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Senate Ag Committee holds first CFTC reauthorization hearing
Story Date: 7/18/2013
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Source: PRESS RELEASE, 7/17/13
Senator Debbie Stabenow (D-MI), Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, today said the Committee must examine lessons from past market failures as it reauthorizes the Commodity Futures Trading Commission (CFTC) to avoid repeat crises like the 2008 near-collapse of global financial markets that left 8 million men and women without jobs. Today’s hearing, the first official hearing in the Committee’s CFTC reauthorization effort, featured testimony from a range of witnesses including market participants, end users, and regulators.
Speaking about the financial meltdown of 2008, Chairwoman Stabenow said, “We cannot forget that 8 million hard-working men and women lost their jobs. Pensions and retirement savings went up in smoke. A record wave of home foreclosures swept across the country, leaving devastated communities in its wake. There was no question that we needed serious market reform. As this Committee begins the process of reauthorizing the CFTC, we need to examine lessons from the past and consider ongoing challenges to the system. We want to make sure the agency that is responsible for protecting these markets has the authority, staff, and modern technology it needs to do its job.”
Chairwoman Stabenow cited the 2011 collapse of financial firm MF Global, and its loss of $1.2 billion in segregated customer funds, as a critical reminder of why it’s important to make sure the markets are transparent and functioning as intended. The company’s bankruptcy was the eighth largest in history and former MF Global executives are now facing civil charges in federal court.
“This Committee has been closely monitoring the MF Global case, where customer funds –money that rightly belonged to farmers, businesses, and individuals all across the country – went missing. We continue to focus on three goals: getting customers their money back, holding anyone engaged in wrongdoing accountable, and ensuring that proper customer protections are in place so that something like this doesn’t happen again,” Chairwoman Stabenow said.
Chairwoman Stabenow said in the coming weeks the Committee will announce additional hearings and hold a series of staff briefings to more closely examine the issues raised at the hearing today.
Witnesses at today’s hearing included The Honorable Kenneth E. Bentsen, Jr., President, Securities Industry and Financial Markets Association (SIFMA), Washington, DC; Mr. Terrence A. Duffy, Executive Chairman and President, CME Group, Chicago, Illinois; Mr. Adam Cooper (on behalf of Managed Funds Association (MFA)), Senior Managing Director & Chief Legal Officer, Citadel LLC, Chicago, IL; Mr. Dennis Kelleher, President & Chief Executive Officer, Better Markets, Washington, DC; Mr. Daniel J. Roth, President & Chief Executive Officer, National Futures Association (NFA), Chicago, IL; The Honorable Walter L. Lukken, President and Chief Executive Officer, Futures Industry Association (FIA), Washington, DC; Mr. Gene A. Guilford (on behalf of the Commodity Markets Oversight Coalition (CMOC)), National & Regional Policy Counsel, Connecticut Energy Marketers Association, Cromwell, CT; Mr. John M. Heck (on behalf of the National Grain & Feed Association (NGFA)), Vice President, The Scoular Company, Omaha, NE; Mr. Donald A. Russak (on behalf of the American Public Power Association (APPA), Executive Vice President and Chief Financial Officer, New York Power Authority, White Plains, NY; and, Mr. Jim Colby, Assistant Treasurer, Honeywell International, Morristown, NJ.
An archived webcast of the hearing can be accessed on the Senate Agriculture Committee’s website at http://ag.senate.gov. Below are Chairwoman Stabenow’s opening remarks, as prepared for delivery.
Opening Statement as Prepared for Delivery
Sen. Debbie Stabenow (D-MI)
Chairwoman, U.S. Senate Committee on Agriculture, Nutrition and Forestry
July 17, 2013
In the more than the 150 years that we’ve had futures markets in this country, there have been cases that test the stability of the system. In the 1950s, a pair of traders in Chicago was able to corner the market on onions. They bought short positions on onions and flooded the market, driving the price down to pennies. Farmers in the Midwest were devastated and many had to file bankruptcy.
As devastating as the onion scandal was to those farmers in Michigan and Indiana and Illinois, it was nothing compared to the near-collapse of the global financial markets in 2008. We cannot forget that 8 million hard-working men and women lost their jobs. Pensions and retirement savings went up in smoke. A record wave of home foreclosures swept across the country, leaving devastated communities in its wake. There was no question that we needed serious market reform.
As this Committee begins the process of reauthorizing the CFTC, we need to examine lessons from the past and consider ongoing challenges to the system. We want to make sure the agency that is responsible for protecting these markets has the authority, staff, and modern technology it needs to do its job.
This Committee has been closely monitoring the MF Global case, where customer funds –money that rightly belonged to farmers, businesses, and individuals all across the country – went missing. We continue to focus on three goals: getting customers their money back, holding anyone engaged in wrongdoing accountable, and ensuring that proper customer protections are in place so that something like this doesn’t happen again. And I appreciate the important steps our Trustees, market participants, and the Commission have already taken toward that objective. There is, however, still more work to be done.
As several witnesses will testify today, there are lessons to be learned not just from MF Global’s failure, but also that of Peregrine Financial Group. The cause of their failures may be different, but the resulting effect on customer confidence is the same.
These markets have also been tested by the LIBOR scandal, data security breaches, occasionally unexplained price volatility, and technology challenges that raise serious concerns about the ability of our markets to protect customers. I am eager to hear from market participants testifying today about their suggestions and concerns for improving the CFTC and how these markets are supervised and protected.
But as we embark on this reauthorization process, let me be very clear. As my colleagues on this Committee know from our work on the Farm Bill, a collaborative, bipartisan, consensus-driven approach leads to success. We intend to use that model again as we look at CFTC reauthorization. In the coming weeks, we will announce additional hearings as well as hold staff briefings that more closely examine the issues presented to us today.
I look forward to working with my ranking member and our Committee as we write and pass legislation to reauthorize the CFTC.
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