The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS” mentioning the Department of Interior was published in the Senate section on pages S10600-S10609 on Sept. 16, 1996.
The publication is reproduced in full below:
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. CHAFEE (for himself and Mr. Rockefeller):
S. 2075. A bill to amend title XVIII of the Social Security Act to provide additional consumer protections for medicare supplemental insurance; to the Committee on Finance.
The Medigap Portability Act of 1996
Mr. CHAFEE. Mr. President, last month, the President signed into law bipartisan legislation that provides greater portability of health insurance for working Americans. Today, I join with my colleague, Senator Rockefeller, in the introduction of a bipartisan bill that will provide some of the same guarantees for seniors who buy Medicare supplemental insurance or Medigap policies.
Of the 37 million Medicare beneficiaries, 80 percent, or nearly 30 million, have some form of Medicare supplemental insurance, whether covered through a retiree health plan or a private Medigap policy. Under current law, Medigap insurers must issue these policies without pre-existing condition limitations during the 6-month period immediately after the beneficiary becomes eligible for Medicare. Our bill does three things for seniors who have purchased Medigap insurance.
First, it guarantees that if their plan goes out of business or the beneficiary moves out of a plan service area, he or she can buy another comparable policy. These rules also would apply to a senior who has had coverage under a retiree health plan if their plan goes out of business.
Second, it encourages seniors to enroll in Medicare managed care by guaranteeing that they can return to Medicare fee-for-service and, during the first year of enrollment, get back their same Medigap policy if they decide they do not like managed care. Under current law, if a senior wishes to enroll in a Medicare managed care plan, they have two options. They may drop their Medigap policy, and hope they can get another if they go back to fee-for-service, or they can continue paying their Medigap premiums in the event that they may need the policy again some day--a very costly option for those on fixed incomes.
Third, it provides a 6-month open enrollment period for those under 65 who become Medicare beneficiaries because they are disabled. Under current Federal law, Medicare beneficiaries are offered a 6-month open enrollment period only if they are 65. There are approximately 4 million Americans who are under 65 years of age and are enrolled in the Medicare Program. Currently, they do not currently have access to Medigap policies unless State laws require insurers to offer policies to them.
It is true that this bill does not go as far as some advocacy groups would like. Our bill leaves to the States more controversial issues, such as continuous open enrollment and community rating of Medigap premiums. I believe, however, that this legislation will provide seniors the same guarantees that we provided to working Americans under the Kassebaum-Kennedy legislation. Thank you, Mr. President.
I ask unanimous consent that the text of the bill be included in the Record immediately following my remarks.
There being no objection, the bill was ordered to be printed in the Record, as follows:
S. 2075
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Medigap Portability Act of 1996''.
SEC. 2. MEDIGAP AMENDMENTS.
(a) Guaranteeing Issue Without Preexisting Conditions for Continuously Covered Individuals.--Section 1882(s) of the Social Security Act (42 U.S.C. 1395ss(s)) is amended--
(1) in paragraph (3), by striking ``paragraphs (1) and
(2)'' and inserting ``this subsection'',
(2) by redesignating paragraph (3) as paragraph (4), and
(3) by inserting after paragraph (2) the following new paragraph:
``(3)(A) The issuer of a medicare supplemental policy--
``(i) may not deny or condition the issuance or effectiveness of a medicare supplemental policy described in subparagraph (C);
``(ii) may not discriminate in the pricing of the policy on the basis of the individual's health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), or disability; and
``(iii) may not impose an exclusion of benefits based on a pre-existing condition,
in the case of an individual described in subparagraph (B) who seeks to enroll under the policy not later than 63 days after the date of the termination of enrollment described in such subparagraph.
``(B) An individual described in this subparagraph is an individual described in any of the following clauses:
``(i) The individual is enrolled with an eligible organization under a contract under section 1876 or with an organization under an agreement under section 1833(a)(1)(A) and such enrollment ceases either because the individual moves outside the service area of the organization under the contract or agreement or because of the termination or nonrenewal of the contract or agreement.
``(ii) The individual is enrolled with an organization under a policy described in subsection (t) and such enrollment ceases either because the individual moves outside the service area of the organization under the policy, because of the bankruptcy or insolvency of the insurer, or because the insurer closes the block of business to new enrollment.
``(iii) The individual is covered under a medicare supplemental policy and such coverage is terminated because of the bankruptcy or insolvency of the insurer issuing the policy, because the insurer closes the block of business to new enrollment, or because the individual changes residence so that the individual no longer resides in a State in which the issuer of the policy is licensed.
``(iv) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under this title and the plan terminates or ceases to provide (or significantly reduces) such supplemental health benefits to the individual.
``(v)(I) The individual is enrolled with an eligible organization under a contract under section 1876 or with an organization under an agreement under section 1833(a)(1)(A) and such enrollment is terminated by the enrollee during the first 12 months of such enrollment, but only if the individual never was previously enrolled with an eligible organization under a contract under section 1876 or with an organization under an agreement under section 1833(a)(1)(A).
``(II) The individual is enrolled under a policy described in subsection (t) and such enrollment is terminated during the first 12 months of such enrollment, but only if the individual never was previously enrolled under such a policy under such subsection.
``(C)(i) Subject to clause (ii), a medicare supplemental policy described in this subparagraph, with respect to an individual described in subparagraph (B), is a policy the benefits under which are comparable or lesser in relation to the benefits under the enrollment described in subparagraph
(B) (or, in the case of an individual described in clause
(ii), under the most recent medicare supplemental policy described in clause (ii)(II)).
``(ii) An individual described in this clause is an individual who--
``(I) is described in subparagraph (B)(v), and
``(II) was enrolled in a medicare supplemental policy within the 63 day period before the enrollment described in such subparagraph.
``(iii) As a condition for approval of a State regulatory program under subsection (b)(1) and for purposes of applying clause (i) to policies to be issued in the State, the regulatory program shall provide for the method of determining whether policy benefits are comparable or lesser in relation to other benefits. With respect to a State without such an approved program, the Secretary shall establish such method.
``(D) At the time of an event described in subparagraph (B) because of which an individual ceases enrollment or loses coverage or benefits under a contract or agreement, policy, or plan, the organization that offers the contract or agreement, the insurer offering the policy, or the administrator of the plan, respectively, shall notify the individual of the rights of the individual, and obligations of issuers of medicare supplemental policies, under subparagraph (A).''.
(b) Limitation on Imposition of Preexisting Condition Exclusion During Initial Open Enrollment Period.--Section 1882(s)(2)(B) of such Act (42 U.S.C. 1395ss(s)(2)(B)) is amended to read as follows:
``(B) In the case of a policy issued during the 6-month period described in subparagraph (A), the policy may not exclude benefits based on a pre-existing condition.''.
(c) Clarifying the Nondiscrimination Requirements During the 6-Month Initial Enrollment Period.--Section 1882(s)(2)(A) of such Act (42 U.S.C. 1395ss(s)(2)(A)) is amended to read as follows:
``(2)(A)(i) In the case of an individual described in clause (ii), the issuer of a medicare supplemental policy--
``(I) may not deny or condition the issuance or effectiveness of a medicare supplemental policy, and
``(II) may not discriminate in the pricing of the policy on the basis of the individual's health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), or disability.
``(ii) An individual described in this clause is an individual for whom an application is submitted before the end of the 6-month period beginning with the first month as of the first day on which the individual is 65 years of age or older and is enrolled for benefits under part B.''.
(d) Extending 6-Month Initial Enrollment Period to Non-Elderly Medicare Beneficiaries.--Section 1882(s)(2)(A)(ii) of such Act (42 U.S.C. 1395ss(s)(2)(A)), as amended by subsection (c), is amended by striking ``is submitted'' and all that follows and inserting the following: ``is submitted--
``(I) before the end of the 6-month period beginning with the first month as of the first day on which the individual is 65 years of age or older and is enrolled for benefits under part B; and
``(II) for each time the individual becomes eligible for benefits under part A pursuant to section 226(b) or 226A and is enrolled for benefits under part B, before the end of the 6-month period beginning with the first month as of the first day on which the individual is so eligible and so enrolled.''.
(e) Effective Dates.--
(1) Guaranteed issue.--The amendment made by subsection (a) shall take effect on July 1, 1997.
(2) Limit on preexisting condition exclusions.--The amendment made by subsection (b) shall apply to policies issued on or after July 1, 1997.
(3) Clarification of nondiscrimination requirements.--The amendment made by subsection (c) shall apply to policies issued on or after July 1, 1997.
(4) Extension of enrollment period to disabled individuals.--
(A) In general.--The amendment made by subsection (d) shall take effect on July 1, 1997.
(B) Transition rule.--In the case of an individual who first became eligible for benefits under part A of title XVIII of the Social Security Act pursuant to section 226(b) or 226A of such Act and enrolled for benefits under part B of such title before July 1, 1997, the 6-month period described in section 1882(s)(2)(A) of such Act shall begin on July 1, 1997. Before July 1, 1997, the Secretary of Health and Human Services shall notify any individual described in the previous sentence of their rights in connection with medicare supplemental policies under section 1882 of such Act, by reason of the amendment made by subsection (d).
(f) Transition Provisions.--
(1) In general.--If the Secretary of Health and Human Services identifies a State as requiring a change to its statutes or regulations to conform its regulatory program to the changes made by this section, the State regulatory program shall not be considered to be out of compliance with the requirements of section 1882 of the Social Security Act due solely to failure to make such change until the date specified in paragraph (4).
(2) NAIC standards.--If, within 9 months after the date of the enactment of this Act, the National Association of Insurance Commissioners (in this subsection referred to as the ``NAIC'') modifies its NAIC Model Regulation relating to section 1882 of the Social Security Act (referred to in such section as the 1991 NAIC Model Regulation, as modified pursuant to section 171(m)(2) of the Social Security Act Amendments of 1994 (Public Law 103-432) and as modified pursuant to section 1882(d)(3)(A)(vi)(IV) of the Social Security Act, as added by section 271(a) of the Health Care Portability and Accountability Act of 1996 (Public Law 104-191) to conform to the amendments made by this section, such revised regulation incorporating the modifications shall be considered to be the applicable NAIC model regulation
(including the revised NAIC model regulation and the 1991 NAIC Model Regulation) for the purposes of such section.
(3) Secretary standards.--If the NAIC does not make the modifications described in paragraph (2) within the period specified in such paragraph, the Secretary of Health and Human Services shall make the modifications described in such paragraph and such revised regulation incorporating the modifications shall be considered to be the appropriate Regulation for the purposes of such section.
(4) Date specified.--
(A) In general.--Subject to subparagraph (B), the date specified in this paragraph for a State is the earlier of--
(i) the date the State changes its statutes or regulations to conform its regulatory program to the changes made by this section, or
(ii) 1 year after the date the NAIC or the Secretary first makes the modifications under paragraph (2) or (3), respectively.
(B) Additional legislative action required.--In the case of a State which the Secretary identifies as--
(i) requiring State legislation (other than legislation appropriating funds) to conform its regulatory program to the changes made in this section, but
(ii) having a legislature which is not scheduled to meet in 1998 in a legislative session in which such legislation may be considered,
the date specified in this paragraph is the first day of the first calendar quarter beginning after the close of the first legislative session of the State legislature that begins on or after July 1, 1998. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.
SEC. 3. INFORMATION FOR MEDICARE BENEFICIARIES.
(a) Grant program.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') is authorized to provide grants to--
(A) private, independent, non-profit consumer organizations, and
(B) State agencies,
to conduct programs to prepare and make available to medicare beneficiaries comprehensive and understandable information on enrollment in health plans with a medicare managed care contract and in medicare supplemental policies in which they are eligible to enroll. Nothing in this section shall be construed as preventing the Secretary from making a grant to an organization under this section to carry out activities for which a grant may be made under section 4360 of the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508).
(2) Consumer satisfaction surveys.--Any eligible organization with a medicare managed care contract or any issuer of a medicare supplemental policy shall--
(A) conduct, in accordance with minimum standards approved by the Secretary, a consumer satisfaction survey of the enrollees under such contract or such policy; and
(B) make the results of such survey available to the Secretary and the State Insurance Commissioner of the State in which the enrollees are so enrolled.
The Secretary shall make the results of such surveys available to organizations which receive grants under paragraph (1).
(3) Information.--
(A) Contents.--The information described in paragraph (1) shall include at least a comparison of such contracts and policies, including a comparison of the benefits provided, quality and performance, the costs to enrollees, the results of consumer satisfaction surveys on such contracts and policies, as described in subsection (a)(2), and such additional information as the Secretary may prescribe.
(B) Information standards.--The Secretary shall develop standards and criteria to ensure that the information provided to medicare beneficiaries under a grant under this section is complete, accurate, and uniform.
(C) Review of information.--The Secretary may prescribe the procedures and conditions under which an organization that has obtained a grant under this section may furnish information obtained under the grant to medicare beneficiaries. Such information shall be submitted to the Secretary at least 45 days before the date the information is first furnished to such beneficiaries.
(4) Consultation with other organizations and providers.--An organization which receives a grant under paragraph (1) shall consult with private insurers, managed care plan providers and other health care providers, and public and private purchasers of health care benefits in order to provide the information described in paragraph (1).
(5) Terms and conditions.--To be eligible for a grant under this section, an organization shall prepare and submit to the Secretary an application at such time, in such form, and containing such information as the Secretary may require. Grants made under this section shall be in accordance with terms and conditions specified by the Secretary.
(b) Cost-Sharing.--
(1) In general.--Each organization which provides a medicare managed care contract or issues a medicare supplemental policy (including a medicare select policy) shall pay to the Secretary its pro rata share (as determined by the Secretary) of the estimated costs to be incurred by the Secretary in providing the grants described in subsection
(a).
(2) Limitation.--The total amount required to be paid under paragraph (1) shall not exceed $35,000,000 in any fiscal year.
(3) Application of proceeds.--Amounts received under paragraph (1) are hereby appropriated to the Secretary to defray the costs described in such paragraph and shall remain available until expended.
(c) Definitions.--In this section:
(1) Medicare managed care contract.--The term ``medicare managed care contract'' means a contract under section 1876 or section 1833(a)(1)(A) of the Social Security Act.
(2) Medicare supplemental policy.--The term ``medicare supplemental policy'' has the meaning given such term in section 1882(g) of the Social Security Act.
Mr. ROCKEFELLER. Mr. President, I join my colleague from Rhode Island, Senator Chafee, in introducing a bill that aims at taking another significant step in extending the kind of health care security we want for all Americans. I believe the recent enactment of the Kassebaum-Kennedy health reform bill confirms that those of us who want to expand health care access, coverage, and quality for Americans have every reason to press on. And the Senator from Rhode Island and I have very deliberately adopted the same principles of bipartisanship and pragmatism in crafting this new bill to take the next steps forward in health reform.
Our bill responds to a clear need among Medicare's beneficiaries, especially the 4 million disabled Americans who rely on Medicare, to be able to count on supplemental insurance when they seek it. As important as Medicare is, it covers less than one-half of beneficiaries' total health care costs. As a result, almost 80 percent of all Medicare beneficiaries buy private, supplemental insurance that gives them extra coverage and financial relief. But it turns out that seniors and the disabled are having all kinds of difficulties in obtaining or holding onto this supplemental insurance. Our bill solves some of these problems, by making Medigap policies portable, more reliable, and more accessible in different situations.
Specifically, our bill requires insurers to issue a Medigap policy to a Medicare beneficiary who loses his or her Medigap coverage because he or she moves out of a plan's service area; because an HMO or managed care plan goes out of business or withdraws from the market; or because an employer drops, or substantially cuts back, retiree health benefits.
This legislation responds to changes we are seeing that are hurting older and disabled Americans, which includes 50,000 disabled West Virginians. For example, more and more employers are cutting costs by cutting back on their retirees' health benefits. Between 1993 and 1995, the number of large employers who provided retiree health benefits dropped by 5 percent. When retirees lose employer-sponsored health benefits, they are forced to go to the private market and purchase individual coverage.
If they have any type of preexisting medical condition, they will be lucky to find an insurance company who will sell them a Medigap policy without a lengthy pre-existing condition limitation. Others will not be so lucky. They won't find an insurer willing to sell them a policy at any price.
Mr. President, our bill gives Medicare beneficiaries an opportunity to try a managed care plan without worrying about losing their ability to return to fee-for-service medicine. Our legislation would give Medicare beneficiaries a 12-month trial period to try a Medicare managed care option. Understandably, many seniors are very nervous about enrolling in a managed care organization if it means losing access to their lifelong doctor.
Our bill lets Medicare beneficiaries see if a managed health care plan suits them and gives them a way back to fee-for-service medicine, if that is their personal preference.
Mr. President, my preference would be to allow continuously insured Medicare beneficiaries to freely switch types of policies--fee-for-
service versus managed care--and insurers, on an annual basis. This would allow seniors the ability to switch insurers for customer service reasons or any other personal preference. But because the insurance companies are especially opposed to any type of continuous or annual open enrollment policy for Medigap insurance--even for individuals who are continuously insured--we have to have our bill aim for the more modest improvements in portability that we think we have a better chance of enacting.
Our legislation bans insurance companies from imposing any preexisting condition limitation during the 6-month open enrollment period for Medigap insurance when a person first qualifies for Medicare. This makes the rules for Medigap policies consistent with the recently enacted Kassebaum-Kennedy bill, and with Medicare coverage which begins immediately, regardless of preexisting conditions.
For the disabled, this bill is a big improvement over current law. In 1990, Congress mandated that insurers must sell a Medigap policy to any senior wishing to buy coverage when that individual first becomes eligible for Medicare. The disabled were left out at that time because of insurance company-generated concerns about potentially huge premium hikes for current Medigap policyholders.
Since then, at least 10 States went ahead and required insurers to issue policies to all Medicare beneficiaries in their States, including the disabled. My staff called those States, and not one State reported large hikes in premiums as a result of their new laws requiring access to Medigap for the disabled.
The Health Care Financing Administration [HCFA] has also estimated that Medicare's average per-person cost for the disabled is actually less than Medicare's average per-person cost for the aged. So, Mr. President, I believe we can put concerns about large premium hikes to rest, and move to guarantee the disabled access to private Medigap policies.
This bill will help people like a 44-year-old man from Capon Bridge, WV, who qualifies for Medicare because of a disability. He earns too much money to qualify for Medicaid and is unable to buy a private Medigap policy because of a chronic medical condition.
Medigap insurers in West Virginia refuse to sell him a policy because of his medical condition. A 47-year-old woman from Slanesville, WV, is in a similar situation. She was uninsured before qualifying for Medicare because of a chronic kidney disease that requires dialysis. Her husband and she have too many assets to qualify for Medicaid and they cannot afford the $300 a month, or $3,600 a year premium for health insurance provided through her husband's job. The average cost of a Medigap policy ranges from
$700 to $1,000 a year. Access to a Medigap policy would be a more affordable option for this family.
Mr. President, our bill also includes a section to help seniors choose the right health plan for them by ensuring that they get good information on what plans are available in their area.
It allows them to compare different health plans based on results of consumer satisfaction surveys, and will include information on benefits and costs.
Our bill does not directly address affordability. Just as the Kassebaum-Kennedy bill was not able to take that step, we leave it to the States to consider ways to promote affordable Medigap premiums. But Congress has some history in the Medigap market, with legislation passed in 1980, and again in 1990, to guarantee at least a minimal level of value across all Medigap policies. Under the current law that I helped enact back in 1990, individual and group Medigap policies must spend at least 65 percent and 75 percent, respectively, of all premium dollars collected, on benefits. If a Medigap plan fails to meet these minimum loss ratios, they must issue refunds or credits to their customers.
Mr. President, while Federal loss ratio standards help assure a minimum level of value, they do not prevent insurance companies from annually upping premiums as a senior ages. This practice--known as attained age-rating--results in the frailest and the lowest income seniors facing large, annual premium hikes as they age. I would hope that more States would follow the lead of at least five other States who have banned attained age-rating. This would vastly improve the affordability of Medigap for the oldest and frailest of our seniors.
Mr. President, our bill is a targeted, modest bill. But if and when we enact it, it will provide very real, very significant help to the seniors who, year in and year out, pay out billions of dollars in premiums in order to have the extra protection of Medigap protection.
It is wrong and unfair when senior and disabled citizens in West Virginia and across the country are suddenly dropped by insurers or denied a Medigap policy just because they move to another State, or their employer cuts back on promised retiree health benefits, or because they're disabled.
In the bipartisan and practical spirit of the Kassebaum-Kennedy bill, we now propose the same kind of commonsense, consumer protections and reforms, to help over 33 million senior citizens and almost 5 million disabled Americans. It is a great honor to be presenting this bill with the Senator from Rhode Island, someone who is responsible for many of the country's most important achievements in health care. I urge my colleagues to cosponsor this bill, and to help us extend the health care peace of mind that older and disabled Americans ask for and deserve.
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By Mr. MURKOWSKI:
S. 2076. A bill to increase economic benefits to the United States from the activities of cruise ships visiting Alaska; to the Committee on Commerce, Science, and Transportation.
cruise ship legislation
Mr. MURKOWSKI. Mr. President, today, I am reintroducing a very important measure--one that will unlock and open a door that Congress has kept barred for over 100 years.
Opening that door will create a path to thousands of new jobs, to hundreds of millions of dollars in new economic activity and to millions in new Federal, State, and local government revenues. Furthermore, Mr. President, that door can be opened with no adverse impact on any existing U.S. industry, labor interest or on the environment, and it will cost the Government virtually nothing.
There is no magic to this; in fact, it's a very simple matter. My bill merely allows United States ports to compete for the growing cruise ship trade to Alaska, and encourages the development of an all-
Alaska cruise business, as well.
The bill amends the Passenger Service Act to allow foreign cruise ships to operate to and from Alaska, and between Alaska ports. However, it also very carefully protects all existing U.S. passenger vessels by using a definition of ``cruise ships'' designed to exclude any foreign-
flag vessels that could conceivably compete in the same market as U.S.-
flag tour boats or ferries. Finally, it provides a mechamism to guarantee that if a U.S. vessel ever enters this trade in the future, steps will be taken to ensure an ample pool of potential passengers.
Mr. President, this is a straightforward approach to a vexing problem, and it deserves the support of this body.
Let us look at the facts. U.S. ports currently are precluded from competing for the Alaska cruise ship trade by the Passenger Service Act of 1886, which bars foreign vessels from carrying passengers on one-way voyages between U.S. ports. However, it isn't 1886 anymore. These days, no one is building any U.S. passenger ships of this type, and no one has built one in over 40 years.
Because there are no U.S. vessels in this important trade, the only real effect of the Passenger Service Act is to force all the vessels sailing to Alaska to base their operations in an foreign port instead of a U.S. city.
Mr. President, what we have here is an act of Congress prohibiting U.S. cities from competing for thousands of jobs and hundreds of millions in business dollars. That is worse than absurd--in light of our ever-popular election-year promises to help the economy, it belongs in Letterman's ``Top Ten Reasons Why Congress Doesn't Know What It's Doing.''
How, Mr. President, can anyone argue with a straight face for the continuation of a policy that fails utterly to benefit any identifiable American interst, while actively discouraging economic growth.
Mr. President, this is not the first time I have introduced this legislation. When I began, Alaska-bound cruise passengers totaled about 200,000 per year. By last year, almost three times that many people--
most of them American citizens--were making that voyage. Almost 600,000 people joined an Alaska bound vessel in 1995, and almost all those sailings originated in Vancouver, BC--not because Vancouver is necessarily a better port, but because our own foolish policy demands it.
The cash flow generated by this trade is enormous. Most passengers fly in or out of Seattle-Tacoma International Airport in Washington State, but because of the law, they spend little time there. Instead, they spend their pre- and post-sailing time in a Vancouver hotel, at Vancouver restaurants, and in Vancouver gift shops. And when their vessel sails, it sails with food, fuel general supplies, repair and maintenance needs taken care of by Vancouver vendors.
According to some estimates the city of Vancouver receives benefits of well over $200 million per year. Others provide more modest estimates, such as a comprehensive study by the International Council of Cruise Lines, which indicated that in 1992 alone, the Alaska cruise trade generated over 2,400 jobs for the city of Vancouver, plus payments to Canadian vendors and employees of over $119 million. If that business had taken place inside the United States, it would have been worth additional Federal, State, and local tax revenues of approximately $60 million.
In addition to the opportunities now being shunted to Vancouver, we are also missing an opportunity to create entirely new jobs and income through the potential to develop new cruising routes between Alaska ports. The city of Ketchikan, AK, was told a few years ago that two relatively small cruise ships were very interested in establishing short cruises within southeast Alaska. I'm told such a business could have contributed $2 million or more to that small community's economy, and created dozens of new jobs. But, because of the current policy, the opportunity simply evaporated.
Why, Mr. President, do we allow this to happen? This is a market almost entirely focused on U.S. citizens going to see one of the United State's most spectacular places, and yet we force them to go to another country to do it. We are throwing away both money and jobs--and getting nothing whatsoever in return.
Why is this allowed to happen? The answer is simple--but it is not rational. Although the current law is actually a job loser, there are those who argue that any change would weaken U.S. maritime interests. I submit, Mr. President, that is not the case.
For some inexplicable reason, paranoia runs deep among those who oppose this bill. They seem to feel that amending the Passenger Service Act so that it makes sense for the United States would create a threat to Jones Act vessels hauling freight between U.S. ports. Mr. President, there simply is no connection whatsoever between the two. I have repeatedly made clear that I have no intention of using this bill to create cracks in the Jones Act.
This bill would actually enhance--not impede--opportunities for U.S. workers. Both shipyard workers and longshoremen--not to mention hotel and restaurant workers and many others--would have a great deal to gain from this legislation, and the bill has been carefully written to prevent the loss of any existing jobs in other trades.
Finally, let me dispose of any suggestion that this bill might farm smaller U.S. tour or excursion boats. The industry featuring these smaller vessels is thriving, but it simply does not cater to the same client base as large cruise ships. For one thing, the tour boats operating in Alaska are all much smaller--under 1,000 tons compared to the 5,000 ton minimum for cruise ships in this bill. The larger vessels can offer unmatched luxury and personal service, on-board shopping, entertainment, and so forth. The smaller vessels offer more flexible routes, the ability to get closer to Alaska's natural attractions, and other benefits. There is no significant competition between the two types of vessel, because the passengers inclined to one are not likely to be inclined to the other.
Mr. President, I cannot claim that this legislation would immediately lead to increased earnings for U.S. ports. I can only say that it would allow them to compete fairly, instead of being anchored by a rule that is actively harmful to U.S. interests. It is, as I said at the beginning of this statement, only a way to open the door.
We have heard a lot of talk about growing the economy and creating jobs during the last few years, and we are bound to keep hearing those phrases even more often over the next few months. But we all know, Mr. President, that such changes are easier to talk about than they are to accomplish. Well, Mr. President, here is a bill that opens the door to thousands of jobs and hundreds of millions of new dollars, and does it without one red cent of taxpayer money.
It has been 110 years since the current law was enacted, and it's time for a change.
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By Mr. LUGAR (for himself and Mr. Leahy):
S. 2077. A bill to amend the Commodity Exchange Act to improve the act, and for other purposes; to the Committee on Agriculture, Nutrition, and Forestry.
The Commodity Exchange Act Amendments of 1996
Mr. LUGAR. Mr. President, today Senator Leahy and I are introducing legislation to amend the Commodity Exchange Act. This bill follows several months of hearings and informal consultations with industry, academics and regulators. The legislation streamlines U.S. futures trading law, conforming it to changing competitive realities.
In many ways, regulation has benefited the U.S. futures industry. Prudent regulation enhances customer protection, prevents and punishes fraud and other abuses, and makes futures markets better able to provide risk management, price discovery and investment opportunity.
Regulation, however, also has its costs. U.S. futures markets face competition that is, in some cases, less regulated or differently regulated. In the years ahead, our challenge is to balance the need for adequate regulation with the need to offer cost-competitive products.
This bill tries to strike such a balance. It requires the Commodity Futures Trading Commission to consider the costs for industry of the regulations it imposes. The bill streamlines the process of introducing new futures contracts, reducing the time that is required to begin trading these new products. It makes similar reforms to the process by which exchanges' rules are reviewed by the CFTC.
Where additional authority for the CFTC is needed, the bill provides it. The CFTC will have the authority to require delivery points for overseas futures markets to provide information that is also regularly demanded of American market participants. This is eminently reasonable, and may assist the CFTC and other regulators in the future if situations similar to the current copper market scandal recur.
The bill will also provide greater legal certainty for swaps, over-
the-counter products that are of increasing importance to many businesses. It is important that these contracts' enforceability be made more certain, so that legal risk does not compound the other risks inherent in any financial transaction.
The bill contains a number of other provisions. I have provided a descriptive summary which may be helpful to our colleagues. Mr. President, I ask unanimous consent that this document and the text of the introduced bill be printed in the Record.
It is late in the session, and I do not expect the Commodity Exchange Act Amendments of 1996 to become law this year. Senator Leahy and I wanted to introduce it to spur discussion and debate, so that early in the next Congress we can again introduce the bill, with any refinements that may be developed in the interim. We both intend that the bill will be a major focus of attention for the Committee on Agriculture, Nutrition, and Forestry next year.
As usual, I am indebted to Senator Leahy for his bipartisan cooperation in this as in so many other endeavors. I am honored that he is an original co-sponsor of the bill.
There being no objection, the material was ordered to be printed in the Record, as follows:
S. 2077
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Commodity Exchange Amendments Act of 1996''.
SEC. 2. HEDGING.
The fourth sentence of section 3 of the Commodity Exchange Act (7 U.S.C. 5) is amended by striking ``through fluctuations in price''.
SEC. 3. DELIVERY POINTS FOR FOREIGN FUTURES CONTRACTS.
Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is amended--
(1) in the third sentence--
(A) by striking ``(1)'' and ``(2)'' and inserting ``(A)'' and ``(B)'', respectively; and
(B) by striking ``No rule'' and inserting ``Except as provided in paragraph (2), no rule'';
(2) by inserting ``(1)'' after ``(b)''; and
(3) by adding at the end the following:
``(2)(A) The Commission shall consult with a foreign government, foreign futures authority, or department, agency, governmental body, or regulatory organization empowered by a foreign government to regulate a board of trade, exchange, or market located outside the United States, or a territory or possession of the United States, that has 1 or more established delivery points in the United States, or a territory or possession of the United States, for a contract of sale of a commodity for future delivery that is made or will be made on or subject to the rules of the board of trade, exchange, or market.
``(B) In the consultations, the Commission shall endeavor to secure adequate assurances, through memoranda of understanding or any other means the Commission considers appropriate, that the presence of the delivery points will not create the potential for manipulation of the price, or any other disruption in trading, of a contract of sale of a commodity for future delivery traded on or subject to the rules of a contract market, or a commodity, in interstate commerce.
``(C) Any warehouse or other facility housing an established delivery point in the United States, or a territory or possession of the United States, described in subparagraph (A) shall--
``(i) keep books, records, and other information specified by the Commission pertaining to all transactions and positions in all contracts made or carried on the foreign board of trade, exchange, or market in such form and manner and for such period as may be required by the Commission;
``(ii) file such reports regarding the transactions and positions with the Commission as the Commission may specify; and
``(iii) keep the books and records open to inspection by a representative of the Commission or the United States Department of Justice.''.
SEC. 4. EXEMPTION AUTHORITY AND SWAP EXEMPTION.
(a) In General.--Section 4(c) of the Commodity Exchange Act
(7 U.S.C. 6(c)) is amended by adding at the end the following:
``(6)(A) An agreement, contract, or transaction (or class thereof) that is otherwise subject to this Act shall be exempt from all provisions of this Act and any person or class of persons offering, entering into, rendering advice, or rendering other services with respect to the agreement, contract, or transaction (or class thereof) shall be exempt for the activity from all provisions of this Act (except in each case the provisions of sections 2(a)(1)(B), 4b, and 4o, any antifraud provision adopted by the Commission pursuant to section 4c(b), and the provisions of section 6(c) and 9(a)(2) to the extent the provisions prohibit manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market): Provided, That prior to, on, or after the date of enactment of this paragraph, the agreement, contract, or transaction (or class thereof) satisfies the eligibility conditions for an exemption under the regulations of the Commission published in the Federal Register on January 22, 1993, and codified in sections 35.1(b)(2) and 35.2 of part 35 of title 17, Code of Federal Regulations.
``(B) This paragraph shall not restrict the authority of the Commission to grant exemptions under this subsection that are in addition to or independent of the exemption provided in this paragraph. No such exemption shall be applied in a manner that restricts an exemption provided under this paragraph.
``(7)(A) The Commission may exempt an agreement, contract, or transaction (or class thereof) under this subsection to the extent that the agreement, contract, or transaction (or class thereof) may be subject to this Act.
``(B) An exemption under this subsection shall not create a presumption that the exempted agreement, contract, or transaction (or class thereof) is subject to this Act.''.
(b) Review.--Not later than 1 year after the date of enactment of this Act, the Commodity Futures Trading Commission shall complete a reconsideration of the regulations contained in part 36 of title 17, Code of Federal Regulations, with the goal of establishing exemptive provisions that are consistent with subsection (c).
(c) Sense of Congress.--It is the sense of Congress that--
(1) the exemption provided under section 4(c) of the Commodity Exchange Act (7 U.S.C. 6(c)), and codified in part 36 of title 17, Code of Federal Regulations, does not yet sufficiently promote fair competition by affording exchange-traded instruments fair and even-handed treatment with similar products traded over-the-counter among institutions and professionals; and
(2) the Commodity Futures Trading Commission should provide for such fair competition by granting instruments traded on or subject to the facilities of exchanges, exemptive flexibility that is equitable in comparison to the exemptive flexibility the Commission has granted to over-the-counter transactions, while ensuring the protection of market participants and financial and market integrity.
(d) Report.--On completion of the review required by subsection (b), the Commodity Futures Trading Commission shall report on the results of the review to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate.
SEC. 5. CONTRACT DESIGNATION.
(a) In General.--Section 5 of the Commodity Exchange Act (7 U.S.C. 7) is amended--
(1) by striking the matter preceding paragraph (1) and inserting the following:
``SEC. 5. DESIGNATION OF A BOARD OF TRADE AS A CONTRACT
MARKET.
``(a) In General.--The Commission shall designate a board of trade as a contract market if the board of trade complies with and carries out the following conditions and requirements:'';
(2) by striking paragraph (7);
(3) by redesignating paragraph (8) as paragraph (7); and
(4) by adding at the end the following:
``(b) Existing and Future Designations.--
``(1) In general.--If a board of trade is designated as a contract market by the Commission under subsection (a) and section 6, the board of trade shall retain the designation for all existing or future contracts, unless the Commission suspends or revokes the designation or the board of trade relinquishes the designation.
``(2) Existing designations.--A board of trade that has been designated as a contract market as of the date of enactment of this subsection shall retain the designation unless the Commission finds that a violation of this Act or a rule, regulation, or order of the Commission by the contract market justifies suspension or revocation of the designation under section 6(b), or the board of trade relinquishes the designation.
``(c) New Contract Submissions.--Except as provided in subsection (e), a board of trade that has been designated as a contract market under subsection (a) shall submit to the Commission all rules that establish the terms and conditions of a new contract of sale in accordance with subsection (d)
(referred to in this section as a `new contract'), other than a rule relating to the setting of levels of margin and other rules that the Commission may specify by regulation.
``(d) Procedures for New Contracts.--
``(1) Required submission to commission.--Except as provided in subsection (e), a contract market shall submit new contracts to the Commission in accordance with subsection
(c).
``(2) Effectiveness of new contracts.--A contract market may make effective a new contract and may implement trading in the new contract--
``(A) not earlier than 10 business days after the receipt of the new contract by the Commission; or
``(B) earlier if authorized by the Commission by rule, regulation, order, or written notice.
``(3) Notice to contract market.--The new contract shall become effective and may be traded on the contract market, unless, within the 10-business-day period beginning on the date of the receipt of the new contract by the Commission, the Commission notifies the contract market in writing--
``(A) of the determination of the Commission that the proposed new contract appears to--
``(i) violate a specific provision of this Act (including paragraphs (1) through (7) of section 5(a)) or a rule, regulation, or order of the Commission; or
``(ii) be contrary to the public interest; and
``(B) that the Commission intends to review the new contract.
``(4) Notice in the federal register.--Notwithstanding the determination of the Commission to review a new contract under paragraph (3) and except as provided in subsection (e), the contract market may make the new contract effective, and may implement trading in the new contract, on a date that is not earlier than 15 business days after the determination of the Commission to review the new contract unless within the period of 15 business days the Commission institutes proceedings to disapprove the new contract by providing notice in the Federal Register of the information required under paragraph (5)(A).
``(5) Disapproval proceedings.--
``(A) Notice of proposed violations.--If the Commission institutes proceedings to determine whether to disapprove a new contract under this subsection, the Commission shall provide the contract market with written notice, including an explanation and analysis of the substantive basis for the proposed grounds for disapproval, of what the Commission has reason to believe are the grounds for disapproval, including, as applicable--
``(i) the 1 or more specific provisions of this Act or a rule, regulation, or order of the Commission that the Commission has reason to believe the new contract violates or, if the new contract became effective, would violate; or
``(ii) the 1 or more specific public interests to which the Commission has reason to believe the new contract is contrary, or if the new contract became effective would be contrary.
``(B) Disapproval proceedings and determination.--
``(i) Opportunity to participate; hearing.--Before deciding to disapprove a new contract, the Commission shall give interested persons (including the board of trade) an opportunity to participate in the disapproval proceedings through the submission of written data, views, or arguments following appropriate notice and an opportunity for a hearing on the record before the Commission.
``(ii) Determination of disapproval.--At the conclusion of the disapproval proceeding, the Commission shall determine whether to disapprove the new contract.
``(iii) Grounds for disapproval.--The Commission shall disapprove the new contract if the Commission determines that the new contract--
``(I) violates this Act or a rule, regulation, or order of the Commission; or
``(II) is contrary to public interest.
``(iv) Specifications for disapproval.--Each disapproval determination shall specify, as applicable--
``(I) the 1 or more specific provisions of this Act or a rule, regulation, or order of the Commission, that the Commission determines the new contract violates or, if the new contract became effective, would violate; or
``(II) the 1 or more specific public interests to which the Commission determines the new contract is contrary, or if the new contract became effective would be contrary.
``(C) Failure to timely complete disapproval determination.--If the Commission does not conclude a disapproval proceeding as provided in subparagraph (B) for a new contract by the date that is 120 calendar days after the Commission institutes the proceeding, the new contract may be made effective, and trading in the new contract may be implemented, by the contract market until such time as the Commission disapproves the new contract in accordance with this paragraph.
``(D) Appeals.--A board of trade that has been subject to disapproval of a new contract by the Commission under this subsection shall have the right to an appeal of the disapproval to the court of appeals as provided in section 6(b).
``(6) Contract market deemed designated.--A board of trade shall be deemed to be designated a contract market for a new contract of sale for future delivery when the new contract becomes effective and trading in the new contract begins.
``(e) Required Interagency Review.--Notwithstanding subsection (d), no board of trade may make effective a new contract (or option on the contract) that is subject to the requirements and procedures of clauses (ii) through (v) of paragraph (1)(B), and paragraph (8)(B)(ii), of section 2(a) until the requirements and procedures are satisfied and carried out.''.
(b) Conforming Amendment.--The first sentence of section 6(a) of the Commodity Exchange Act (7 U.S.C. 8(a)) is amended by striking ``Any board of trade desiring'' and inserting ``A board of trade that has not obtained any designation as a contract market for a contract of sale for a commodity under section 5 that desires''.
SEC. 6. DELIVERY BY FEDERALLY LICENSED WAREHOUSES.
Section 5a(a) of the Commodity Exchange Act (7 U.S.C. 7a(a)) is amended by striking paragraph (7) and inserting the following:
``(7) Repealed;''.
SEC. 7. SUBMISSION OF RULES TO COMMISSION.
Section 5a(a) of the Commodity Exchange Act (7 U.S.C. 7a(a)(12)) is amended by striking paragraph (12) and inserting the following:
``(12)(A)(i) except as otherwise provided in this paragraph, submit to the Commission all bylaws, rules, regulations, and resolutions (collectively referred to in this subparagraph as `rules') made or issued by the contract market, or by the governing board or committee of the contract market (except those relating to the setting of levels of margin, those submitted pursuant to section 5 or 6(a), and those the Commission may specify by regulation) and may make a rule effective not earlier than 10 business days after the receipt of the submission by the Commission or earlier, if approved by the Commission by rule, regulation, order, or written notice, unless, within the 10-business-day period, the Commission notifies the contract market in writing of its determination to review such rules for disapproval and of the specific sections of this Act or the regulations of the Commission that the Commission determines the rule would violate. The determination to review such rules for disapproval shall not be delegable to any employee of the Commission. Not later than 45 calendar days before disapproving a rule of major economic significance (as determined by the Commission), the Commission shall publish a notice of the rule in the Federal Register. The Commission shall give interested persons an opportunity to participate in the disapproval process through the submission of written data, views, or arguments. The determination by the Commission whether a rule is of major economic significance shall be final and not subject to judicial review. The Commission shall disapprove, after appropriate notice and opportunity for hearing (including an opportunity for the contract market to have a hearing on the record before the Commission), a rule only if the Commission determines the rule at any time to be in violation of this Act or a regulation of the Commission. If the Commission institutes proceedings to determine whether a rule should be disapproved pursuant to this paragraph, the Commission shall provide the contract market with written notice of the proposed grounds for disapproval, including the specific sections of this Act or the regulations of the Commission that would be violated. At the conclusion of the proceedings, the Commission shall determine whether to disapprove the rule. Any disapproval shall specify the sections of this Act or the regulations of the Commission that the Commission determines the rule has violated or, if effective, would violate. If the Commission does not institute disapproval proceedings with respect to a rule within 45 calendar days after receipt of the rule by the Commission, or if the Commission does not conclude a disapproval proceeding with respect to a rule within 120 calendar days after receipt of the rule by the Commission, the rule may be made effective by the contract market until such time as the Commission disapproves the rule in accordance with this paragraph.
``(B)(i) The Commission shall issue regulations to specify the terms and conditions under which, in an emergency as defined by the Commission, a contract market may, by a \2/3\-vote of the governing board of the contract market, make a rule (referred to in this subparagraph as an `emergency rule') immediately effective without compliance with the 10-day notice requirement under subparagraph (A), if the contract market makes every effort practicable to notify the Commission of the emergency rule, and provide a complete explanation of the emergency involved, prior to making the emergency rule effective.
``(ii) If the contract market does not provide the Commission with the requisite notification and explanation before making the emergency rule effective, the contract market shall provide the Commission with the notification and explanation at the earliest practicable date.
``(iii) The Commission may delegate the power to receive the notification and explanation to such individuals as the Commission determines necessary and appropriate.
``(iv) Not later than 10 days after the receipt from a contract market of notification of such an emergency rule and an explanation of the emergency involved, or as soon as practicable, the Commission shall determine whether to suspend the effect of the rule pending review by the Commission under the procedures of subparagraph (A).
``(v)(I) The Commission shall submit a report on the determination of the Commission on the emergency rule under clause (iv), and the basis for the determination, to the affected contract market, the Committee on Agriculture of the House of Representatives, and the Committee on Agriculture, Nutrition, and Forestry of the Senate.
``(II) If the report is submitted more than 10 days after the Commission's receipt of notification of the emergency rule from a contract market, the report shall explain why submission within the 10-day period was not practicable.
``(III) A determination by the Commission to suspend the effect of a rule under this subparagraph shall be subject to judicial review on the same basis as an emergency determination under section 8a(9).
``(IV) Nothing in this paragraph limits the authority of the Commission under section 8a(9);''.
SEC. 8. AUDIT TRAIL.
Section 5a(b) of the Commodity Exchange Act (7 U.S.C. 7a(b)) is amended--
(1) in paragraph (3), by inserting ``selected by the contract market'' after ``means'' each place it appears; and
(2) by adding at the end the following:
``(7) The requirements of this subsection establish performance standards and do not mandate the use of a specific technology to satisfy the requirements.''.
SEC. 9. MISCELLANEOUS TECHNICAL AMENDMENTS.
Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended--
(1) in paragraph (2)--
(A) in subparagraph (B), by inserting ``this paragraph or'' after ``the provisions of''; and
(B) in subparagraph (D), by inserting ``pleaded guilty to or'' after ``such person has''; and
(2) in paragraph (3)(H), by striking ``or has been convicted in a State court,'' and inserting ``or has pleaded guilty to, or has been convicted, in a State court,''.
SEC. 10. CONSIDERATION OF EFFICIENCY, COMPETITION, RISK
MANAGEMENT, AND ANTITRUST LAWS.
Section 15 of the Commodity Exchange Act (7 U.S.C. 19) is amended--
(1) by striking ``Sec. 15. The Commission'' and inserting the following:
``Sec. 15. (a)(1) Prior to adopting a rule or regulation authorized by this Act or adopting an order (except as provided in subsection (b)), the Commission shall consider the costs and benefits of the action of the Commission.
``(2) The costs and benefits of the proposed Commission action shall be evaluated in light of considerations of protection of market participants, the efficiency, competitiveness, and financial integrity of futures markets, price discovery, sound risk management practices, and other appropriate factors, as determined by the Commission.
``(b) Subsection (a) shall not apply to the following actions of the Commission:
``(1) An order that initiates, is part of, or is the result of an adjudicatory or investigative process of the Commission.
``(2) An emergency action.
``(3) A finding of fact regarding compliance with a requirement of the Commission.
``(c) The Commission''; and
(2) by striking ``requiring or approving'' and inserting
``requiring, reviewing, or disapproving''.
SEC. 11. DISCIPLINARY AND ENFORCEMENT ACTIVITIES.
(a) In General.--It is the sense of Congress that the Commodity Futures Trading Commission should--
(1) to the extent practicable, avoid unnecessary duplication of effort in pursuing disciplinary and enforcement actions if adequate self-regulatory actions have been taken by contract markets and registered futures associations; and
(2) retain an oversight and disciplinary role over the self-regulatory activities by contract markets and registered futures associations in a manner that is sufficient to safeguard financial and market integrity and the public interest.
(b) Report.--Not later than 1 year after the date of enactment of this Act, the Commission shall submit a report to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate that evaluates the effectiveness of the enforcement activities of the Commission, including an evaluation of the experience of the Commission in preventing, deterring, and disciplining violations of the Commodity Exchange Act (7 U.S.C. 1 et seq.) and Commission regulations involving fraud against the public through the bucketing of orders and similar abuses.
SEC. 12. DELEGATION OF FUNCTIONS BY THE COMMISSION.
(a) In General.--It is the sense of Congress that the Commodity Futures Trading Commission should--
(1) review its rules and regulations that delegate any of its duties or authorities under the Commodity Exchange Act (7 U.S.C. 1 et seq.) to contract markets or registered futures associations;
(2) consistent with the public interest and law, determine which additional functions, if any, performed by the Commission should be delegated to contract markets or registered futures associations; and
(3) establish procedures (such as spot checks, random audits, reporting requirements, pilot projects, or other means) to ensure adequate performance of the additional functions that are delegated to contract markets or registered futures associations.
(b) Report.--Not later than 1 year after the date of enactment of this Act, the Commission shall report the results of its review and actions under subsection (a) to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate.
____
Summary and Discussion--The Commodity Exchange Act Amendments of 1996
Section 1. Short title.
The bill is entitled ``The Commodity Exchange Act Amendments of 1996.''
Section 2. Hedging.
The CEA does not directly define the term ``hedging.'' In Section 3 of the CEA, which contains various legislative findings that justify regulation of futures markets, the statute speaks of business operators ``hedging themselves against possible loss through fluctuations in price.'' Questions have been raised whether hedging can occur against risks other than price risks--for instance, in new futures contracts that are based on yields of specified crops in particular states. The bill deletes the phrase ``through fluctuations in price.'' It makes clear that risks to be hedged may be risks other than those directly resulting from price changes. This change will not affect the authority to establish speculative limits, require reporting of large trader positions and otherwise ensure market integrity.
Section 3. Delivery Points for Foreign Futures Contracts.
In recent years, some overseas futures exchanges have established delivery points in the U.S. The implications of making and taking delivery of a physical commodity that is priced on a foreign exchange may differ, depending on the comparability of price discovery on that exchange and on U.S. exchanges, as well as other factors. Serious questions have been raised, as the current scandal in the copper markets has unfolded, about what role, if any, delivery points for foreign futures contracts may have played in that affair. These questions are not yet answered. However, the legislation makes changes that will be appropriate regardless of the outcome of specific investigations.
The bill directs the CFTC to consult with overseas regulators and other appropriate parties in countries where futures exchanges have established U.S. delivery points. The aim of the consultations will be to secure adequate assurances against any adverse effect on U.S. markets because of these delivery points. Such assurances could take the form of changes to regulations or trading rules in the overseas market.
The bill also gives the CFTC authority to obtain information from warehouses that are delivery points for foreign exchanges. This information would be similar to that which the CFTC may already require of persons making trades on overseas futures markets, and will assist the CFTC in ensuring market integrity, preventing abuses and otherwise discharging its responsibilities.
Section 4. Exemption Authority and Swap Exemption.
The Act gives the CFTC authority to exempt transactions from its regulatory requirements, either completely or on stated terms. In 1993, the CFTC used this authority to exempt swap agreements from most, but not all, portions of the Act. This exemption generally seems to have worked well, facilitating a climate in which swaps, which offer numerous benefits to their users if properly and prudently employed, could trade with secure legal status. (It was the lack of such legal certainty which, in part, prompted Congress to enact the exemptive authority.)
The bill will provide additional legal certainty for swaps transactions in two ways. First, the bill codifies the present exemption from regulation for transactions that meet its requirements, either now or in future. For these qualifying instruments, a statutory change would be required in order for the exemption to become more restrictive than it now is. The codification does not affect the CFTC's power to grant additional exemptions that would be less restrictive than the current exemption. Nor does it limit the CFTC's ability to enforce anti-manipulation or anti-fraud provisions of the CEA as they may apply to these transactions or as the present exemptions may be conditioned on compliance with their provisions.
Second, the bill codifies two important elements of the present swaps exemptive authority, again to enhance legal certainty. The legislation clarifies that the CFTC may issue an exemption that is applicable to the extent the exempted transaction may have been subject to the Act--i.e., without requiring a prior decision on whether the transaction actually was, in fact, subject to the Act. Relatedly, the legislation states that the mere fact that a transaction was exempted from the Act does not, in itself, create a presumption that the transaction was one that would have fallen under the Act's regulatory requirements had it not been exempted. Both these clarifications are consistent with present regulations for exemptions.
This section of the bill also directs the CFTC to review rules that permit futures exchanges, under narrowly defined conditions, to operate less-regulated markets that are restricted to professional and institutional participants. These so-called ``Part 36'' rules have not, so far, resulted in the active operation of such markets. The issue is an especially important one because of the competitive challenges futures exchanges face, both from overseas markets and from over-the-counter products in the U.S. The legislation does not contemplate greater regulation of the latter markets, and indeed strives to achieve greater legal certainty for O-T-C products. But it does express the view of Congress that futures exchanges need to be able to compete in today's financial marketplace, in a way that reduces regulatory costs of doing business while assuring customer protection. To this end, the CFTC is directed to re-examine the Part 36 rules and report, within a year, to Congress on what if any changes may be appropriate. This broad mandate, as opposed to requirements for specific changes in the current regulations, reflects a view that the CFTC should be better able than Congress to assess necessary reforms. The report will afford an opportunity for Congress to judge the adequacy of any changes, and to contemplate any additional statutory changes that may be required.
Section 5. Contract Designation.
The Act now requires futures exchanges to be ``designated'' as a ``contract market'' for each futures contract they trade. This process has been streamlined by the CFTC in recent years, but the statute continues to reflect a rather elaborate process in which, in many ways, the burden of proof is placed on exchanges to demonstrate why they should be able to offer new products for trading. Even for a regulated financial sector like the futures industry, this implicit presumption against new product development is out of date. The bill streamlines the process of introducing new futures contracts, both by compressing the time available for agency review and by creating a presumption that products developed by exchanges should be permitted to trade unless the CFTC finds compellingly why they should not. The legislation treats new contract applications as rules, albeit under somewhat different procedures from other exchange rules. Under the new procedure, an exchange submits a new contract to the CFTC. The new contract may trade after 10 business days, unless the CFTC states an intention to review it for possible disapproval. After a further 15 business days, the new contract can be traded unless the CFTC institutes proceedings to disapprove it. These proceedings are to be completed within 120 days; if not, the new contract can trade until and unless it is finally disapproved. In contrast to the present burden on an exchange to show that a contract is in ``the public interest,'' the CFTC could only disapprove a contract by showing that it was ``contrary to the public interest'' (or by showing that it violated law or regulations). The philosophy is a fairly simple one: Subject to prudent regulatory limits, private futures exchanges can more appropriately and efficiently decide which new products are ripe for trading than can the government. The exchanges may sometimes err in these judgments, but that is the way markets work.
Section 6. Delivery by Federally Licensed Warehouses.
An obscure provision of the Act now allows any federally licensed grain warehouse to make delivery against a futures contract, on giving reasonable notice. Though seldom used, this provision appears to conflict with the ability of exchanges to establish their own trading procedures, including delivery points. In an extremely tight market, the current provision could in some circumstances facilitate market manipulation. The bill repeals this provision.
Section 7. Submission of Rules to Commission.
The bill revises current requirements for submitting exchange rules to the CFTC. These rules affect the everyday procedures for doing business on the exchange, as well as the ground rules for trading. They run the gamut from major to minor. As with the procedures for approving new contracts, the legislation compresses the time available for federal review and generally streamlines procedures. Rules are to be submitted to the CFTC and can become effective in 10 business days unless the CFTC notifies the exchange that it will review them for possible disapproval. If the CFTC does not institute disapproval proceedings within 45 days of receiving the proposed rule, or conclude its proceedings within 120 days, the rule can become effective until and unless disapproved.
The authors of the bill intend that its legislative history will also discuss the implementation of statutory requirements for the composition of exchange boards of directors. The CFTC will be directed to report, on an ongoing basis, its evaluation of how fully these requirements are being met. The report language will provide further clarification of Congressional intent with regard to the qualification of individuals to satisfy particular requirements for board representation.
Section 8. Audit Trail.
Futures exchanges are subject to audit trail requirements that are intended to ensure market integrity, and to deter and detect abuse. The bill clarifies these requirements in one respect. It states--consistent with testimony by the CFTC before Congress in 1995--that the audit trail requirements establish a performance standard, not a mandate for any particular technological means of achieving the standard. In further support of this clarification, the bill speaks of the
``means selected by the contract market'' for meeting audit trail standards. The authors of the bill intend that its legislative history will also note further CFTC testimony that, in assessing the ``practicability'' of various components of the audit trail standards, the cost to exchanges of meeting the standards is one factor to be taken into account.
Section 9. Miscellaneous Technical Amendments.
The bill makes several technical changes to correct omissions in the current statute.
Section 10. Consideration of Efficiency, Competition, Risk Management, and Antitrust Laws.
The bill requires the CFTC, in issuing rules, regulations or some types of orders, to take into account the costs and benefits of the action it contemplates. The requirement is not for a quantitative cost-benefit analysis, but a mandate to consider both costs and benefits, as well as other enumerated factors. The authors of the bill believe that in establishing its policies and giving direction to market participants, the CFTC should weigh how its actions may effect the participants' costs of doing business, as well as what benefits may accrue from the action.
Some activities of the CFTC, of course, do not call for this kind of approach, and indeed applying a cost-benefit requirement to them would be inappropriate. Thus, the bill exempts the CFTC's adjudicatory and investigative processes, emergency actions and certain findings of fact that are objective, quantitative or otherwise unsuitable for a cost-benefit approach. The bill's eventual legislative history will further discuss Congressional intent in enacting this requirement.
Section 11. Disciplinary and enforcement activities.
Enforcement is a priority for the CFTC. Like other financial regulators, the CFTC is assisted in its enforcement activities by the complementary rules, surveillance and disciplinary actions of self-regulatory organizations (SROs). These include both the futures exchanges themselves and the National Futures Association. The bill provides guidance to the CFTC on the deployment of enforcement resources, and requires a report in 1 year on the overall enforcement program. The legislation expresses the sense of Congress that the CFTC should avoid unnecessary duplication of effort where SROs have taken adequate action to deter abuse and ensure customer protection. It further states that the CFTC's oversight and disciplinary role should be sufficient to safeguard market integrity and protect public confidence in markets.
Section 12. Delegation of functions by the Commission.
The CFTC, under current law, has delegated some limited duties to the National Futures Association. Today's austere budget climate makes it prudent for the commission to assess whether other functions could appropriately be delegated. The bill calls on the CFTC to determine which, if any, additional functions should be delegated to SROs, suggesting the use of procedures like spot checks and random audits to ensure that any delegated functions are adequately performed, and requires a report in one year with the results of the review. The authors intend that the bill's legislative history will cite several current CFTC activities that could be considered for delegation.
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Outline of the Commodity Exchange Act Amendments of 1996
The Commodity Exchange Act has benefited the American economy. It has helped encourage a dynamic, world-class futures trading industry that allows farmers, ranchers and other business operators to manage risk, provides investment opportunities and offers protection to consumers of its services. From time to time, Congress has re-examined the Act to bring it up to date with changing markets. Such an update is now opportune.
On June 5, the Committee on Agriculture, Nutrition, and Forestry heard testimony on the need to update the Commodity Exchange Act. Since then, committee staff have consulted extensively with federal agencies and private industry, seeking to explore the implications of legislative proposals by various groups.
As a result of this thorough process, we announced on August 2, 1996, our intention to introduce legislation to amend the Commodity Exchange Act. Today we are introducing that legislation. Because it is late in the legislative session, we do not intend that the bill become law this year. We intend it to spark discussion, so that the Congress can make comprehensive revisions to the Act in 1997.
There is a public interest in a strong, competitive U.S. futures industry because of its critical role in price discovery and business risk management. This public interest implies, and requires, a degree of regulation. In recent years, U.S. futures exchanges have also faced increasing competition from foreign exchanges and from over-the-counter derivative products.
U.S. exchanges face some regulatory costs that are not borne by their competitors. The Act, and the Commodity Futures Trading Commission's actions to implement its requirements, must strike an appropriate balance between prudent regulation and the need for a cost-competitive industry.
In our August 2 statement, we noted the importance of a provision of the Act called the ``Treasury amendment.'' This amendment excludes interbank foreign exchange transactions and some other enumerated transactions from the CFTC's jurisdiction. It has been the subject of much more frequent litigation than other sections of the Act. It was written, in some haste, in 1974 at a time when many financial markets and instruments were different or less fully developed than today. The case for Congress to revisit, reassess and clarify the Treasury amendment is compelling.
We asked the CFTC and the Treasury Department to conclude discussions which they had begun some months before, and report their progress around Labor Day. Unfortunately, these discussions have so far produced some points of agreement but no overall consensus among the two agencies or among the other members of the President's working group on financial markets.
We are disappointed that an agreement on the Treasury amendment has not yet been forged. The issues raised by the amendment seem to us substantial but not insurmountable. In fairness to the Administration, there is not yet a consensus in the private sector either about the appropriate scope of the amendment's exclusions from the Act.
With some reluctance, we have been persuaded to defer addressing the Treasury amendment in this bill. The Administration asserts that given furhter time, it will be able to reach internal agreement. We are today informing the Administration that, in our view, an agreement by the end of this year is necessary so that the issue can be presented to our colleagues at the beginning of the 105th Congress. If the Administration is not able to present its ideas by the end of 1996, we will reluctantly conclude that no consensus in the executive branch is likely, and not await further agency deliberations.
Deferring a provision of the Treasury amendment does not diminish its importance. Since today's legislation will have to be reintroduced in January 1997, we believe this course of action is prudent, since not only the Administration but also various interested private groups will have the opportunity to confer between now and the end of the year. We urge them to do so. Independent of both efforts, we are considering a variety of specific reforms to the Treasury amendment, and will be interested to compare these ideas to those of the private sector and the Administration. We intend that the reintroduced version of today's bill will propose a solution to the Treasury amendment problem.
We invite public comment on the Commodity Exchange Act Amendments. We believe this bill represents sound policies. We want to take full account, however, of other views. As we said in August, the bill is neither an opening gambit nor a least common denominator. It represents our best judgment of how the Act should prudently be changed, but our minds remain open.
The Agriculture Committee's work on the Commodity Exchange Act has been bipartisan and collegial. Like the 1996 farm bill, the landmark new food safety law and other important laws originated by the committee, this legislative effort is one on which we have worked together. Our cooperation will continue.
Mr. LEAHY. Mr. President, today Senator Lugar and I are introducing legislation to amend the Commodity Exchange Act. This legislation updates and streamlines U.S. futures trading law.
There is a strong interest in maintaining a viable futures market. Senator Lugar's and my review of committee testimony combined with the informal meetings with the industry, regulators, and interested academics has convinced us that it is appropriate to make these revisions to the CEA.
I do not expect that this bill will become law during this session. But introducing it now will afford an opportunity to engage in an active public discussion and debate over the changes that we propose here today.
It is my experience that such a dialog helps develop solid bipartisan legislation. As with most issues, there are many interests that must be balanced. And, Senator Lugar and I have strived to strike the right balance between these interests. But we will profit from the dicussions that this bill is sure to prompt.
I am pleased to join my colleague in offering this bill. Senator Lugar and I have worked together on futures issues since we came to the Agriculture Committee. We did the same on this bill--working to ensure that these markets remain competitive while still maintaining effective provisions on customer protection and market integrity such as the 1992 audit trail provisions.
I look forward to continuing our discussions.
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By Mr. BINGAMAN (for himself, Mr. Kempthorne, and Mr. Craig):
S. 2078. A bill to authorize the sale of excess Department of Defense aircraft to facilitate the suppression of wildfire; to the Committee on Armed Services.
the wildfire suppression aircraft transfer act
Mr. BINGAMAN. Mr. President, this Nation has had a very severe fire season this year. So far almost 6 million acres have burned. The average amount burned over the last 6 years is a little over 2 million acres per year. Airplanes, known as airtankers, play a critical role in fighting wildfires. Airtankers are used in the initial attack of wildfires in support of firefighters on the ground and, on large wildfires, to aid in the protection of lives and structures from rapidly advancing fires.
Today, I and my colleagues, Senators Kempthorne and Craig, are introducing legislation that will help ensure that Federal firefighters continue to have access to airtanker services. The Wildfire Suppression Aircraft Transfer Act of 1996 will help facilitate the sale of former military aircraft to contractors who provide firefighting services to the Forest Service and the Department of the Interior. The existing fleet of available airtankers is aging rapidly and fleet modernization is critical to the continued success of the firefighting program.
Currently, legislative authority does not exist for the transfer or sale of excess turbine-powered military aircraft, suitable for conversion to airtankers, to private operators. This greatly hampers efforts to modernize the airtanker fleet. This bill will require that the aircraft be used only for firefighting activities.
Time is very short, but it is critical that this bill become law in this Congress. If we fail to pass this law, airtanker operators will not have access to the planes they need to update the aging airtanker fleet.
I urge my colleagues to support our efforts to ensure that Federal firefighters have the resources they need to protect the public and their property from the threat of wildfires.
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By Mr. MOYNIHAN:
S. 2079. A bill to repeal the prohibition against State restrictions on communications between government agencies and the INS; to the Committee on the Judiciary.
alien information provision repeal legislation
Mr. MOYNIHAN. Mr. President, on Wednesday, September 11, Mayor Rudolph W. Giuliani of New York City delivered an address at Georgetown University Law School about an obscure provision in the recently passed welfare legislation. The provision, section 434 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, states:
Notwithstanding any other provision of Federal, State, or local law, no State or local government entity may be prohibited, or in any way restricted, from sending to or receiving from the Immigration and Naturalization Service
(INS) information regarding the immigration status, lawful or unlawful, of an alien in the United States.
Mayor Giuliani said it would ``create chaos in New York City.'' I agree with him that this provision is ill-advised and threatens the public health and safety of residents of New York City. It conflicts with a 1985 executive order issued by then-Mayor Edward I. Koch prohibiting city employees from reporting suspected illegal aliens to the INS unless the alien was charged with a crime. That executive order, which is similar to local laws in other States and cities, was intended to ensure that fear of deportation does not deter illegal aliens from seeking emergency medical attention, reporting crimes, and so on.
An earlier version of this provision was first introduced in welfare legislation during the 103d Congress as a part of H.R. 3500, the Responsibility and Empowerment Support Program Providing Employment, Child Care, and Training Act, sponsored by Representatives Michel, Gingrich, and Santorum. On September 8, 1995, during Senate consideration of H.R. 4, the Work Opportunity Act of 1995, Senator Santorum, along with Senator Nickles, offered a similar amendment. The amendment was adopted by the Senate by a vote of 91 to 6, but H.R. 4 was later vetoed by President Clinton.
This year, the provision was included in S. 1795, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which was signed by President Clinton on August 22, 1996.
Because this provision poses a threat to health and safety in New York City and elsewhere, I am today introducing legislation to repeal section 434 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. I ask unanimous consent that the text of the bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the Record, as follows:
S. 2079
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. REPEAL OF THE PROHIBITION AGAINST STATE
RESTRICTIONS ON COMMUNICATIONS BETWEEN
GOVERNMENT AGENCIES AND THE INS.
Section 434 of the Personal Responsibility and Work Opportunity Act of 1996 (Public Law 104-193) is repealed.
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