U.S. Representative K. Michael Conaway (R-Texas) today praised the House Agriculture Committee's passage of two bills he has supported that would help prevent Dodd-Frank from hurting end users and the swaps market.
H.R. 1003, introduced by Rep. Conaway, would require the Commodity Futures Trading Commission to quantify the costs and benefits of future regulations and orders. It would also mandate that the commission quantify the impact of market liquidity, a marked change from the current policy of just "considering" costs.
The legislation would also update the commission's current requirements to require the examination of the impacts on the previously unregulated swaps markets, a necessary addition because of new authority given to the CFTC under Dodd-Frank. It also would require the CFTC's chief economist be involved in the cost-benefit analysis, a recommendation made by the commission's inspector general. Only future proposed rules would be affected; the legislation would not require retroactive analysis of pending proposals.
"If regulators do not bother to calculate how much it costs to comply with a proposal or to systematically quantify what the expected benefits of a proposal will be, then they cannot make educated decisions. A clearheaded analysis of the costs and benefits of all available options must be the foundation of the regulatory process. This small mandate on the economists and lawyers at the CFTC will ensure that the burdens placed on businesses large and small are justified in the real world, not just in the pages of the Federal Register," said Rep. Conaway, chairman of the House Agriculture Subcommittee on General Farm Commodities and Risk Management.
The Swap Jurisdictional Certainty Act (H.R. 1256) would ensure U.S.-based financial companies are able to compete on a level playing field with their international counterparts. The bill would require that any new cross-border rules must go through a formal rulemaking process, and neither the U.S. Securities and Exchange Commission nor the CFTC could finalize cross-border rules unless both agencies' rules are identical. The legislation would also exempt foreign countries with broadly equivalent regulatory regimes for their swaps markets, which are honoring their G20 commitments, not be subject to U.S. rules.
"If we get the cross-border application of Dodd-Frank wrong, the swaps trade could move permanently to foreign jurisdictions, and American end users could see the costs of the financial tools they need to compete in a global marketplace dramatically increase. The Swaps Jurisdiction Certainty Act will ensure that domestic and global swaps regulations are coherent and complementary, and it offers a common-sense approach with broad bipartisan support," Rep. Conaway said.
H.R. 1003 is cosponsored by Reps. Scott Garrett (R-N.J.), Jim Jordan (R-Ohio), Patrick McHenry (R-N.C.), Reid Ribble (R-Wisc.), David Scott (D-Ga.) and Juan Vargas (D-Calif).
The Swap Jurisdictional Certainty Act was introduced by Rep. Garrett. In addition to Rep. Conaway, Reps. John Carney (D-Del.) and David Scott (D-Ga.) are also cosponsors.