amendment would have the reverse of this presumption, directing the SEC and CFTC to jointly consider the regulatory framework of these countries to provide appropriate exemptions when jurisdictions have derivatives rules that are truly broadly equivalent to our own.

A closed rule prevents us from considering these issues. Why do they have a closed rule? Why did they try to hide this bill inside the DOD?

They don't want this debate. They didn't want an opportunity for any amendments. They don't care that foreign countries would be determining our fate when they set up their regulatory regimes, which won't be comparable to ours.

We owe it to the American people to do better than we have done. We have had the subprime meltdown. We've had the economic crisis. Why throw us back into that simply because you're trying to protect Wall Street?

Our citizens don't deserve that. They deserve for us to stand up and protect them from having to bail out these big institutions that will fail.

We have gone through AIG. We have gone through JP Morgan, the London Whale, the $6 billion failure. Why should we do that again?

I yield back the balance of my time.

Mr. Speaker, I demand a recorded vote.

Mr. Chairman, I thank the gentleman for yielding and for his leadership in so many ways in this body.

I rise in opposition to H.R. 4413. This bill would impose unnecessary burdens on the CFTC and would restrict our financial regulators' ability to regulate cross-border derivatives.

Dodd-Frank brought the previously unregulated derivatives market out of the shadows and created a robust regulatory regime for derivatives. One of the core principles of this regulatory regime was that if the United States is ultimately bearing the risk on a derivative, then you have to comply with the Dodd-Frank rules.

One of the reasons that the U.S. markets are so strong is because investors have confidence in our markets and in our market participants. I am concerned that this bill, particularly in the cross- border area, could undermine that confidence.

For foreign derivatives entered into by a U.S. bank, the bank can only avoid complying with Dodd-Frank rules if they are already complying with regulations that are at least equivalent or stronger than Dodd-Frank rules. This bill, unfortunately, establishes a presumption that the derivatives rules in London and the EU are equivalent to Dodd-Frank, even though we know that is not true. The truth is London and the EU are well behind the United States on financial reform, and it may take many years for them to become equivalent to our rules. This is in my view a very real concern and presents an undue risk to the United States financial system and to our investors and to our taxpayers. This is why I cannot support this bill.

Mr. Chairman, I include for the Record two letters, one from Americans for Financial Reform and one from the Center For Progressive Reform.

Americans for Financial Reform,

Washington, DC, June 16, 2014.

Dear Representative, on behalf of Americans for Financial

Reform, we are writing to express our opposition to HR 4413,

``The Customer Protection and End User Relief Act''. This

legislation would have a severe negative impact on the

Commodity Futures Trading Commission (CFTC) and its ability

to police commodities and derivatives markets crucial to our

economy. The new restrictions it places on CFTC rulemaking

would require additional years of bureaucratic and legal red

tape prior to agency action, even in areas where Congress has

clearly directed the CFTC to act and where action is badly

needed to protect the public interest.

This legislation also includes no provisions that address

the CFTC's most fundamental problem--the lack of resources to

accomplish its mission. Due to both the agency's new

responsibilities under the Dodd-Frank Act for hundreds of

trillions of dollars in previously unregulated derivatives

markets, and the growth of the commodities markets the agency

has traditionally regulated, the size of CFTC-regulated

markets has increased roughly 15-fold over the last decade.

But funding for the agency lags enormously behind. As CFTC

commissioner Mark Wetjen recently stated, ``The unfortunate

reality is

that, at current funding levels, the agency is unable to

adequately fulfill the mission given to it by Congress: to

prevent disruptions to market integrity, to protect customer

assets, monitor and reduce the build-up of systemic risk, and

ensure to the greatest degree possible that derivatives

markets are free of fraud and manipulation''. The agency

authorization process could and should be an opportunity to

supplement appropriations with some form of agency self-

funding. Self-funding mechanisms are used by all other

financial regulatory agencies and have been endorsed by the

Obama Administration.

Instead of addressing the pressing problem of funding, HR

4413 would instead load down the CFTC with additional

mandates that would drain resources and act as a roadblock to

necessary oversight and enforcement. HR 4413 would more than

double the number of cost benefit analyses the agency must

perform prior to taking any action. Since any of these

analyses could serve as grounds for a lawsuit, this measure

would greatly expand Wall Street's ability to dispute any

agency action in court, tilting the regulatory playing field

still further in their favor. The legislation would also

create an initial presumption that CFTC rules did not apply

to so-called `cross-border' transactions, which include a

vast number of transactions involving foreign subsidiaries of

U.S. banks. The agency would have to perform a

`determination' (jointly with the Securities and Exchange

Commission) each time it wanted to regulate such

transactions. HR 4413 also includes additional internal

process requirements for the CFTC that would also act as

barriers to action. These additional requirements would

affect everything from the supervision of key employees to

the ability to respond to public requests for information.

In combination, these changes would greatly reduce the

CFTC's capacity to effectively police Wall Street. HR 4413

also includes many additional changes. Some of them, such as

amendments to indemnification requirements for swaps data

repositories, are reasonable. Other changes--including (but

not limited to) provisions that expand the definition of

`commercial end user' to include financial entities (Sections

321 and 352), exemptions for entities with billions of

dollars in swaps business from `swap dealer' oversight

(Section 355), provisions that would permit marketing of

complex institutional commodity pools to retail investors

(Section 357), and provisions that weaken limits on commodity

market speculation (Section 358)--raise serious questions of

their own.

But even before considering these issues, the major new

restrictions on the agency created by the cost-benefit and

cross-border provisions of this bill mean that supporting

needed derivatives regulation requires opposing this

legislation.

Provisions Related to Cost Benefit Analysis and Judicial Review

The CFTC already has a statutory requirement to consider

the costs and benefits of its actions, and to evaluate these

costs and benefits as applied to a long list of

considerations, including market efficiency, price discovery,

and protection of the public. Section 203 of HR 4413 would

massively expand this requirement. The section would more

than double than number of different factors the CFTC must

evaluate in any rulemaking, order, or guidance, and change

the standard of evaluation from consideration of costs and

benefits to a more extensive and burdensome `reasoned

determination' of costs and benefits. The section also

includes a particularly sweeping mandate that would require

the agency to determine whether an action 'maximizes net

benefits' compared to all possible regulatory alternatives.

This requirement alone, which seems to require comparison of

any actual regulation to a potentially vast number of

theoretical alternatives, could be read to require dozens of

additional agency analyses.

Some of this cost-benefit language does replicate cost-

benefit instructions from the Office of Management and Budget

that already applies to agencies within the executive branch,

although not to independent financial regulatory agencies

like the CFTC. In addition to this extension of reach, a

crucial difference is that since HR 4413 would add this

language in statute, each and every additional instruction

regarding cost-benefit analysis could become grounds for a

Wall Street lawsuit against a CFTC rule. The extensive new

cost-benefit requirements in Section 203 amount to a roadmap

for industry interests to tie up regulations in endless

litigation, delays, and red tape. With critical rulemakings

to implement new requirements like position limits to control

commodity price manipulation still incomplete almost four

years after they became law, the addition of new barriers to

action would be dramatic movement in the wrong direction.

Heightening the effect of the new cost-benefit provisions

are new internal process requirements in Section 204 of the

legislation. Section 204 would apparently change the CFTC's

internal structure so that the entire five-member Commission

directly supervised the activities of all key division

directors. These key employees would `serve at the pleasure'

of the entire Commission, `report directly' to the entire

Commission, and perform duties as prescribed by the entire

Commission. Currently, as in other Federal agencies

supervised by a multi-member Commission, the Chair of the

CFTC supervises the employees of the Commission. Giving

direct control of all employee activities to an entire five-

member Commission is a recipe for endless delay and

bureaucratic red tape. Currently, individual Commissioners

are able to hire their own personal staff and express their

views on Commission activities through the voting process.

Should this legislation pass, any individual Commissioner,

even if their views were in the minority, could interfere

directly with the activities of Commission staff in

implementing the law.

Provisions Relating to International Derivatives Markets

Section 359 of the bill contains sweeping new restrictions

on the ability of the CFTC to properly oversee derivatives

transactions conducted through foreign subsidiaries of U.S.

banks, even when such transactions have a direct and

significant connection to the U.S. economy. We need only look

at the example of J.P Morgan's `London Whale' transactions,

or the London derivatives transactions of AIG Financial

Products which resulted in the largest bailout in U.S.

history, to see that derivatives transactions conducted

through nominally overseas entities can have a profound

impact on the U.S. economy. Over half of Wall Street

derivatives transactions are currently booked in nominally

foreign subsidiaries, and it is very likely that more could

easily be transacted in this way if there was an incentive to

do so to avoid regulation.

Section 359 of the bill, mirroring the `Swaps Jurisdiction

Certainty Act', controversial legislation which recently

passed the House on a 301 to 124 vote, would create a

presumption that U.S. rules would not govern transactions

booked in major foreign jurisdictions. The legislation would

force U.S. regulators to accept foreign rules for derivatives

transactions booked by U.S. banks in any of the nine largest

global financial markets. The CFTC could overturn this

presumption that foreign rules would apply, but only through

a complex procedure involving a joint determination with the

Securities and Exchange Commission that foreign rules were

not `broadly equivalent' to U.S. rules, supported by an

official report to Congress. Furthermore, any rules governing

these cross-border derivatives would have to be identical

between the SEC and the CFTC, despite the fact that these

agencies regulate very different parts of the derivatives

markets and have differing jurisdictional authority under the

Dodd-Frank Act.

The drastic new limitations placed on CFTC jurisdiction

over cross-border derivatives would have a profound impact on

the ability of U.S. regulators to properly oversee

derivatives transactions. It would effectively overturn a key

provision in Section 722 of the Dodd Frank Act that gives the

CFTC jurisdiction over all swaps transactions that have a

`direct and significant' effect on the U.S. economy. This

provision of Dodd-Frank was put in place precisely to ensure

that the trillions of dollars in swaps booked in offshore

subsidiaries would be properly regulated and would not

endanger the U.S. economy.

As mentioned above, this legislation also includes numerous

other provisions targeted at various areas of CFTC

regulation. Some of these provisions would take positive

steps, while others could roll back financial protection in

troubling ways. But even before considering these and other

provisions positive or negative, the major new burdens the

cost-benefit and international derivatives provisions of this

bill place on the basic ability of the CFTC to do its job

create overwhelming reasons to reject this legislation as

currently written.

We urge you to vote against HR 4413 and preserve the CFTC's

capacity to properly regulate crucial futures and derivatives

markets. Thank you for your consideration. For more

information please contact AFR's Policy Director, Marcus

Stanley.

Sincerely,

Americans for Finincial Reform.