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Ms. CANTWELL. Mr. President, I rise to speak in opposition to the Chambliss substitute amendment and to ask my colleagues to think about this substitute in a significant way because it dramatically changes the underlying bill. In fact, I almost want to ask my colleagues on the other side of the aisle if they are serious--if they are serious that this is the proposal they are going to put before us in response to the catastrophe that we have seen on Wall Street.
I know we have been on the Senate floor and we have had a lot of history with this, starting in 2001. I think it must have been 2002 or 2003 when we tried to regulate derivatives after the Enron crisis, and one of my colleagues on the other side of the aisle said: We can't regulate derivatives; we don't know enough about them.
What lessons have we learned since this catastrophe? I can tell you this: We were wrong to say we can't understand derivatives because our misunderstanding or not paying attention has led us to the catastrophe we are in today. For the other side of the aisle to say we can't even propose exchange trading, that is like saying the stock market should make changes in options and stock without being on an exchange. That would be like the Presiding Officer and I swapping back and forth Microsoft or Starbucks stock and selling it to other people and having none of the trade basically being reported.
Why would we tolerate that for the stock market? Yet we are saying somehow it is OK for derivatives, this product that has become this unbelievable $600 trillion market, to operate in the dark.
The other side does not even want to have exchange trading? I cannot believe that. I cannot believe somebody would even propose that. I know some people will say they have clearing, but the clearing requirements in this legislation would leave 60 percent of the market uncovered. So we are talking about not having the product on exchange and not having a lot of it cleared. So the two primary principles, learning from the mistakes of the last 10 years, are basically going unnoticed, unaccounted for on the other side of the aisle.
Let's go back to how we got into this situation because we used to have a law that basically said, yes; let's protect consumers. We had transparency in trades--that was reporting to the CFTC; we had on the books capital requirements, we had speculation limits, we had antifraud and antimanipulation laws, we had trader licensing and registration and public exchange trading. So, yes, we actually had it right. We had it right. We had some tools in place. We had an oversight agency that was supposed to do this job, all of these things that protected the investments of millions of people and made the functionality of people who legitimately had to hedge, such as farmers or airline industries, rules of the road so they weren't taken to the cleaners or the price wasn't artificially driven through the roof.
What happened to these things? What happened to these things is, in 2000, somebody came out on the Senate floor, basically at 7:30 on a Friday night, and stuck into an over 2,000-page bill a little exemption that said: Don't regulate these derivatives. That is what happened.
What happened in the marketplace is that derivatives were a very small business, only a few hundred billion dollars, as you can see, in 1999. It was kind of an uninteresting little market. But we ended up deregulating them, and since then, in this short period of time, it turned into a $700 trillion market.
How do you go, in that period of time, to this $700 billion? You go because we made it a dark market. We basically said: You don't have to have the rules of the road or the regulation or the oversight or the basic things that make this a functioning market.
What happened? We had no transparency, no requirements to keep records. That means you didn't have to be able to prove to the CFTC exactly what you were doing in the market. That way, you could not actually prove fraud because you didn't know what anybody was doing because nobody had to make records. It is like Bernie Madoff on steroids. We had no large trader reporting and no speculation limits.
The reason you have things on an exchange is because when an exchange sees that somebody is making the market or has too large a position--and oftentimes across several exchanges--you have a regulator who can come in and say, you know what. We have speculation limits and you cannot do that much trading because you were driving the market.
So after that we had no speculation limits, we had no capital requirements, and we had this high-risk manipulation and excessive speculation. That is what we did.
A lot of people thought: You know what. I wasn't here, but I know a lot of people said this is going to revolutionize things. Derivatives are going to be the wave of the future. It is going to help us in our financial markets and the amount of liquidity. Everything is going to be great.
Some people said don't worry about this because they are not going to be a very big resource, they are going to be very small and it is only going to be a few people who are going to trade back and forth.
I showed you the chart. It turned into a $700 trillion industry. It was a big opportunity for people to make a lot of money without the oversight.
Where are we today? Have we learned the lessons of this catastrophe? Have we? It is not to say that it isn't hard to be ahead of the smartest guys on Wall Street. I will say it is very hard. That is why you have to have bright lines because otherwise people do come up with new tools. I saw it with Enron in my State. I have seen it now with derivatives. There will be something else. Unless we have rules of the road, then there will be people who will try to continue to have opaque markets and drive trading.
But our underlying proposal, by the chair of the Agriculture Committee and this underlying bill, working with the chair of the Banking Committee, has the rules of the road. The other side of the aisle is proposing a substitute that would take those away. This is clear. If you have unregulated trading, none of this happens. If you had exchange trading, this is what the American public gets protected with: transparent pricing, real-time trade monitoring, transparent valuation, speculation limits and public transparency. That is what this underlying bill does and that is what the amendment is trying to get rid of.
They want this to be blank over here. They want this to be blank. They don't want those things to have to be met.
How could you possibly propose that after what we just went through? You had, prior to 2000, regulation. Things were working hard. You have afterwards a major catastrophe, and these are fundamentals that we have behind all of our markets and exchange trading. So why would you let one thing off the hook?
I will never forget the day when one of the former CFTC staff came and testified before the Energy Committee and said to our committee: Do you know that hamburger in America has more regulation on it than energy futures?
I thought he couldn't be serious, but he was right. Futures of beef have reporting requirements, have to have transparency and real-time monitoring, have speculation limits. But these energy derivatives, because they were exempted by this 2000 act, did not. So somehow we were saying that hamburger in America--making sure it played by the rules--was more important than whether oil or electricity or these other things--as we know, CDOs--played by the same rules.
Make no mistake. This underlying bill gives us this kind of predictability and certainty in the tried and true ways that markets function, with transparency.
We are talking about old-fashioned capitalism. We are not talking about oligarchies where people hide behind things and only a few people know. Who knows when we are going to find out what happened with the ``fat finger'' the other day and what moved the markets? But I know this: If you come back to capital trades with transparency in pricing and real-time monitoring and those speculation limits--their legislation on the other side does nothing to make sure we prohibit the excessive speculation that can move the market in a manipulative way.
So I hope we do not adopt this substitute amendment. Let's show America we are serious about the kind of transparency that has worked in markets in the tried-and-true part of our capitalist system.
I yield the floor.
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