Today, the House Agriculture Committee held a public hearing to review seven legislative proposals amending Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposals are the culmination of the committee's oversight efforts of the Commodity Futures Trading Commission (CFTC) as it writes rules for Dodd-Frank.

"This committee has heard from numerous market participants - from agricultural producers to public power companies - and all of them have the same concerns. They fear some of these regulations will make using derivatives so expensive that businesses will be forced to scale back or stop using them to hedge against risk. That increases the costs for consumers and reduces stability in the marketplace.

 

Today's hearing examined several balanced proposals to ensure Dodd-Frank is implemented in a way that does not disrupt markets or harm the economy," said Chairman Frank Lucas.

The bills include the following:
H.R. 634, the Business Risk Mitigation and Price Stabilization Act, ensures that end-users can continue to use derivatives to manage business risks without being subject to costly margin requirements. H.R. 677, the Inter-Affiliate Swap Clarification Act, ensures that transactions between affiliates within a single corporate group are not regulated as swaps.

 

H.R. 742, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013, would allow data sharing between U.S. and international regulators and swap data repositories without adding an unnecessary layer of legal bureaucracy.

 

H.R. 992, the Swaps Regulatory Improvement Act, amends Section 716 of the Dodd-Frank Act to limit the swap desk push-out requirement so that it does not apply to equity or commodity swaps. H.R. 1003 would require the CFTC to assess the costs and benefits of its actions.

 

And, H.R. 1038, the Public Power Risk Management Act, would allow producers, utility companies, and other non-financial entities to continue entering into energy swaps with government-owned utilities without danger of being required to register with the CFTC as a swap dealer.

Additionally, the Committee also examined one draft proposal, the Swap Jurisdiction Certainty Act, which would direct the CFTC and the Securities and Exchange Commission to adopt a joint rule on how they will regulate cross-border swaps transactions as part of the new requirements created in the Dodd-Frank Act.
Written testimony provided by the witnesses below.
Witness List:
Panel I
The Honorable Gary Gensler, Chairman, U.S. Commodity Futures Trading Commission, Washington, D.C.
Panel II
The Honorable Kenneth E. Bentsen, Jr., Acting President and CEO, Securities Industry and Financial Markets Association (SIFMA), Washington, D.C.
Mr. Jim Colby, Assistant Treasurer, Honeywell International Inc., Morristown, New Jersey; on behalf of the Coalition for Derivatives End-Users
Mr. Terrance Naulty, General Manager & CEO, Owensboro Municipal Utilities, Owensboro, Kentucky; on behalf of the American Public Power Association
Mr. Larry Thompson, General Counsel, Depository Trust and Clearing Corporation (DTCC), New York, New York
Ms. Marie Hollein, President and CEO, Financial Executives International (FEI) and Financial Executives Research Foundation, Washington, D.C.; on behalf of the Coalition for Derivatives End-Users
Mr. Wallace C. Turbeville, Senior Fellow, Demos, New York, New York; on behalf of Americans for Financial Reform

Opening Statement of Chairman Frank D. Lucas
Committee on Agriculture Public Hearing
Examining Legislative Improvements to Title VII of the Dodd-Frank Act
March 14, 2013
As prepared for delivery

Thank you all for being here today.

In a way, we have already had this hearing during the last Congress. In fact, we held more than a dozen hearings on the Dodd-Frank Act during the last Congress with dozens of witnesses. And, we have discussed all of the bills or topics that are on our agenda today during past hearings.

Unfortunately, the reason we are still talking about the very same issues is because the same concerns still exist with parts of Dodd-Frank. We stand to harm significant portions of our economy if these issues are not addressed with legislative fixes.

Since the start of 2011, the feedback we have heard all across the country has been fairly consistent. Farmers, ranchers, financial firms, and Main Street businesses are worried about the unintended consequences of Dodd-Frank rules.

We’ve heard from public power companies that might not be able to hedge against volatile energy prices because their counterparties are walking away. As a result, energy prices could rise for millions of Americans—an unacceptable result that was certainly never contemplated when Dodd-Frank was written to reform our financial system.

And we’ve heard from manufacturers – who employ hundreds of thousands of Americans – that that they will have to alter their business models because they may be required to post margin on important risk management trades or on their very own internal transactions.

It boils down to this: some of these regulations could make using derivatives so expensive that businesses will be forced to stop using them to hedge against risk.

That increases costs for consumers and reduces stability in the market place. That is completely contrary to the intent of the original Dodd-Frank legislation.

Today, we will review legislation that are balanced proposals that ensure the legislation is implemented in the manner Congress intended or provides a technical fix to ensure Dodd-Frank does not disrupt markets or harm the economy.

It is good to note that this Committee heard from top regulators from Japan and the European Union just last December who warned that without better coordination between the CFTC and international regulators, there will be global fragmentation of the derivatives markets. That cannot be allowed to happen. One of today’s bills – a discussion draft – will directly address that issue in a common-sense manner that Dodd-Frank should have already included.

It is very important to note that every single bill we will discuss today is bipartisan with Republicans and Democrats both on the Agriculture Committee and the Financial Services Committee supporting them. They are bipartisan because they contain common-sense tweaks to ensure that Dodd-Frank does not unnecessarily burden our agricultural producers, job-creators, local utilities, financial institutions, and small businesses.

Again, all of these bills are intended to restore the balance that I believe can exist between sound regulation and a healthy economy.

I look forward to advancing all of them in a bipartisan fashion.
I now will turn to the Ranking Member to make his opening statement.

Opening Statement by Agriculture Committee Ranking Member Collin C. Peterson
Examining Legislative Improvements to Title VII of the Dodd-Frank Act

--As Prepared for Delivery--

“Thank you Mr. Chairman. I want to welcome CFTC Chairman Gensler for what I have been told is his 50th appearance before a Congressional Committee, going all the way back to his confirmation hearing. That has to be some kind of record.

“For his first two years in office, Chairman Gensler was helping us fix the financial mess left over from years of de-regulation and lax oversight. During the past two years, he has been called to account for the Commission’s implementation of the Dodd-Frank reforms Congress enacted in 2010.

“Last Congress, this Committee held several hearings where we listened to a host of stakeholders express concerns about Dodd-Frank’s implementation. At each of these hearings, I repeatedly recommended patience and caution for those seeking to change the law. I believe that patience has generally been rewarded, with the Commission producing thoughtful, final rules that respond to the concerns being raised.

“Today’s hearing is to examine legislative proposals seeking to address many of those same concerns and I, again, recommend patience.

“Despite the bipartisan support that some of these bills may have, I just don’t see how they have any chance passing the Senate.

“Additionally, given the CFTC’s performance, I still believe that much of the legislation we’re discussing today will not be needed. The CFTC is going to get this right. To date, many of the final rules coming out of the Commission have broad bipartisan support and are addressing the concerns that stakeholders have expressed to both us and the Commission.

“Ironically, the issue that may truly need to be addressed – margin requirements on end-users – is a problem not being caused by the CFTC, but by the proposed rule of the Prudential Regulators.
We really should be bringing the Prudential Regulators in to answer questions about their proposed rule because we aren’t holding them held accountable for their actions. I raised this same issue in previous Congress when we held a hearing on the predecessor to H.R. 634.

“Sometime this summer, the CFTC will complete the vast majority of its rulemaking. To me, that is the best time to see what has been done and fix what needs to be fixed. Hopefully, we will have completed our work in the House on the farm bill and can turn our attention to CFTC reauthorization, which I believe is the best chance for enacting any improvements to Dodd-Frank, if necessary.

“With that Mr. Chairman, I appreciate the time and I yield back.”