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Public Statements

Treatment of Affiliate Transactions Under the Dodd-Frank Wall Street Reform and Consumer Protection Act

Floor Speech

Location: Washington, DC


Mr. GARRETT. Mr. Speaker, I yield myself 2 minutes.

The legislation that is before us today ensures that American businesses will not be needlessly forced to use up the capital that they need to create jobs simply to satisfy some duplicative regulations. Under H.R. 2779, the inter-affiliate trades would be only exempt from costly margin, clearing, and real-time reporting requirements. Swap trades facing non-affiliated counterparties would still be subject to all the other regulatory requirements under proposed agency rules. So, without this bill, companies could face double--yes, double--the margin and regulatory cost.

To my point, last June the office of the OCC--that's the Comptroller of the Currency--estimated that margin requirements under proposed prudential regulator margin rules could conservatively cost over $2 trillion, which could increase substantially if regulators force affiliates to post margins on trades between themselves.

Without the relief of this bill, American companies face the prospect of having to post double margins on swap trades: once on a swap trade with themselves and secondly when they trade outside. So the Stivers-Fudge bill provides this needed relief.

This bill strengthens the ability of the regulators to oversee the affiliate swaps marketplace because those transactions must be reported still to a swap depository, or the CFTC or the SEC. Either way, Mr. Speaker, regulators will be able to monitor these transactions very closely. The bill also gives the SEC and CFTC the power to regulate swap transactions that are structured as affiliate trades only for purposes of evading regulation.

To conclude, Mr. Speaker, I commend the efforts of my colleagues from both sides of the aisle this morning, and I urge my colleagues to support this bipartisan bill.

I reserve the balance of my time.


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