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Public Statements

SEC Regulatory Accountability Act

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume.

I rise to strongly oppose H.R. 1062. This bill places significant additional requirements for economic analysis by the Securities and Exchange Commission, effectively bringing any efforts at rulemaking to a standstill.

Let's be clear: the purpose of this legislative effort is to stop implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act dead in its tracks. After losing in Congress, the fight against the Dodd-Frank act moved to the courts, beginning with overturning the proxy access rules they adopted under authority provided by that act.

Although I agreed fully with the SEC's position, they went with their friends to court and the court found that the SEC did not meet its already significant requirements to conduct an economic analysis.

After the proxy access case was overturned, the SEC adopted improved standards for conducting cost-benefit analyses. These procedures were cited by the GAO just last December as having all of the elements of good regulatory analysis. Basically, what the GAO is saying is we took a look, we studied it, and they do a good job.

Nonetheless, the bill before us today adds even more requirements, tying up the SEC resources, and putting it at even greater risk for litigation for every rule, despite the assurances of my Republican colleagues that they're only applying the terms of an executive order to the SEC. That executive order explicitly protects agencies from lawsuits based on their economic analysis. H.R. 1062 has no such protection for the SEC.

The Commission is undertaking a valiant effort to finish the Dodd-Frank and Jobs Acts rule, even in the face of attempts by the majority to restrict their funding. As the SEC attempts to balance capital formation with the need to protect investors, this bill weights the scales heavily in favor of industry over investors. In fact, the words ``investor protection'' do not appear anywhere in this bill.

Even without this bill, we can count on industry lobbyists to sue the SEC anytime it sees a weakness in the justification supporting a rule, as they have in several other cases currently before the courts.

And this bill does not apply only to new rules. This is extraordinary--and I want to say this so everybody understands--this bill would require the Commission to review every rulemaking ever issued--even those that have protected our securities markets since the Great Depression--1 year after the adoption of this bill, and then again every 5 years thereafter. As a result, the Commission will be forced to divert resources away from other key areas, such as enforcement.

This comes at a time when House Republicans want to hold SEC funding flat, despite the SEC's new responsibilities--the increase in the number of participants it oversees and the growth of complexity and the size of U.S. securities markets.

It is ironic that as House Republicans push this bill forward, they are also calling for the SEC to speed up its efforts on Jobs Act rules. This bill makes it impossible for the SEC to meet the very deadline we adopted just 2 days ago when we passed H.R. 701.

I urge my colleagues to oppose H.R. 1062, and I reserve the balance of my time.

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Ms. WATERS. I yield myself the balance of the time.

In closing, allow me to quote one of the Financial Services Committee members in a hearing yesterday, because I think it is so important for us to understand that the SEC is our cop on the block that has the responsibility for protecting investors.

Let us understand that my colleagues on the opposite side of the aisle are opposed to the SEC having an adequate budget. They do everything that they can to cut the budget, to deny the resources; but they keep adding on additional responsibilities, recognizing that the SEC has a tremendous load. Not only do they have all of the work, the cost-benefit analysis that they do on everything, but they have the responsibility of rulemaking for all of Dodd-Frank, which is the reform legislation that will cause us to eliminate risk and to protect our constituents and the citizens of this country.

But let me just say that yesterday, during a Financial Services Committee hearing, Chairman Emeritus Spencer Bachus said that it would be penny-wise and pound foolish for there not to be a bipartisan agreement for raising the funding or increasing the funding for the SEC.

And I think that's important to get out there. They need more resources; and while we have this bill that's costing them more money to simply implement what they would like to do in H.R. 1062, they oppose giving additional resources.

In addition to that, let's talk about this court action. We mentioned early on that the SEC had been taken to court on proxy access. What are we talking about?

We're talking about the fact that the institutional investors, the ones who are responsible for investing the money so that the workers, the public workers, the firemen, the police, the teachers, all can have adequate retirement. And so our institutional investors wanted very much to ensure that the companies that they're investing in are managing these funds well, and they simply wanted the ability to place proxy access into the proxy materials so that they could nominate directors to the board to make sure that they're overseeing the money for all of our first responders and our employees.

Well, my friends on the opposite side of the aisle teamed with Wall Street and they went to court and they made this big case, and it was right here in Washington, D.C., in the district court. And they got an opinion. They got a ruling.

And so the SEC went back and it said, basically, to everybody, all of its employees, what have you, let's do even more. And on top of them not only saying let's do more and instruct the employees to do more, then they come with this bill and want to put more on top of that.

This is not about those people that Mr. Hensarling referred to around the kitchen table talking about jobs. This is about protecting Wall Street. This is about tying up the SEC. This is about making sure the SEC is not able to carry out its responsibilities.

This, again, is about putting us all at risk. This is about not being about the investors, but being about the markets. This, again, is about protecting those who really need no protection, those who placed us at risk to begin with, those who not only placed us at risk, but would do it again if we allow them to do it.

I don't know why my friends on the opposite side of the aisle would be opposed to something like proxy access and then lined up in the courts again with other litigation, litigation that's going to take away precious dollars from the SEC that they need to protect us, to protect the investors.

But, no, they come to this floor and they simply describe this bill in ways that it really is not. This is dangerous, it is irresponsible, it is not something that the people of this country would expect of people that they sent to Congress to represent them.

This, again--and we'll say it over and over again as it has been said by so many who have come here and testified today on this side of the aisle--this is about protecting Wall Street. This is about protecting those who simply want to find ways to keep the SEC from stopping them in their rulemaking from doing things that will be harmful to the American public.

And so, Mr. Chairman and Members, I say to you we should all stop and think about this. And for all those who are listening, all of the Members on both sides of the aisle, we should think about our responsibility here today and understand what this bill is all about and vote ``no,'' a resounding ``no'' on this bill.

Let us make sure that people are not saying a few years from now, oh, I'm sorry. I made a mistake. I should not have tied the hands of the SEC. I should have been more careful. I should not have listened to what was being said by the very people who caused us the problem in the first place.

I think if our Members stop and they listen and they pay attention that they're going to oppose this bill, even some on the opposite side of the aisle. And I think some of them know this. They know that they're being asked to support something that may not be in the best interest of their constituents, but they might want to go along with the leadership.

But it's not time to go along with the leadership. It's time to be independent. It's time to look at the facts and vote ``no'' on this bill.

I yield back the balance of my time.

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Ms. WATERS. Mr. Chairman, I yield myself such time as I may consume.

This amendment adds a requirement that the SEC analyze the number of jobs created or lost as a result of a new rule or order, while differentiating between public and private sector jobs.

Although this amendment is not by itself problematic, it layers one more requirement onto a bill already bursting with onerous cost-benefit requirements. And while counting the jobs created or lost because of a particular regulation is a noble goal, we have to view this goal in the context of the overall bill, which tips the scales heavily in favor of industry over investors, including the pension plans for millions of Americans.

The criteria by which the SEC would need to engage in cost-benefit analysis under H.R. 1062 would have the Commission make all decisions on the basis of whether the rules impose the least burden on ``market participants.'' In fact, nowhere in the bill are the words ``investor protection'' used, despite the fact that a central mission of the Securities and Exchange Commission is to protect investors.

Let's be clear: H.R. 1062 is essentially a solution in search of a problem. This bill is not about refining the SEC's cost-benefit analysis. The Commission, in fact, has already done that by adopting a new set of guidelines to ensure that its analysis meets the very high bar set in the decision overturning their proxy access rule. Instead, this bill is about making it easier for industry groups to overturn SEC regulations in the courts.

After the 2008 financial crisis, the public spoke; and they demanded that Congress stand up and legislate rules of the road to prevent another crisis. So we took action to regulate the over-the-counter derivatives market, improve corporate governance, implement the Volcker rule to stop commercial banks from gambling with depositor money, and to reform the credit ratings agencies that slapped AAA ratings onto toxic securities.

Having lost that battle here in Congress, the industry--with the help of some of my colleagues on the other side of the aisle--is now waging a new, quiet battle to have these regulations thrown out in court. H.R. 1062 abets that goal by making it significantly easier for the industry to win in court. This is a key differentiation from the President's executive order on cost-benefit analysis, whose requirements cannot be used as a basis for litigation.

So, again, this amendment is harmless, but it amends what is a deeply problematic bill.

I yield back the balance of my time.

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Ms. WATERS. I yield myself such time as I may consume.

Mr. Chairman, this amendment doubles down on all of the problems raised by H.R. 1062 by imposing the same burdensome cost-benefit analysis requirements on the Municipal Securities Rulemaking Board, or MSRB, and certain self-regulatory organizations as the underlying bill imposes on the SEC.

Beyond the problems caused by H.R. 1062, this amendment would further put individual citizens and taxpayers at risk by tying the hands of the MSRB, which is entrusted with regulating dealers of municipal securities, including city bond issuances.

The Wall Street Reform Act expanded the mission of the board to protect State and local governments and to regulate, for the first time in history, the individuals who provide municipalities with financial advice.

We had good reason to expand the mission and responsibilities of the MSRB under Dodd-Frank. Like many borrowers who were sold exotic mortgages based on the representations made by mortgage brokers in the lead-up to the financial crisis, we saw that many municipalities entered into complex financial instruments that they didn't fully understand. At the same time, we saw that many financial advisers to municipalities were involved in pay-to-play scandals and recommended unsuitable investments, particularly to small communities. The result was the imposition of substantial costs on taxpayers in communities across the country. The most high-profile example is the case of Jefferson County, Alabama, which entered into the largest municipal bankruptcy in history after a simple sewer bond financing deal ended with the county going broke over faulty interest rate derivatives.

This amendment will make it much more difficult for the MSRB to regulate the financial entities selling these derivative products to our small counties, cities, and towns.

But that's just one example. The amendment would impose similar onerous requirements on the Financial Industry Regulatory Authority--that is FINRA--the self-regulatory organization for broker-dealers, and the Public Companies Accounting Oversight Board, which regulates the auditing industry.

Again, this amendment doubles down on what is already a harmful bill by extending the same onerous requirements of self-regulatory organizations. I see no reason why the Congress would want to further tip the scales in favor of Wall Street over Main Street.

I reserve the balance of my time.

BREAK IN TRANSCRIPT

Ms. WATERS. Thank you very much.

Mr. Chairman and Members, I would like to thank the gentlelady from New York for bringing this amendment today. As a matter of fact, the opposite side should thank her, too, because she is giving them an opportunity to back out of this awful bill that will be harmful and that is ill-informed and to get on with just saying that her resolution would make good sense. So I am eager to support this amendment from the gentlelady from New York.

The amendment strikes all bill text and replaces it with a sense of Congress, reiterating all the economic analysis requirements already imposed on the SEC.

Specifically, current law requires the SEC to conduct economic analyses pursuant to the Paperwork Reduction Act, the Congressional Review Act and the Regulatory Flexibility Act, as well as additional cost-benefit analysis per the National Securities Markets Improvement Act.

BREAK IN TRANSCRIPT

Ms. WATERS. This is the final amendment to the bill, which would not kill the bill or send it back to committee. If adopted, the bill will immediately proceed to final passage, as amended.

This motion ensures the ability of the SEC to continue to protect investors and enforce the securities laws. I want to emphasize that this motion does not stop the bill, but it does flag the very important ways in which we need to let the SEC act. The motion would ensure that the SEC can protect investors and enforce the securities laws in two specific areas:

First, the motion will ensure that this bill does not reduce the ability of the SEC to protect the pension plans of our firefighters and police, the people on whom we rely as our first responders, as well as the pension plans of teachers and other retirees against fraudulent and deceptive practices. Protecting investors is a core element of the SEC's mission and one that we ignore at our peril. This week is Police Officers Week. Do we really want to honor our men and women in service by stripping them of protections for their hard-earned and hard-won earnings? Mr. Speaker, these protections become ever more crucial as we rely increasingly on the securities markets for our retirement savings.

Second, the motion to recommit focuses on protecting investors by ensuring that the SEC can protect against the takeover of American firms by foreign companies, particularly Chinese companies, that are using such mergers to access the investor funds in our capital markets without going through the SEC registration process. The SEC has had numerous enforcement actions against such companies which purchase a small company and merge it with a larger, often fraudulent, foreign company. It has worked hard to protect the savings of hardworking Americans, including union pension holders and other pensioners, from being disadvantaged by these Chinese firms that don't play by the same rules.

Both of these areas highlight the importance of SEC action to protect investors, particularly those preparing for retirement. With Americans increasingly dependent on the securities markets to protect their retirement savings, it is more critical than ever to ensure that we preserve the ability of the SEC to act.

Just yesterday, we heard from the SEC's new chairwoman, Mary Jo White. When we asked her about this bill, she said that she found it ``very troubling.'' I don't imagine that a former prosecutor who took on the Mob and terrorists is easily troubled. Indeed, she said that she had already needed at least 45 new economists to meet the need for an expanded economic analysis under the SEC standards, but she couldn't hire them due to the sequester. This is troubling indeed.

Rather than helping the SEC to do its job better, we are cutting its budget and throwing up new roadblocks, like this bill. It is a mistake. I urge my colleagues to support this motion, and I yield back the balance of my time.

BREAK IN TRANSCRIPT


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