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Public Statements

Swap Jurisdiction Certainty Act

Floor Speech

By:
Date:
Location: Washington, DC

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

I would like to try to clear up some of the misunderstandings of what this bill is about. The more we debate it, the better Members understand the impact of this bill on our economy.

The gentleman from Texas, the chairman, just talked about how generous they are in allowing this debate to take place. Members, let me tell you what really happened. The fact of the matter is there has been an attempt to hide H.R. 1256 in this DOD bill. What business does it have in this bill? Why is it the Rules Committee determined that it would be a closed rule?

The first reason is that they tried to get away without having amendments to the bill. I had an amendment that I offered in committee that was not accepted, an amendment that if there were an open rule, I would have been able to offer this amendment on the floor. But, no, they close-ruled this bill to keep any amendments from being heard, to be debated, to be voted on, because they know that if Members really discover what these derivatives are all about and how they could create such risk that we'll be put in the position of bailing out failed institutions all over again, that Members would not support this kind of bill.

This country has been through a terrible financial crisis. Part of the reason is that we allowed our banks and financial institutions to place unregulated bets on the mortgage markets. Remember AIG? What did AIG do? It made a really big bet that the mortgage market would go up, and it lost, and the taxpayer was put in the position of having to bail it out. The Dodd-Frank Act enabled us to put a stop to that kind of betting going on, hidden from the rest of us, finally dragging that activity out into the sunlight.

The CFTC and the SEC are finally putting in place rules of the road to prevent any one institution from threatening our livelihood again, but this bill wants to drag some of that activity back into the shadows, allowing banks and others, once again, to enter into transactions without even our regulators being able to see them.

You may say that this bill just concerns the limits on how far U.S. law goes. So why is it so important that the CFTC and SEC have discretion over the rules on cross-border initiatives? Because the exposure that a foreign branch or subsidiary of a U.S. institution takes in foreign markets comes back home to the U.S. Moreover, U.S. banks and corporations may find that those they do business with have much more hidden exposure because of foreign transactions. This bill says that we will have to rely on the foreign regulators to protect us. We shouldn't have to rely on foreign regulators who don't even have regulatory regimes to protect us. We should protect ourselves by making sure that anybody our branches and our subsidiaries are doing business with have comparable rules. Those countries must have comparable rules to the U.S. rules in order to protect us.

To put it simply, this bill would delay the implementation of the Wall Street Reform Act's derivatives provisions by months, if not years, and would preserve the kind of opacity in our markets that led to taxpayers' bailing out AIG just 5 short years ago.

For example, while Europe has made considerable progress on its swaps' clearing and reporting rules, Europe's framework for implementing trading and internal business conduct standards have been caught up in delays. It is unclear at this point how strong those requirements ultimately will be. This bill increases the incentives for other jurisdictions to avoid making the tough decisions to put in a strong financial framework.

I reserve the balance of my time.

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Ms. WATERS. Reclaiming my time, the gentleman from Texas knows how it works. We have Dodd-Frank reform, and it has to be implemented. You know the living wills have to be done. You know that we have to put in place all that it takes to have the orderly liquidation procedure. And it is important that you understand, and that all of our Members understand, that derivatives are an important part of reform.

If we allow this bill that presumes that other countries are comparable to us in their regulatory regimes without even checking, without vetting, without asking any questions, without requiring anything, then we absolutely put our own country at risk, and we put at risk the American taxpayers who will have to bail out the major financial institutions if we allow you to pass a bill like this, presuming that they are okay, that these countries are okay.

The other thing is--I know and understand now. I understand very well that if we allow this presumption to take place, then you'll just go to court and you'll argue that you have the presumption, and you'll try and tie up the CFTC all over again.

I reserve the balance of my time.

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

Mr. Speaker and Members, I'm very disappointed and worried that this bill has been brought to the floor under a closed rule, as have more than one-third of the bills so far this Congress.

I believe there are important issues concerning the structure of this bill, particularly the bill's presumption that the rules of the nine largest foreign markets will be broadly equivalent to our own. The bill would require the SEC and the CFTC to act in order to allow U.S. rules to apply to transactions, even though the risk of the transactions will ultimately be imported back to the United States.

My amendment would have the reverse of this presumption, directing the SEC and CFTC to jointly consider the regulatory framework of these countries to provide appropriate exemptions when jurisdictions have derivatives rules that are truly broadly equivalent to our own.

A closed rule prevents us from considering these issues. Why do they have a closed rule? Why did they try to hide this bill inside the DOD?

They don't want this debate. They didn't want an opportunity for any amendments. They don't care that foreign countries would be determining our fate when they set up their regulatory regimes, which won't be comparable to ours.

We owe it to the American people to do better than

we have done. We have had the subprime meltdown. We've had the economic crisis. Why throw us back into that simply because you're trying to protect Wall Street?

Our citizens don't deserve that. They deserve for us to stand up and protect them from having to bail out these big institutions that will fail.

We have gone through AIG. We have gone through JP Morgan, the London Whale, the $6 billion failure. Why should we do that again?

I yield back the balance of my time.

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