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Restoring American Finacial Stability Act of 2010

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. CHAMBLISS. Mr. President, I will say more about it in my conclusion remarks, but first of all, Senators DODD and SHELBY, thanks for continuing your dialog with each other, and thanks for coming forth with the type of agreement that has allowed us to get this extremely important agreement to the floor.

With the financial collapse of 2008, there are a number of issues that simply have to be addressed, and this is the appropriate forum now for all of those issues to come forward and have debate on both sides of the aisle; to hopefully at the end of the day come up with the right kind of product that is going to make sure situations like 2008 never occur again.

To my chairman and my partner on the Committee on Agriculture, she is my dear friend, and we have worked very closely together on so many issues, including this one. When we have our differences, we are able to disagree in a very professional way. I am very appreciative of her as well as of her friendship.

We all know that appropriate regulation of derivatives and specifically the swaps market is a critical component of this legislation, and the Agriculture Committee is responsible for the oversight of the Commodity Futures Trading Commission, which will become one of the key regulators of the swaps market. As the ranking member on the Agriculture Committee, I have the responsibility to ensure that we get this right.

The Agriculture Committee has a history of not falling subject to partisan influence. We have a long tradition of checking our partisan politics at the door in an effort to reach consensus so that both Republicans and Democrats can then support our products on the floor. For instance, the Agriculture Committee facilitated a bipartisan deal to close the Enron loophole back in 2008. Then-chairman Senator Harkin and I worked across party lines with Senators SNOWE, FEINSTEIN, LEVIN, and CANTWELL to ensure that electronic trading facilities offering contracts that perform a significant price discovery function are properly regulated in a transparent way. Earlier this week, the CFTC used this new authority to subject seven natural gas contracts to increased oversight. That is an example of how laws written with bipartisan agreements yield real results.

Derivatives legislation should have been handled this way too. It should have come out of the Agriculture Committee as a bipartisan product. My staff and Chairman LINCOLN's staff spent 5 months crafting a derivatives bill which should have been reported from the committee with support from both sides.

Unfortunately, things fell apart just as we were about to circulate an agreed-upon discussion draft. This discussion draft, which would have required clearing of swaps by swaps dealers and others who contribute to systemic risk--it would have provided the FTC and the CFTC with the authority to establish capital markets and margin requirements. It would have allowed the CFTC to impose aggregate limits, and, most importantly, it would have provided the much needed transparency that has been absent from the swaps market. This would have represented a 180-degree shift from current law that was in place in 2008. Transparency is the key here. Under our agreed-upon discussion draft, 100 percent of all trades in the swaps and derivatives market would have been out in the open and available to regulators to review in real time.

Unfortunately, this language is not part of the underlying bill. Instead, we are faced with a derivatives product crafted without input from Republicans, a derivatives product that reflects an agreement between both Democratic committee chairmen and the administration. Republicans were not even invited into the room to provide input.

The product they have developed will have many unfortunate consequences for Main Street businesses that had nothing to do with creating this financial meltdown. I fear what I believe to be unintended consequences resulting from applying complicated regulations too broadly will subject our American businesses to more risk, not less.

For example, this legislation would force the Farm Credit System institutions to run their interest rate swaps through a clearinghouse, which will result in additional costs in the form of higher interest rates to their customers, without doing anything to lessen systemic risk. Let me be clear as to whom this will ultimately affect--our farmers and ranchers, our electric cooperatives, and our ethanol facilities that seek financing from these institutions. Institutions such as CoBank will be forced to clear their swaps and execute them on a trading facility, which will impose significant new costs and result in higher interest rates for their customers or, worse, discourage them from managing their risk, which will again result in higher costs for their borrowers.

Because this legislation broadly applies regulation, treating all financial institutions exactly the same. Cobank and Goldman Sachs are not the same and should not be regulated in the same manner. Cobank should have the option to clear their swaps and not be mandated to do so.

This legislation will also prevent John Deere Credit from hedging its interest rate risk except through a clearinghouse. Again, this will result in less attractive credit arrangements for farmers who need financing to buy tractors and combines.

The same can be said for consumers who would like favorable financing arrangements with Ford Motor Credit to buy a car. They will not be allowed the best deal because Ford Motor Credit is now going to be forced to take on additional cost when hedging their interest rate risk. Can anyone tell me why we are treating John Deere and Ford Motor Credit exactly the same as Goldman Sachs?

Also, entities such as Koch Industries that is hedging their risk and also engaged in developing products for their customers' hedging needs should not inadvertently be captured in a new regulatory category designed to apply to big financial dealers. But that is exactly what this legislation does.

Koch's and Goldman Sachs' swaps businesses would essentially be regulated in the same way. Treating these entities like dealers may force them to stop offering those products to their customers, in which case their customers will have no other option but to seek products from the large dealers such as Goldman Sachs and other Wall Street bankers.

Today I heard the stock price of Goldman Sachs is up, and this explains it. They will get increased opportunities to make more money under this legislation. Why do we want to essentially lessen competition and drive all of the swaps business to those that are the most systemically risky or, even worse, drive them offshore where we cannot regulate them?

Banks such as Goldman Sachs may even be forced out of the swaps business if this legislation becomes law, which begs the question: Who will then be left to offer these risk management tools to our constituents' businesses?

Businesses rely on swaps as a very legitimate option to help them alleviate risk inherent to their business. But if no one is left to sell them this protection, they will be forced to hold the risk on their books. Why on Earth would Congress advance legislation that would actually prevent the businesses in each of our States from properly managing their risk, especially in these difficult times?

The American public wants to know why we cannot target these new regulations so Wall Street is regulated properly without punishing the businesses they rely on every day. I would like to know the same thing. Unfortunately, I think I already know the answer: It has absolutely nothing to do with regulating Wall Street.

When the Obama administration realized the Committee on Agriculture was on the verge of producing a derivatives regulation package that would have appealed to both Republicans and Democrats, they scrambled to kill the deal. You see, to the extent that any aspect of the financial regulatory reform package has Republican support, they can no longer play politics with this issue.

If we produce a bill that has the support of several Republicans, then they can no longer blame us for holding up this process, which would cause the administration to lose the message they are pushing, in hopes that voters will forget about health care. Their message is simple: They want to be able to tell the public that Republicans are opposed to regulating Wall Street.

Well, that is disingenuous at best and totally false at worst. Republicans are just as anxious as Democrats to address what went wrong on Wall Street and, frankly, it is long overdue. Why has the administration waited almost 18 months to push financial regulatory reform? Why are they trying to cut Republicans out of the process? Is it that they wanted an issue that will drag on into the election season, not a solution that will truly protect the consumers on Main Street?

I wish we were here today debating a derivatives product that had input from Senators on both sides of the aisle and perhaps a little less input from the administration. The American people expect the administration to implement the laws that Congress passes, but they elected us to write those laws.

I feel certain that we could have done a much better job had we been allowed to work in a more bipartisan way. Unfortunately, I have to encourage my colleagues to oppose the derivatives portion of this bill because I think it will have undesirable consequences for Main Street businesses and consumers who are already struggling in this weakened economy.

We will have amendments to correct the deficiencies in this bill, and I hope we will receive bipartisan support for those amendments because they truly will reflect commonsense solutions to the complex derivatives issue.

Let me close by saying that I know Senator Dodd, Senator Lincoln, Senator Shelby, all of us, wanted, at the end of the day, to develop a bipartisan bill. I hope we can still do that. I see my friend, Senator Warner, is on the Senate floor. He and I have had some conversations about trying to meld some of our ideas. I know he has worked very closely with my dear friend, Senator Corker, from this side of the aisle.

Now that we have this bill on the Senate floor, I hope we can get by the rhetoric; that we can all say our piece and that we can roll up our sleeves and do what the American people want to see us do, which is to work together for their best interests. They are the ones who are going to suffer for what comes out of here or they will be the ones to benefit from what comes out of the Senate.

Senator Dodd is a dear friend. We have had many conversations about this bill. I know what is in his heart. I know he wants to get this done in the right way. Likewise with my dear friend, Senator Lincoln. So as we move ahead now, I am very hopeful we can settle down to the real business the Senate is famous for; that is, having real, hard-core debate on issues because these are extremely tough.

There has not been a more complex issue that we have had to deal with in my now going on 8 years in this body. But the minds are very capable of resolving these issues. We can do so with good ideas from both sides of the aisle. I am very hopeful at the end of the day, we will come out with a product the American people can look back at and say: Wow. That is the way the Senate is supposed to work. And the people we sent to do the peoples' business have, in fact, put together a good product that is going to benefit America; it is going to benefit American business and, most importantly, it will benefit Americans.

I yield the floor.

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