Cantwell Urges Senate to Adopt Tough Wall Street Reform Legislation
Today, U.S Senator Maria Cantwell (D-WA) urged the Senate leadership to push for transparency and tough regulatory oversight of derivatives trading and commodities markets to end abusive trading practices. Joining Cantwell at a news conference were financial experts and commodity "end-users" representing businesses that actually trade in or use commodities such as petroleum and agriculture products.
"Unregulated, dark derivatives markets allowed Wall Street traders to reap billions before their toxic financial assets imploded the American economy," said Senator Cantwell at today's press conference. "These bad bets had consequences that reached far beyond lower Manhattan. This is not just a debate about history. Without tough derivatives regulation, the financial crisis that has done so much damage to our economy will happen again."
Cantwell, a leader in the fight to prevent a repeat of the financial meltdown of 2008, praised legislation proposed by Senate Agriculture Committee Chairwoman Blanche Lincoln (D-AR) that lays down tough restrictions on derivatives trading. Senate leadership should adopt the Lincoln language as the basis for derivatives controls included in the financial regulatory reform bill to be taken up by the full Senate, Cantwell said. As the evidence has mounted of the role derivatives played in causing the financial crisis, Cantwell has advocated moving standardized derivatives onto fully regulated public exchanges and clearinghouses. Loopholes in the House-passed bill could exempt up to 60 percent of the derivatives market from exchange trading and central clearing requirements..
"Once Congress deregulated the swaps market in 1999 it became a $600 trillion high-stakes casino for Wall Street to take big risks and bring our economy to the brink. We are going to fight for legislation to change this system and bring transparency and capital backing to this market. Senator Lincoln has put forth a tough proposal that represents a stare-down of Wall Street interests who want to protect their highly profitable and highly risky trading practices."
In the Senate, two committees are involved in crafting regulatory reform legislation. The Banking Committee has sent its bill to the Senate floor for debate. The Senate Agriculture Committee, chaired by Senator Lincoln, is due to mark-up its version of regulatory reform on Wednesday. Because derivatives often involve financial instruments based on agriculture products, the Agriculture Committee plays a key role in proposing derivatives controls.
"As the daughter of a farmer, Senator Lincoln knows the difference between farmers legitimately hedging and Wall Street speculators cooking up toxic assets," said Senator Cantwell. "We believe the model Senator Lincoln has laid out should be the basis for very strong, loophole-free derivatives reform legislation. Although I still have suggestions on how it can be strengthened, Senator Lincoln's bill looks to be a real stare down of Wall Street."
Senator Lincoln first laid out her tough stance on derivatives in a letter last week that responded to a bipartisan letter sent in January by Cantwell and Senators Dianne Feinstein (D-CA), Byron Dorgan (D-ND), and Olympia Snowe (R-ME), advocating tough restrictions on derivative trading.
"I have long pushed for more aggressive regulation of the complex financial instruments known as derivatives and bilateral swaps, which were exempted from federal oversight through loopholes in the Commodity Futures Modernization Act of 2000," said Senator Feinstein in a written statement.
"Senator Lincoln's regulatory reform bill is a major step forward. It will help rein in the reckless trading of Wall Street Banks and their executives who took enormous gambles in unregulated markets at the expense of our nation's economic health. The proposal, as currently drafted, will close the so-called London loophole and Swaps loophole; establish greater transparency; help reduce systemic risk; and encourage exchange trading and clearing.
"This is a substantive proposal, and I look forward to working with Senator Lincoln, Senator Cantwell and others to make any necessary improvements to help prevent future massive financial meltdowns of the scale of Enron, AIG or Lehman Brothers. It's time to get market reform done."
Once the Agriculture Committee bill is reported from committee, the bills will be combined on the floor of the Senate and Cantwell will be pushing for the Lincoln bill to be the basis of the legislation.