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Public Statements

Hearing of the House Agriculture Committee - On Oversight of Swaps and Futures Markets


Location: Washington, DC

Mr. Chairman, I want to thank you for convening this hearing today. Over the past several months, the financial services industry has continued to garner headlines; unfortunately not often for flattering reasons. We have witnessed a large public trade go awry; another Futures Commission Merchant misplace a significant amount of customer funds; and a large international bank confess to aiding drug cartels and international terrorists finance their operations by laundering their drug proceeds.

At the same time, the CFTC has continued to work through the remaining Dodd-Frank rulemakings. Earlier this month, the final product definition rules were issued, starting a 60 day countdown for swap dealers to register. Confounding this process, however, is that the guidance intended to clarify the extraterritorial application of the CFTC's new regulatory powers has only further confused market participants and raised the ire of international regulators.

All in all, Mr. Chairman, today is a good day for a hearing to begin the process of sorting through some of these knotty issues. Today's hearing is not about assigning blame or finding fault for any particular event, it is about how to make the system work better for market participants and most importantly, the end-users who rely on the financial system to work correctly every single day.

The recent failures and other shortcomings of the industry show that there is much work to be done. Each crisis we see erodes the publics' trust in the institutions -- both private firms and the regulators alike -- that are essential to our economic growth.

Less visible to the public, but certainly no less important, are the barrage of rulemakings that the CFTC has been finalizing over the past year. These rules will be the new regulatory foundation that Americans believe will prevent another financial meltdown. The size, scope, and frequency of the failures that will inevitably occur under this new regime will determine the trust that Americans continue to place in regulators of high finance.

I continue to worry about the sequencing and timing of the rules, as well as the refusal of the CFTC to conduct quantitative and qualitative cost-benefit analysis. In particular, with the Extraterritoriality guidance that was recently issued. I am troubled that by choosing to issue guidance instead of proposing a rule, the Commission has circumvented the need to perform any analysis of the costs or the benefits of its guidance to market participants or end-users. The guidance may well have consequences that the Chairman's staff did not think of which could be detrimental to the ability for firms to participate in these newly regulated markets.

I would like to close by thanking each of our panel participants for your participation today and your unfailing willingness to work with our committee to improve the regulation and oversight of the futures and derivatives markets. While we may not always see eye to eye on every issue, I appreciate the honest and direct discussions that I have had with many of you about how to improve the financial systems we all care so deeply about.

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