“Good afternoon. Thank you Chairman Lucas for holding today’s hearing and welcome, Chairman Gensler, back to the Committee. Today we are again reviewing provisions within Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“When writing this legislation the Committee’s goal was to bring greater transparency and accountability to the derivatives marketplace. For too long the over-the-counter swap market operated in the darkness; as a consequence, the actions of some financial institutions contributed to the worst recession our country has seen since the Great Depression. The Dodd-Frank Act gave regulators new tools to monitor derivatives trading. To accomplish this, we had to identify the market activities and participants that merited greater oversight.
“However, we also worked very hard to ensure that those not responsible for the financial collapse, such as end users using the markets to mitigate risk, would not bear the burden of further oversight. After all, they weren’t the ones that got us into the mess. Given that these markets have been hidden for so long, the challenge was to distinguish the products and persons to which regulation should apply from those to which it should not.
“I’ve heard from a lot of folks that are concerned about how the CFTC’s proposed rules - or lack thereof - classifying certain entities and products could potentially impact them. I am sympathetic to those concerns since they have been coming from groups that were not responsible for the financial crisis. We need to look closely at the situation before us to make sure that is not the case.
“However, I am equally concerned that some of the big financial firms, whose irresponsible behavior Dodd-Frank seeks to address, are looking at ways to use the end user concerns to create loopholes for themselves. While I’m not a big fan of regulation, the requirements under Title VII are necessary to ensure we don’t get in another situation where the American taxpayer has to bail out large financial firms. I hope the second panel of witnesses will speak to how their concerns can be addressed in a manner that precludes the possibility of inadvertently creating a new loophole that renders the law obsolete.
“Additionally, I would like to remind everyone that the process of implementing a law has to have a starting point. While not everyone may like where the CFTC is starting, these are proposed rules, not final rules. Interested parties and even members of Congress have and will continue to share their thoughts with the CFTC both in person and through the comment process. I have some optimism that at the end of the day the resulting rules are going to be acceptable. If they aren’t, it will definitely be an area for the Committee to address.
“Again, I thank the Chair for holding today’s hearing and look forward to hearing from our witnesses."
Source: House Committee on Agriculture
