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Mr. CARNEY. I would like to thank Mr. Scott for yielding time and for his leadership on this issue.
I rise today in support of H.R. 1256. It will lead to a stronger, more robust set of regulations for the derivatives market.
Let me be clear, this is not an effort to roll back Title VII of Dodd-Frank or to weaken its reach overseas. In fact, its intent is to harmonize regulations for cross-border swaps transactions, to eliminate confusion, and to prevent the establishment of two sets of rules in certain jurisdictions, which we know will leave us vulnerable to companies who would want to exploit those loopholes. In fact, this is a goal that our former chair and ranking member articulated well in a letter that he cosigned with Senator Tim Johnson to the regulators dated October 4, 2011, in which he says:
U.S. regulators should work with other international regulators to seek broad harmonization of appropriately tough and effective standards. Should current harmonization efforts ultimately fail or prove a race to the bottom that would undermine effective regulation, the U.S. would of course reserve the right to proceed to extend the application of its standards to overseas operations.
That's exactly what this bill does: it calls on the CFTC and the SEC to issue joint regulations in overseas markets, and in the G8 plus Hong Kong, in those markets where there are already rigorous regulations, the CFTC to determine whether our regulations are strong enough. If they are not, they can apply our regulations there.
So this bill is a good bill to create one set of regulations around the world that will be strong and clear and consistent.
Mr. Speaker, I rise today to support H.R. 1256. It will lead to a stronger, more robust set of regulations for the derivatives market.
Let me be clear, this is not an effort to roll back Title 7 of Dodd-Frank or to weaken its reach overseas.
In fact its intent is to harmonize regulations for cross-border swaps transactions.
To eliminate confusion.
And to prevent the establishment of two sets of rules in certain jurisdictions--which we know leaves us vulnerable to companies who want to exploit loopholes when there's a patchwork of regulations.
Unfortunately, since the passage of Dodd-Frank, the CFTC and SEC have moved forward with conflicting proposals to enforce Dodd-Frank derivatives law in markets overseas.
This bill has one goal: to create clear, strong and consistent rules governing derivatives transactions for U.S. companies operating around the world.
It does this in two ways.
First: it tells the SEC and CFTC to coordinate and issue their swaps regulations jointly. That way, we have one set of regulations that companies have to follow.
Under current law, the two agencies can issue overlapping, or even conflicting regulations. In fact, that's exactly what they've done.
This is confusing and burdensome for U.S. firms. But more importantly, it creates opportunities for firms to exploit inconsistencies and loopholes in the regulations.
This bill requires one consistent set of regulations to close loopholes and eliminate confusion.
Second: this bill acknowledges the strong regulatory commitment some nations have already made to regulate swaps.
The bill says that since these countries are moving forward with derivatives regulations that are comparable to ours in scope and rigor, companies engaged in derivatives transactions in these countries can follow those regulations.
During consideration of this bill in the Financial Services Committee, I supported an amendment offered by the Ranking Member that would have flipped the presumption in the bill.
Instead of presuming that certain countries have broadly equivalent regulations to ours, it would've directed the regulators to proactively make that determination. That amendment didn't pass. But there is a failsafe in this bill.
But, this is critical. Under this bill, if the SEC and CFTC look at these countries' regulations and determine that they are not in fact as strong or robust as our regulations, the agencies can require that companies operating in those countries follow U.S. law.
Our regulators remain in control.
Without this bill, firms operating overseas, even in the nine countries where most of this business takes place, will have to comply both with U.S. regulation, and the regulations of those countries.
Again, this leaves us vulnerable to firms that want to exploit this patchwork regulatory framework. Or worse, it could drive derivative trading away from US firms and further away from the view of our regulators.
The SEC, just a few weeks ago, proposed a draft rule that acknowledges the need for harmonization between our rules and the rules of other countries.
Here's the bottom line.
The goal is really simple, and that is to reach an accommodation where we have strong regulatory requirements that are consistent across borders, that are strong, but that do not create loopholes or confusion in those markets.
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