Adjustable Interest Rate (Libor) Act of 2021

Floor Speech

BREAK IN TRANSCRIPT

Mr. SHERMAN. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4616) to deem certain references to LIBOR as referring to a replacement benchmark rate upon the occurrence of certain events affecting LIBOR, and for other purposes, as amended.

The Clerk read the title of the bill.

The text of the bill is as follows: H.R. 4616

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.

This Act may be cited as the ``Adjustable Interest Rate (LIBOR) Act of 2021''. SEC. 2. FINDINGS AND PURPOSE.

(a) Findings.--The Congress finds that--

(1) LIBOR is used as a benchmark rate in more than $200 trillion of contracts worldwide;

(2) a significant number of existing contracts that reference LIBOR do not provide for the use of a clearly defined or practicable replacement benchmark rate when LIBOR is discontinued; and

(3) the cessation or non-representativeness of LIBOR could result in disruptive litigation related to existing contracts that do not provide for the use of a clearly defined or practicable replacement benchmark rate.

(b) Purpose.--It is the purpose of this Act--

(1) to establish a clear and uniform process, on a nationwide basis, for replacing LIBOR in existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate, without affecting the ability of parties to use any appropriate benchmark rate in new contracts;

(2) to preclude litigation related to existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate; and

(3) to allow existing contracts that reference LIBOR but provide for the use of a clearly defined fallback and practicable replacement rate, to operate according to their terms.

(c) Rule of Construction.--Nothing in this Act shall be construed to disfavor the use of any benchmark rate on a prospective basis. SEC. 3. DEFINITIONS.

As used in this Act, the following terms shall have the following meanings:

(1) ``Benchmark'' shall mean an index of interest rates or dividend rates that is used, in whole or in part, as the basis of or as a reference for calculating or determining any valuation, payment or other measurement.

(2) ``Benchmark Administrator'' means a person that publishes a Benchmark for use by third parties.

(3) ``Benchmark Replacement'' shall mean a Benchmark, or an interest rate or dividend rate (which may or may not be based in whole or in part on a prior setting of LIBOR), to replace LIBOR or any interest rate or dividend rate based on LIBOR, whether on a temporary, permanent, or indefinite basis, under or in respect of a LIBOR Contract.

(4) ``Benchmark Replacement Conforming Changes'' shall mean any technical, administrative, or operational changes, alterations, or modifications that--

(A) the Board determines, in its discretion, would address one or more issues affecting the implementation, administration, and calculation of the Board-Selected Benchmark Replacement in LIBOR contracts; or

(B) solely with respect to a LIBOR Contract that is not a Consumer Loan, in the reasonable judgment of a Calculating Person, are otherwise necessary or appropriate to permit the implementation, administration, and calculation of the Board- Selected Benchmark Replacement under or in respect of a LIBOR Contract after giving due consideration to any Benchmark Replacement Conforming Changes under subparagraph (A).

(5) ``Board'' means the Board of Governors of the Federal Reserve System.

(6)(A) ``Board-Selected Benchmark Replacement'' shall mean a Benchmark Replacement identified by the Board that is based on SOFR.

(B) The Board shall adjust the Board-Selected Benchmark Replacement for each category of LIBOR Contract that the Board may identify to--

(i) apply to each LIBOR tenor; and

(ii) incorporate the relevant Tenor Spread Adjustment.

(C) For Consumer Loans, the Board-Selected Benchmark Replacement shall initially reflect the spread between the Board-Selected Benchmark Replacement and LIBOR immediately before the LIBOR Replacement Date and shall incorporate the relevant Tenor Spread Adjustment over a one-year transition period.

(7) ``Calculating Person'' shall mean, with respect to any LIBOR Contract, any person (which may be the Determining Person) responsible for calculating or determining any valuation, payment, or other measurement based on a Benchmark.

(8) ``Consumer Loan'' shall mean a consumer credit transaction. For purposes of this paragraph, the terms ``consumer'' and ``credit'' have the meaning given those terms, respectively, under section 103 of the Truth in Lending Act (15 U.S.C. 1602).

(9) ``Determining Person'' shall mean, with respect to any LIBOR Contract, any person with the authority, right, or obligation, including on a temporary basis, (as identified by the provisions of the LIBOR Contract, or as identified by the governing law of the LIBOR Contract, as appropriate) to determine a Benchmark Replacement.

(10) ``Fallback Provisions'' shall mean terms in a LIBOR Contract for determining a Benchmark Replacement, including any terms relating to the date on which the Benchmark Replacement becomes effective.

(11) ``LIBOR'' shall mean the overnight and 1-, 3-, 6-, and 12-month tenors of U.S. dollar LIBOR (formerly known as the London interbank offered rate) as administered by ICE Benchmark Administration Limited (or any predecessor or successor thereof). LIBOR shall not include the 1-week or 2- month tenors of U.S. dollar LIBOR.

(12) ``LIBOR Contract'' shall mean, without limitation, any contract, agreement, indenture, organizational documents, guarantee, mortgage, deed of trust, lease, Security (whether representing debt or equity, and including any interest in a corporation, a partnership, or a limited liability company), instrument, or other obligation or asset that, by its terms, continues in any way to use LIBOR as a Benchmark as of the applicable LIBOR Replacement Date.

(13) ``LIBOR Replacement Date'' shall mean the first London banking day after June 30, 2023, unless the Board determines that any LIBOR tenor will cease to be published or cease to be representative on a different date.

(14) ``Security'' shall have the meaning assigned to such term in section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)).

(15) ``SOFR'' shall mean the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (or a successor administrator).

(16) ``Tenor Spread Adjustment'' shall mean--

(A) 0.00644 percent for overnight LIBOR;

(B) 0.11448 percent for 1-month LIBOR;

(C) 0.26161 percent for 3-month LIBOR;

(D) 0.42826 percent for 6-month LIBOR; and

(E) 0.71513 percent for 12-month LIBOR. SEC. 4. LIBOR CONTRACTS.

(a) On the LIBOR Replacement Date, the Board-Selected Benchmark Replacement shall, by operation of law, be the Benchmark Replacement for any LIBOR Contract that, after giving any effect to subsection (b)--

(1) contains no Fallback Provisions; or

(2) contains Fallback Provisions that identify neither--

(A) a specific Benchmark Replacement; nor

(B) a Determining Person.

(b) On the LIBOR Replacement Date, any references in the Fallback Provisions of a LIBOR Contract to--

(1) a Benchmark Replacement that is based in any way on any LIBOR value, except to account for the difference between LIBOR and the Benchmark Replacement, or

(2) a requirement that a person (other than a Benchmark Administrator) conduct a poll, survey, or inquiries for quotes or information concerning interbank lending or deposit rates, shall be disregarded as if not included in the Fallback Provisions of such LIBOR Contract and shall be deemed null and void and without any force or effect.

(c) Subject to subsection (g)(2), a Determining Person shall have authority under this Act, but shall not be required, to select the Board-Selected Benchmark Replacement as the Benchmark Replacement.

(d) Any selection by a Determining Person of the Board- Selected Benchmark Replacement pursuant to subsection (c) shall be--

(1) irrevocable;

(2) made by the earlier of the LIBOR Replacement Date and the latest date for selecting a Benchmark Replacement according to the terms of such LIBOR Contract; and

(3) used in any determinations of the Benchmark under or in respect of such LIBOR Contract occurring on and after the LIBOR Replacement Date.

(e) If a Determining Person has authority to select the Board-Selected Benchmark Replacement under subsection (c) but does not select a Benchmark Replacement by the date specified in subsection (d)(2), then, on the LIBOR Replacement Date, the Board-Selected Benchmark Replacement shall, by operation of law, be the Benchmark Replacement for the LIBOR Contract.

(f) If the Board-Selected Benchmark Replacement becomes the Benchmark Replacement for a LIBOR Contract pursuant to subsection (a), (c), or (e) then all Benchmark Replacement Conforming Changes shall become an integral part of such LIBOR Contract by operation of law. For the avoidance of doubt, a Calculating Person shall not be required to obtain consent from any other person prior to the adoption of Benchmark Replacement Conforming Changes.

(g) The provisions of this Act shall not alter or impair--

(1) any written agreement specifying that a LIBOR Contract shall not be subject to this Act;

(2) any LIBOR Contract that contains Fallback Provisions that identify a Benchmark Replacement that is not based in any way on any LIBOR value (including, but not limited to, the prime rate or the Effective Federal Funds Rate), except that such LIBOR Contract shall be subject to subsection (b);

(3) any LIBOR Contract subject to subsection (c) as to which a Determining Person does not elect to use a Board- Selected Benchmark Replacement pursuant to subsection (c), except to the extent that such LIBOR Contract is subject to subsection (b) or (e);

(4) the application to a Board-Selected Benchmark Replacement of any cap, floor, modifier, or spread adjustment to which LIBOR had been subject pursuant to the terms of a LIBOR Contract; or

(5) any provisions of Federal consumer financial law that require creditors to notify borrowers regarding a change-in- terms or that govern the reevaluation of rate increases on credit card accounts under open-end (not home-secured) consumer credit plans.

(h) Except as provided in section 5(c), the provisions of this Act shall not alter or impair the rights or obligations of any person, or the authorities of any agency, under Federal consumer financial law (as defined in section 1002(14) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5481(14)). SEC. 5. CONTINUITY OF CONTRACT AND SAFE HARBOR.

(a) A Board-Selected Benchmark Replacement and the selection or use of a Board-Selected Benchmark Replacement as a Benchmark Replacement under or in respect of a LIBOR Contract, as well as any Benchmark Replacement Conforming Changes, by operation of section 4 shall constitute--

(1) a commercially reasonable replacement for and a commercially substantial equivalent to LIBOR;

(2) a reasonable, comparable, or analogous rate, index, or term for LIBOR;

(3) a replacement that is based on a methodology or information that is similar or comparable to LIBOR;

(4) substantial performance by any person of any right or obligation relating to or based on LIBOR; and

(5) a replacement that has historical fluctuations that are substantially similar to those of LIBOR for purposes of the Truth in Lending Act and its implementing regulations.

(b) Neither of (1) the selection or use of a Board-Selected Benchmark Replacement as a Benchmark Replacement or (2) the determination, implementation, or performance of Benchmark Replacement Conforming Changes, in each case by operation of section 4, shall (A) be deemed to impair or affect the right of any person to receive a payment, or to affect the amount or timing of such payment, under any LIBOR Contract or (B) have the effect of (i) discharging or excusing performance under any LIBOR Contract for any reason, claim, or defense (including, but not limited to, any force majeure or other provision in any LIBOR Contract), (ii) giving any person the right to unilaterally terminate or suspend performance under any LIBOR Contract, (iii) constituting a breach of any LIBOR Contract, or (iv) voiding or nullifying any LIBOR Contract.

(c) No person shall be subject to any claim or cause of action in law or equity or request for equitable relief, or have liability for damages, arising out of--

(1) the selection or use of a Board-Selected Benchmark Replacement,

(2) the implementation of Benchmark Replacement Conforming Changes, or

(3) with respect to a LIBOR Contract that is not a Consumer Loan, the determination of Benchmark Replacement Conforming Changes, in each case after giving effect to the provisions of section 4; provided, however, that in each case any person (including a Calculating Person) shall remain subject to the terms of a LIBOR Contract that are not affected by this Act and any existing legal, regulatory, or contractual obligations to correct servicing or other ministerial errors under or in respect of a LIBOR Contract.

(d) The selection or use of a Board-Selected Benchmark Replacement or the determination, implementation, or performance of Benchmark Replacement Conforming Changes, in each case by operation of section 4, shall not be deemed to--

(1) be an amendment or modification of any LIBOR Contract for the purpose of the governing law of such LIBOR Contract; or

(2) prejudice, impair, or affect any person's rights, interests, or obligations under or in respect of any LIBOR Contract.

(e) Except as provided in either subsections (a), (b), or (c) of section 4, the provisions of this Act shall not be interpreted as creating any negative inference or negative presumption regarding the validity or enforceability of--

(1) any Benchmark Replacement (including any method for calculating, determining, or implementing an adjustment to the Benchmark Replacement to account for any historical differences between LIBOR and the Benchmark Replacement) that is not a Board-Selected Benchmark Replacement; or

(2) any changes, alterations, or modifications to or in respect of a LIBOR Contract that are not Benchmark Replacement Conforming Changes. SEC. 6. PREEMPTION.

(a) This Act and the regulations hereunder shall supersede any and all laws, statutes, rules, regulations, or standards of any State, the District of Columbia, or any territory or possession of the United States, insofar as they provide for the selection or use of a Benchmark Replacement or related conforming changes.

(b) No provision of State or local law that expressly limits the manner of calculating interest, including the compounding of interest, shall apply to the selection or use of a Board-Selected Benchmark Replacement or Benchmark Replacement Conforming Changes. SEC. 7. TRUST INDENTURE ACT OF 1939.

Section 316 of the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is amended--

(1) by striking ``and'' after ``of subsection (a),'' in subsection (b); and

(2) by inserting ``, and except that the right of any holder of any indenture security to receive payment of the principal of and interest on such indenture security shall not be deemed to be impaired or affected by any change occurring by the application of section 4 of the Adjustable Interest Rate (LIBOR) Act of 2021 to any indenture security'' after ``subject to such lien'' in subsection (b). SEC. 8. RULEMAKING.

Not later than 180 days after the date of enactment of this Act, the Board shall issue such regulations as may be necessary or appropriate to enable it to administer and carry out the purposes of this Act. SEC. 9. REVISED CALCULATION RULE TO ADDRESS INSTANCES WHERE 1-MONTH USD LIBOR CEASES OR IS NON- REPRESENTATIVE.

Section 438(b)(2)(I) of the Higher Education Act of 1965 (20 U.S.C. 1087-1(b)(2)(I)) is amended by adding at the end the following:

``(viii) Revised calculation rule to address instances where 1-month usd libor ceases or is non-representative.--

``(I) Substitute reference index.--The provisions of this clause apply to loans for which the special allowance payment would otherwise be calculated pursuant to clause (vii).

``(II) Calculation based on sofr.--For loans described in subclause (III) or (IV), the special allowance payment described in this subclause shall be substituted for the payment provided under clause (vii). For each calendar quarter, the formula for computing the special allowance that would otherwise apply under clause (vii) shall be revised by substituting `of the quotes of the 30-day Average Secured Overnight Financing Rate (SOFR) in effect for each of the days in such quarter as published by the Federal Reserve Bank of New York (or a successor administrator), adjusted daily by adding the Tenor Spread Adjustment, as that term is defined in the Adjustable Interest Rate (LIBOR) Act of 2021, for 1- month LIBOR contracts of 0.11448 percent' for `of the 1-month London Inter Bank Offered Rate (LIBOR) for United States dollars in effect for each of the days in such quarter as compiled and released by the British Bankers Association'. The special allowance calculation for loans subject to clause (vii) shall otherwise remain in effect.

``(III) Loans eligible for sofr-based calculation.--Except as provided in subclause (IV), the special allowance payment calculated under subclause (II) shall apply to all loans for which the holder (or, if the holder acts as an eligible lender trustee for the beneficial owner of the loan, the beneficial owner of the loan) at any time after the effective date of this clause notifies the Secretary that the holder or beneficial owner affirmatively and permanently elects to waive all contractual, statutory, or other legal rights to a special allowance paid under clause (vii) or to the special allowance paid pursuant to any other formula that was previously in effect with respect to such loan, and accepts the rate described in subclause (II). Any such waiver shall apply to all loans then held, or to be held from time to time, by such holder or beneficial owner; provided that, due to the need to obtain the approval of one of the following, demonstrated to the satisfaction of the Secretary--

``(aa) one or more third parties with a legal or beneficial interest in loans eligible for the SOFR-based calculation, or

``(bb) a nationally recognized rating organization assigning a rating to a financing secured by loans otherwise eligible for the SOFR-based calculation, the holder of the loan (or, if the holder acts as an eligible lender trustee for the beneficial owner of the loan, the beneficial owner of the loan) may elect to apply the rate described in subclause (II) to specified loan portfolios established for financing purposes by separate notices with different effective dates. The special allowance rate based on SOFR shall be effective with respect to a portfolio as of the first day of the calendar quarter following the applicable effective date of the waiver received by the Secretary from the holder or beneficial owner and shall permanently and irrevocably continue for all subsequent quarters.

``(IV) Fallback provisions.--

``(aa) In the event that a holder or beneficial owner has not elected to waive its rights to a special allowance payment under clause (vii) with respect to a portfolio with an effective date of the waiver prior to the first of--

``(AA) the date on which the ICE Benchmark Administration (`IBA') has permanently or indefinitely stopped providing the 1-month United States Dollar LIBOR (`1-month USD LIBOR') to the general public,

``(BB) the effective date of an official public statement by the IBA or its regulator that the 1-month USD LIBOR is no longer reliable or no longer representative, or

``(CC) the LIBOR Replacement Date, as that term is defined in section 3 of the Adjustable Interest Rate (LIBOR) Act of 2021, the special allowance rate calculation as described in subclause (II) shall, by operation of law, apply to all loans in such portfolio.

``(bb) In such event--

``(AA) the last determined rate of special allowance based on 1-month USD LIBOR will continue to apply until the end of the then current calendar quarter; and

``(BB) the special allowance rate calculation as described in subclause (II) shall become effective as of the first day of the following calendar quarter and remain in effect for all subsequent calendar quarters.''.

Mr. Speaker, today we show that the House of Representatives can deal with a really big problem before it becomes a crisis and before almost anybody even knows that there is a problem. We can deal with such a problem without drama, without deadlock, without partisanship. We can do it a year and a half before it all explodes, so as to give the Senate, the regulatory agencies, and the private sector the time that they need to do this job long before the impending uncertainty disrupts our economy.

As co-chair of the CPA Caucus, I am here to certify that this is the most important genuinely boring bill that will come before this House this year.

Mr. Speaker, there are trillions of outstanding loans that have adjustable interest rates. The adjustment of these loans is tied to the London Interbank Offered Rates, known as LIBOR. LIBOR has been referred to as the most important interest rate in the world.

We are dealing here with adjustable rate mortgages, business loans and securities, and even some student loans. For many years LIBOR was the index. When LIBOR went up, the interest rate on these instruments would go up. When LIBOR went down, the interest would go down. For many years it worked well.

LIBOR is based on a survey of British bankers. A few years ago some British bankers lied and some went to jail. Our friends across the pond said they would stop publishing the LIBOR index. We asked them to keep doing it. They are going to stop on June 30, 2023.

Some $16 trillion of loans and business instruments will still be outstanding. Those instruments will specify that you calculate the interest rate based on LIBOR, and LIBOR will not exist.

These $16 trillion of loans and other business instruments do not specify what is supposed to happen if you go to calculate the interest rate based on LIBOR and there is no LIBOR. That is why they are called tough legacy LIBOR instruments.

We could do what all too often happens in Washington--we could ignore the problem. We could then leave it up to tens of thousands of class action lawsuits, hundreds of thousands of regular lawsuits, as borrower and lender try to figure out what interest rate would apply. That would be terrible for our economy and our court system.

We have got a better idea. The legislation before us today, H.R. 4616, the Adjustable Interest Rate (LIBOR) Act, which will provide borrowers, investors, and all those in the financial space certainty as to what happens when LIBOR is no longer published.

Before I continue, I want to thank Chairwoman Waters and Ranking Member McHenry, and their staff for working closely with me to get this bill on the floor today. I particularly want to thank Rob Robilliard of my staff who has poured his heart and soul into this bill for the entire year.

I am pleased to say that H.R. 4616 has received the support of 21 business organizations, I would say every business organization with a stake in this matter, including the American Bankers Association, the Independent Bankers, and the Chamber of Commerce.

I want to particularly thank Kristi Leo, President of the Structured Finance Association, for working with us on this bill. The legislation has also won the support of so many public interest groups, including the National Consumer Law Center and Americans for Financial Reform.

I particularly want to thank Andrew Pizor of the National Consumer Law Center for his assistance.

Not only has this legislation received support from these important organizations, but every word--and I mean every word--has been carefully reviewed by the Federal Reserve Board, the U.S. Treasury Department, the Securities and Exchange Commission, the Office of Controller of the Currency, the Federal Housing Finance Agency, and the Consumer Financial Protection Bureau. We have revised it again and again based on their comments.

Each of these agencies has cleared on every word of the bill before us today. Once again, I want to thank the staff, particularly of the Federal Reserve, for their excellent work for helping us draft this legislation: Mackenzie Gross, Evan Winerman, and Mark Van Der Weide.

This text before us is a consensus product and all the agencies have signed off. We have worked with over 100 different organizations and groups, and to my knowledge none oppose the text that is before us today.

I want to thank the Alternative Reference Rate Committee, which was convened by the New York Fed which created the structured overnight finance rates, which are based on the treasury markets. Those markets are public, transparent, and not subject to manipulation. It is a broad market. Unlike the LIBOR rate, it is not subject to manipulation.

This bill provides that as to that $16 trillion of tough legacy LIBOR, pursuant to regulations published by the Fed, the various SOFR rates that are applicable will stand in for the LIBOR rate once the LIBOR rate is no longer published. It sounds simple, but let me tell you it has been a hell of a year as you try to get consensus on a bill affecting $16 trillion.

Mr. Speaker, I want to talk a little bit about why this bill is necessary and why it is so important. Just 2 months ago, October 20, the Federal Reserve, the CFPB, the FDIC in conjunction with the State Bank and Credit Union Regulators issued a joint statement stating that failure to adequately prepare for LIBOR's discontinuance could undermine the financial stability and safety and soundness of the institutions they oversee.

The Financial Stability Oversight Council, which we created in response to the 2008 meltdown, said that a cessation of LIBOR has the potential to significantly disrupt our financial markets. The SEC similarly warned that LIBOR's discontinuance may pose a significant risk to our stock and bond markets.

Secretary Janet Yellen and Federal Reserve Board Chair Powell told us that we need legislation to deal with this matter at the Federal level, and it is bipartisan. Steve Mnuchin testified to the same thing when he was Secretary of the Treasury in the Trump administration.

Finally, I should point out that Federal Reserve Chair Powell has told us that failure to deal with this presents a big financial stability risk to our entire economy.

As to the scope of this bill, it deals only with tough legacy LIBOR. It does not deal with those instruments that expire while LIBOR is still published, nor does it deal with those instruments that are created in the future and do not reference LIBOR.

There was an earlier draft of this bill that set forth the obvious, and that is the substitution of SOFR for the LIBOR index does not constitute a sale or exchange for tax purposes. We took that out because we wanted to move the bill quickly and not cause a referral to the Ways and Means Committee. Mostly we took it out because it was absolutely unnecessary.

It is very clear under existing tax law, the change of one index to another index that is incredibly similar, in this case, designed to be as close as humanly possible does not constitute a sale or exchange, but especially where that change is through the operation of law and where the change is necessitated because the original index is no longer published. The tax outcome is obvious and does not need to be part of the statute.

The last change we made in this bill was to add the words ``for purposes of the governing law of such LIBOR contracts'' to section 5(d). We did that to make it clear that we weren't dealing with any tax issue and anybody could hold it up to a magnifying glass and try to find a tax word in it. By putting these words in it we satisfied the Committee on Ways and Means. There is no taxation in this statute.

This law does deal and preempts the field with regard to all non-tax law, that means contract, commercial, financial law at both the Federal, State, and local level.

Finally, this act does not prescribe what interest rates ought to be used in the future. That is up to the parties involved. Nothing in this bill is designed to encourage the use of SOFR or any other particular benchmark interest rate, nor does it encourage or authorize any Federal regulatory agency to push any bank or other institution to use any particular rate in the future. That is up to them.

This bill deals with $16 trillion of tough legacy LIBOR. It is a consensus product. It is the result of the work of regulators, industry, and the public interest community.

Mr. Speaker, I urge its adoption and I reserve the balance of my time. House of Representatives, Committee on Ways and Means, Washington, DC, December 7, 2021. Hon. Maxine Waters, Chairwoman, Committee on Financial Services, Washington, DC.

Dear Chairwoman Waters: In recognition of the desire to expedite consideration of H.R. 4616, the ``Adjustable Interest Rate (LIBOR) Act of 2021,'' the Committee on Ways and Means agrees to waive formal consideration of the bill as to provisions that fall within the rule X jurisdiction of the Committee on Ways and Means.

The Committee on Ways and Means takes this action with the mutual understanding that we do not waive any jurisdiction over the subject matter contained in this or similar legislation, and the Committee will be appropriately consulted and involved as the bill or similar legislation moves forward so that we may address any remaining issues within our jurisdiction. The Committee also reserves the right to seek appointment of an appropriate number of conferees to any House-Senate conference involving this or similar legislation.

Finally, I would appreciate your response to this letter confirming this understanding and would ask that a copy of our exchange of letter on this matter be included in the Congressional Record during floor consideration of H.R. 4616. Sincerely, Richard E. Neal, Chairman. ____ House of Representatives, Committee on Financial Services, Washington, DC, December 7, 2021.

Hon. Richard Neal, Chairman, Committee on Ways and Means, Washington, DC.

Dear Mr. Chairman: I am writing to acknowledge your letter dated December 7, 2021, regarding the waiver by the Committee on Ways and Means of any jurisdictional claims over the matters contained in H.R. 4616, the ``Adjustable Interest Rate (LIBOR) Act of 2021.'' The Committee on Financial Services confirms our mutual understanding that your Committee does not waive any jurisdiction over the subject matter contained in this or similar legislation, and your Committee will be appropriately consulted and involved as this bill or similar legislation moves forward so that we may address any remaining issues within your jurisdiction.

The Committee on Financial Services further recognizes your interest in appointment of outside conferees from the Committee on Ways and Means should this bill or similar language be considered in a conference with the Senate.

Pursuant to your request, I will ensure that this exchange of letters is included in the Congressional Record during Floor consideration of the bill. I appreciate your cooperation regarding this legislation and look forward to continuing to work with you as this measure moves through the legislative process. Sincerely, Maxine Waters, Chairwoman. ______ Committee on Education and Labor, House of Representatives, Washington, DC, December 7, 2021. Hon. Maxine Waters, Chairwoman, Committee on Financial Services, Washington, DC.

Dear Chairwoman Waters: I write concerning H.R. 4616, the Adjustable Interest Rate (LIBOR) Act of 2021. This bill was primarily referred to the Committee on Financial Services, and additionally to the Committee on Education and Labor. As a result of your having consulted with me concerning this bill generally, I agree to forgo formal consideration of the bill so the bill may proceed expeditiously to the House floor.

The Committee on Education and Labor takes this action with our mutual understanding that by forgoing formal consideration of H.R. 4616, we do not waive any jurisdiction over the subject matter contained in this or similar legislation, and we will be appropriately consulted and involved as the bill or similar legislation moves forward so we may address any remaining issues within our Rule X jurisdiction. I also request that you support my request to name members of the Committee on Education and Labor to any conference committee to consider such provisions.

Finally, I would appreciate a response confirming this understanding and ask that a copy of our exchange of letters on this matter be included in the Committee Report filed by the Committee on Financial Services and in the Congressional Record during floor consideration of H.R. 4616. Very truly yours, Robert C. ``Bobby'' Scott, Chairman. ____ Committee on Financial Services, House of Representatives, Washington, DC, December 7, 2021. Hon. Bobby Scott, Chairman, House Committee on Education and Labor, Washington, DC.

Dear Mr. Chairman: I am writing to acknowledge your letter dated December 7, 2021, regarding the waiver by the Committee on Education and Labor of any jurisdictional claims over the matters contained in H.R. 4616, the ``Adjustable Interest Rate (LIBOR) Act of 2021.'' The Committee on Financial Services confirms our mutual understanding that your Committee does not waive any jurisdiction over the subject matter contained in this or similar legislation, and your Committee will be appropriately consulted and involved as this bill or similar legislation moves forward so that we may address any remaining issues within your jurisdiction.

The Committee on Financial Services further recognizes your interest in appointment of outside conferees from the Committee on Education and Labor should this bill or similar language be considered in a conference with the Senate.

Pursuant to your request, I will ensure that this exchange of letters is included in the Congressional Record during Floor consideration of the bill. I appreciate your cooperation regarding this legislation and look forward to continuing to work with you as this measure moves through the legislative process. Sincerely, Maxine Waters, Chairwoman.

Mr. Speaker, I wish to respond to this gentleman's remarks about the process. First, this bill is a good bill. Vote for the bill. There is no doubt this bill is a good bill.

I don't need to talk about the process, but I will for just a second. As to whether we had sufficient hearings and enough hearings that match the interest of this House, we had a full hearing of my subcommittee on this, and it is not as if 400 Members of the House showed up and said: We are not a member of the subcommittee, but can we participate?

It is not as if the balcony is filled. It is not as if we deprived our colleagues of information they were anxious to obtain.

But it is not just one hearing of the subcommittee. I regarded at least a dozen of the hearings of the Financial Services Committee over the last 2 years as hearings on LIBOR. In my opening remarks, I quoted what Secretary Mnuchin said. He said that in response to my questions when he came before us at hearings. The gentleman knows that at least probably a dozen hearings that we have had at Financial Services where we had the Secretary of the Treasury, where we had the Chair of the Federal Reserve, where we had other experts, I asked a question about LIBOR. And if my colleagues had found this subject near as interesting as I do, they would have asked questions about LIBOR as well. So we had one hearing dedicated to LIBOR and a dozen and more hearings where those dedicated to LIBOR could have asked questions.

As to whether people in this House should think that we are interfering with the rights of businesses to transact business, I include in the Record a letter in support of this bill signed by 21 business groups basically, every business group that deals with any instrument tied to the LIBOR index. December 7, 2021. Hon. Nancy Pelosi, Speaker, House of Representatives, Washington, DC. Hon. Kevin McCarthy, Republican Leader, House of Representatives, Washington, DC.

Dear Speaker Pelosi and Republican Leader McCarthy: We, the undersigned organizations, support H.R. 4616, the ``Adjustable Interest Rate (LIBOR) Act,'' to address ``tough legacy'' contracts that currently reference LIBOR. We respectfully request the House of Representatives expeditiously pass this legislation.

In June 2023, all tenors of US dollar LIBOR, one of the most important financial benchmarks that underpins nearly $200 trillion in financial contracts, will cease to be published. As a result, there are trillions of dollars of hard to modify financial contracts, securities, and loans that use LIBOR--known as ``tough legacy'' contracts--that are unable, before this end date, to either convert to a non- LIBOR rate or amend the contracts to add adequate fallback language to another rate. Without federal legislation to address these contracts, investors, consumers, and issuers of securities may face years of uncertainty, litigation, and a change in value. This would thereby create ambiguity that would lead to a reduction in liquidity and an increase in volatility.

H.R. 4616 provides a solution for these ``tough legacy'' contracts that have insufficient fallback language and cannot otherwise be amended among the parties. The legislation is narrowly crafted to allow parties to contracts that already have effective fallback provisions to opt-out of the legislation and to only apply to tough legacy contracts so that new or future business will not be affected. In addition, the legislation offers uniform, equitable treatment for all U.S. contracts that fall under the federal legislation. It creates a safe harbor from litigation for parties that are covered by the legislation and prevents otherwise inevitable litigation costs and gridlock. The need for uniform federal legislation has been expressed by consumer groups, investors, financial regulators, and industry participants.

We thank the House Committee on Financial Services for providing a bipartisan solution that offers fair, equitable and consistent treatment for all ``tough legacy'' contracts in support of the LIBOR transition by passing H.R. 4616 out of the committee by voice vote. We wholeheartedly support the Adjustable Interest Rate (LIBOR) Act and ask that you and all Members of the House of Representatives vote in favor of this critical legislation. Sincerely,

Securities Industry and Financial Markets Association (SIFMA); Structured Finance Association (SFA); Bank Policy Institute; National Association of Corporate Treasurers; Education Finance Council; The Loan Syndications and Trading Association (LSTA); The International Swaps and Derivatives Association (ISDA); The Real Estate Roundtable; The Financial Services Forum; Institute of International Bankers; Government Finance Officers Association.

Mortgage Bankers Association; Commercial Real Estate Finance Council (CREFC); Consumer Bankers Association; Investment Company Institute; Institute for Portfolio Alternatives; Independent Community Bankers of America; U.S. Chamber of Commerce, Center for Capital Markets Competitiveness; Housing Policy Council; Student Loan Servicing Alliance; American Bankers Association; The American Council of Life Insurers (ACLI).

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Mr. SHERMAN. Finally, as to the issue, I agree with the gentleman that I would like to have had this bill come up 2\1/2\ years before LIBOR ceased to be published. We are bringing this to this House 1\1/2\ years before LIBOR ceases to be published. Compared to everything else in Washington, that is record time. I speak today on a fiscal year that began October 1 where we hope to pass the appropriations bills in February. Dealing with a problem 1\1/2\ years before it happens may not be 2\1/2\ years in advance, but it is good compared to everything else I have seen.

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Mr. SHERMAN. Mr. Speaker, I would simply say to my Republican colleagues who may be watching: You don't have to trust the 21 business groups who have signed the letter that I just included in the Record, and you don't have to trust me. Listen to the words you just heard from our colleague, Mr. Hill: This bill does not increase government or regulatory power. You ought to vote for the bill.

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Mr. SHERMAN. Mr. Speaker, I would be thrilled.

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Mr. SHERMAN. Will the gentleman yield?

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Mr. SHERMAN. This bill reflects an awful lot of work by the regulators, particularly the Fed.

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Mr. SHERMAN. Absolutely.

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Mr. SHERMAN. I have long advocated for a unicameral legislature.

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Mr. SHERMAN. If I can comment on that further?

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Mr. SHERMAN. The Senate has addressed this issue, and they have discussed the bill. Most of the commentary has been positive. There was a recent hearing.

In particular, I believe that Mr. Toomey had a concern that somehow this bill would influence future instruments and that somehow regulators would be pushing banks, particularly smaller banks, to use SOFR in the instruments they draft in the future. That is why the report that accompanies this bill makes it excruciatingly clear that nothing in this bill authorizes, directs, encourages, or allows a regulator to point to this bill and say: Now, bank, you need to use SOFR in the instruments used in the future.

Nothing in this bill authorizes a regulator to push or give a preference to any other regulation. The report language was drafted with Senator Toomey in mind.

I will simply comment again, for the record. This bill deals with tough legacy LIBOR instruments drafted in the past, and nothing in it-- and you can look at every word of all 22 pages--nothing in it would allow anyone to say you have got to use SOFR, or you ought to use SOFR, or we give you a preference to use SOFR, or any other benchmark in any instrument you draft in the future. And just in case that wasn't excruciatingly clear, we put it in the report as well.

Mr. Speaker, I believe I have the right to close. I have no other speakers, so I will reserve the balance of my time.

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Mr. SHERMAN. I am prepared to close.

As to the process, we have had a dozen hearings with the top financial officials in the U.S. Government over a period of 2 or 3 years at the full committee, in which it was appropriate and, in my case, I used this opportunity to bring up the LIBOR issue. They have testified again and again that we need Federal legislation.

Then the six regulatory agencies involved each have reviewed this down to the comma, and we have had discussions, down to the comma. They have helped us draft legislation.

My hope is that we not only pass this legislation today, but that my Republican colleagues help me pass this bill through the Senate in the current form. You want a form that reflects the regulators? Every comma reflects what the regulators would like to see.

It is important that this bill not be held up in the Senate by those who want to change existing law and say, well, not only should this act not allow a regulator to push a bank toward this or that index, but if any other law gives the regulators the power to do that, we should strip that authority from them. That is not the purpose of this bill.

If somebody wants a bill titled, regulators shouldn't be pushed to telling banks what to do on indexes, I will work with the gentleman, if he wants to, on a freedom to pick your own index bill. This is a bill to just deal with LIBOR.

So my hope is that we will have Republican House Members who urge the Senate to move quickly because, yes, it would have been better to deal with this issue 2\1/2\ years in advance. We have dealt with it 1\1/2\ years in advance; a full hearing, a full markup, a full opportunity for anyone to submit amendments at that full markup, and a dozen hearings, at which it was appropriate to address questions--at least I did--of the top officials in our country dealing with financial matters about the importance of LIBOR.

This bill is important because it deals with $16 trillion of instruments where we will not be able to calculate how much the borrower must pay the lender after June 30 of 2023 unless we pass this bill.

This is a consensus product. The consumer and public interest groups, the business groups, the regulators, and we are passing it and need to pass it expeditiously so that we deal with this issue long before it disrupts our financial markets.

Mr. Speaker, I urge its adoption, and I yield back the balance of my time.

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