Senator Debbie Stabenow, Chairwoman, U.S. Senate Committee on Agriculture, Nutrition and Forestry
March 3, 2011
Washington, DC
Good morning. The Senate Committee on Agriculture, Nutrition and Forestry will now come to order.
Thank you to our witnesses and to the public for joining us this afternoon in what has been a busy week. We are here today to discuss an extremely important part of this Committee’s jurisdiction - oversight of derivatives reforms in the Wall Street Reform and Consumer Protection Act.
Derivatives are a significant part of our financial markets and play an important role in our economy. More than 38 million Americans work at companies that use derivatives to manage their risk and many more, from pensions to municipalities, use them to protect against market volatility. Unfortunately, derivatives also played a significant role in the failures that led to the financial crisis. Before regulatory reform, swaps were trading over-the-counter, off-exchange, and in the dark. The result was that people who had saved money and played by the rules saw their 401(k) plans plummet in value. Small businesses and farmers couldn't get the credit they needed to keep the lights on, and many had to close their doors permanently. Before it was over, 8 million Americans had lost their jobs.
Last year, Congress passed the Wall Street Reform and Consumer Protection Act to address the abuses in these markets and to give significant authority to regulators to prevent future crises. During that debate, I fought to ensure that the bill preserved the ability of American farmers, co-ops, manufacturers, utilities, and businesses to use derivatives for legitimate business reasons. They use derivatives to protect themselves from fluctuating currency exchange rates, interest rates, fuel prices, and commodity prices. This risk protection provides companies with the certainty to grow and create jobs.
While Congress greatly expanded the authority of the SEC and the CFTC, that authority came with a warning - they must not overreach. These agencies must follow Congressional intent and protect end-users from burdensome margin requirements, which if imposed, would divert much-needed capital from investments and job creation.
Chairman Gensler and Chairman Shapiro, I hope you have considered how new rules will fit together in a way that makes sense for the markets; whether that is phasing-in implementation or carefully sequencing the rules. We must make sure the market infrastructure is in place, the technology is ready, and that market participants are able to meet the requirements of this law. The new accountability and transparency we have created is clearly in the public interest and the most important thing is to get it right, not do it quickly.
We also know there are serious budget constraints. I am concerned that if our agencies don't have the tools they need, we are asking for a repeat of the crisis that cost, as I mentioned before, 8 million American jobs.
It is also critical that the system is able to adapt to the significant changes in the law. These are dynamic, diverse markets, and we need to provide as much certainty as possible.
I look forward to working with everyone involved to make sure we get the implementation of these reforms right to protect our system from another crisis, while maintaining the competiveness of U.S. farmers, businesses and financial markets.
I will now yield to Senator Roberts for his opening remarks.
Source: U.S. Senate Committee On Agriculture, Nutrition, & Forestry
