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Public Statements

Wall Street Reform And Consumer Protection Act Of 2009

Floor Speech

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Date:
Location: Washington, D.C.

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I thank Chairman Peterson for his leadership on the bill and Chairman Frank for his good work on this terribly important work that we now do to try to restore a sense of faith and trust in the financial system, which American companies and families rely on for the credit that allows them to create jobs and offer employment.

One of the least understood portions of this bill, Madam Chair, but one of the most important is the work that has been done on derivatives, instruments that allow our farmers to get rid of the risk of future soybean prices if they don't want to bear those risks, that allow our exporters to get rid of currency risk that they don't want to bear, but instruments that, despite the comments of my good friend from New Jersey, were very, very much at the core of the financial meltdown that we have seen and are now living through.

My friend seems to forget three letters: AIG. He forgets that that great enemy of American capitalism, that wild-eyed critic of markets, Warren Buffett, called credit default swaps ``weapons of financial mass destruction.'' And in reviewing some of these, he said these must have been contracts that were devised by madmen. This is Warren Buffett. The Democratic amendment would do several market-friendly things. One, it would say that these contracts will trade in the light of day, that they will clear in clearinghouses. This is an idea that is thousands of years old, Economics 101. Markets are healthier if we know who is selling what to whom and for what price, if we can see who is taking on what risk, something that if the market had known in the AIG experience, we might have been saved the awful spectacle of taxpayer dollars being injected into private companies. The Democratic amendment says it will trade in the light of day. That is not a radical, heavy-handed, Byzantine, or cumbersome idea; it's plain good market economics.

The Democratic amendment would say that if you take big bets, we're going to make sure you've got the capital to make good on those bets. Again not a terribly radical idea. But if you are going to insure somebody, we will make sure you've got the capital to make good on the insurance that you have sold.

Lastly and importantly, a derivative contract always involves somebody getting rid of risk, that farmer, that company. We protect those end users and say you will not be subject to regulation. But the people who buy that risk, the financial entities that brought us to this place, will be subject to oversight.

So, my colleagues, this is a good, smart, market-friendly amendment, and I urge its passage and support.

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