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Ms. CANTWELL. Mr. President, I wish to spend a few minutes talking about our previous vote this evening.
I know many of my colleagues worked hard on regulatory reform legislation, but I also think it is important that we keep our eye on a very critical part of solving this problem. I know many of my colleagues, particularly on the Banking Committee, have had a long history with banking issues and may see things a little differently from the context of the issues they have been dealing with in the committee.
It has been clear to me for a long time that the deregulation of the derivatives market in 2000 led to a very unfortunate situation. Before deregulation, we actually had transparent trades in reporting to the CFTC. We had capital requirements. We had speculation limits. We had antifraud and antimanipulation. We had trader licensing and registration. And we had public exchange trading.
The reason I bring that up is because to me, if the derivative crisis brought on basically a world economic implosion, then the principles of this underlying bill ought to adhere to the principles that have been laid out by the White House and others on what would help us fix this problem.
We know it was deregulated, and we know these things were eliminated. But I take the Treasury Secretary at his word when he wrote earlier this year:
To contain systemic risks, the CEA and the securities laws should be amended to require clearing of all standardized derivatives through regulated central counterparties.
The reason I bring that up is because the underlying bill before us--even though the Agriculture Committee corrected this--the language coming from the Banking Committee created a loophole and basically says that if you go to a clearinghouse and they say you do not need to be cleared, don't worry about it, you don't need to be cleared.
It should be no surprise to anybody that the swaps dealers are the people who own the clearinghouses. In that context, a fundamental tenet of derivative regulatory reform, exchange trading, clearing, aggregate position limits, and transparency, one of those pillars is missing from this bill.
Look at what happened because of this deregulation in 1999. There was less than $100 billion in the derivatives market, and today we are at a $600 trillion derivatives market--$600 trillion. Before deregulation it was a very small amount of money, and now we have this incredible market.
The question is whether we are going to regulate it to have the basic tenets of true competition, which means there is some oversight and some transparency to make sure that there are not manipulative devices or contrivances in this legislation.
The good news is we have tried to say that of these principal tenets of exchange trading, we have to have transparency, real-time monitoring--all these things should be in there. But you also have to have capital behind the trades. That means we have to have a clearinghouse to make sure this type of activity is being cleared.
There were many times before the Senate Finance
Committee where the Treasury Secretary said:
I'm fully supportive of moving the standard part of those markets onto central clearinghouses and exchanges ..... We want to make sure that the standardized part of those markets moves into central clearinghouses and onto exchanges as quickly as possible .....
That was in January.
We had another time where the administration said:
..... we need to establish a comprehensive framework of oversight, protections and disclosure for the OTC derivatives market, moving the standardized parts of those markets to central clearinghouses, and encouraging further use of exchange-traded instruments.
That was in March.
I don't know why we are still having this debate as to whether we are going to have clearing of these derivatives. To me it is critical.
I know there are other good parts of this legislation about which people care deeply. But if we have this $600 trillion market and we are not truly going to have exchange trading and clearing and aggregate position limits across all exchanges, we are not going to rein in the derivatives problem. We are not.
I hope my colleagues will take these words from the Treasury Secretary and from the White House and hopefully get a piece of legislation on this floor that will take care of this clearinghouse loophole.
I know my colleagues think we can talk about building a dam against this wall of dark derivatives. But even something such as Hoover Dam, with all the great concrete and all the great engineering and all the great things that make that structure work, still has a problem if somebody drills a hole in the bottom of it. Over time, that is where all the water will flow, and that is where this derivative market is, too. If we do not have a regime of exchange trading and clearing, we will have money seeping into a continuation of a dark market.
Would I like other amendments, would I like a vote on an amendment by my colleague from Arizona and me that is the reinstatement of Glass-Steagall? Sure, I would. Sure, I would like to have many other amendments that my colleagues have been talking about, and hopefully they will get votes on them, whether it is Merkley-Levin or other pieces of legislation people have been offering. But this issue is a fundamental one. We will not have reform if we do not have exchange trading and clearing, if we do not bring derivatives onto the same kind of mechanisms we have for other products in the financial markets. If we do not do that, then I don't know what we are doing out here in the context of what brought us to this crisis.
Trading of dark market derivatives is what has brought this challenge to our U.S. economy. Let's bring some transparency into that market. Let's adhere to these words and actually implement this so we can move on with this legislation.
I yield the floor.
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