Swaps Regulatory Improvement Act

Floor Speech

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

The financial crisis of 2008 wreaked untold havoc on the U.S. economy. This disaster, which was intensified by the use of derivatives, set back hardworking Americans for generations. At the same time, it bailed out many of the Nation's largest banks.

The Dodd-Frank Act sought to put our financial markets back together by, for example, creating comprehensive oversight and reforms for derivatives markets, as well as prohibitions on banks betting with taxpayers' resources.

H.R. 992 would undo some of these reforms before our regulators, Wall Street's cops, have a chance to finish them, especially the Volcker Rule. Congress passed the Volcker Rule to stop banks from using customer deposits, backed by the taxpayer, for trades intended to only benefit the bank and not its customers. The rule, when finalized, will define legitimate bank activities like hedging and market making, but prevent other behavior that would leave the taxpayer and the economy hurting.

In the same vein, Congress passed the Lincoln amendment, the provision that H.R. 992 would gut, to insulate the taxpayer by ``pushing out'' certain derivatives from the insured bank, while also making broad exceptions for swaps that bank customers overwhelmingly use.

The Bipartisan Policy Center also recognized a connection between the Volcker Rule and the Lincoln amendment, noting that a ``well-executed Volcker Rule would simultaneously accomplish the intended goal of the Lincoln amendment.''

In case America forget, JPMorgan reminded all of us of the importance of setting limits on bank activity. In 2012, 4 years after the crisis, JPMorgan Chase's ``London Whale'' caused the bank to lose more than $6 billion in a few months. What were purportedly hedges using complicated derivatives transactions were later transformed by the bank's focus on profit into what would likely be banned under Volcker.

The sense of urgency to separating the taxpayer-supported bank from the investment bank is shared across the aisle. Let me just tell you, in March of this year, Representative Jeb Hensarling said that, ``Certainly, we have to do a better job ring-fencing, fire-walling, whatever metaphor you want to use, between an insured depository institution and a noninsured investment bank.''

Yet, 3 years after the passage of Dodd-Frank, and 5 years after the financial crisis, we still do not have a ban on the very behavior that hurt our economy.

Instead, H.R. 992 eliminates one taxpayer protection, the Lincoln amendment, by now allowing banks to engage in 99 percent of the swaps market without the taxpayer knowing how robust the monitoring and oversight of such activities will be.

Mr. Speaker, H.R. 992 is a step backward in repairing our economy. This view is shared by the Commodity Markets Oversight Coalition, a nonpartisan alliance of American industries, businesses, consumers, and derivatives users.

Similarly, the White House, the AFL-CIO, CalPERS, the Teamsters, Public Citizen, and Americans for Financial Reform all strongly oppose H.R. 992.

Former Republican chairman of the FDIC, Sheila Bair, who strongly defended taxpayers during the crisis, noted immediately after the Financial Services Committee passed H.R. 992, ``Repeal of section 716 moves in the wrong direction. In an area as complex as this, I wish, I just wish Congress would at least wait for the regulators.''

I do too. Vote ``no'' on H.R. 992.

Mr. Speaker, I reserve the balance of my time.

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Ms. WATERS. Mr. Speaker, I would like to read a statement from Ms. Sheila Bair who formerly chaired the FDIC. She said:

Derivatives have many legitimate functions, but they can be high risk and poorly understood because of their complexity by bank managers and even regulators, as we saw with the ``London Whale'' debacle. So keeping them outside of insured banks and making the market fund them is the way to go. This will increase market discipline and protect the FDIC.

She said:

I'm concerned that Members of Congress act on these issues without full understanding of the ramifications. If we are going to revisit derivatives regulation, I'd go in the direction of more market discipline and disclosure, rather than letting big derivatives dealers use insured deposits to support their high-risk operations.

The Executive Office of the President sent over a statement that includes these words:

Wall Street Reform represents the most comprehensive set of reforms to the financial system since the Great Depression, and its derivatives provisions constitute an important part of the reforms being put in place to strengthen the Nation's financial system by improving transparency and reducing risks for market participants.

Again, let me refer you to Representative Hensarling who said:

Certainly, we have to do a better job ring-fencing, fire-walling--whatever metaphor you want to use--between an insured depository institution and a noninsured investment bank.

I ask for a ``no'' vote on this bill.

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