Adjustable Interest Rate (Libor) Act of 2021

Floor Speech

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Mr. HUIZENGA. I appreciate the opportunity to be here today and to have this conversation.

This shouldn't be a surprise. We knew this day was coming since 2014. The Alternative Reference Rate Committee, the ARRC, has worked diligently to help ensure a successful transition from the aforementioned LIBOR rate system to a new system.

In fact, over the last several years, Republicans on the Financial Services Committee have raised this issue on numerous occasions with our prudential regulators, as well as the Secretary of the Treasury under even the last administration.

I, myself, have asked for a greater focus on this issue, but unfortunately, this request seemingly fell on some deaf ears. It was unfortunate that my colleagues on the other side seemed to sort of forge ahead without having a broader conversation. There was one hearing on this issue before we marked up this bill in July. We needed to do a better job in socializing this particular issue because now, Mr. Speaker, we have a problem.

We have Members of this Chamber who do not understand the issue and don't understand the process, and they look at this as being just rushed. They don't see the 2\1/2\, 3, 4, 5 years of having this discussion since the London Whale scandal happened where there was a manipulation of those international interest rates.

Here we are today, once again, because of a truncated process, and it appears to some of our Members that we are rushing through a bill that is going to expand the Federal Government, that could cost the Federal Government something, that is going to interfere with private contracts. We simply have not done the work to normalize and socialize this particular issue.

This has been described as a once-in-a-generation event, and we are talking about financial instruments with hundreds of trillions of dollars at stake, including effects that we can't even totally foresee.

Fast-forward more than 2\1/2\ years, here we are less than a month from the deadline, and we are just now voting on a bill to address these legacy contracts for the transition from LIBOR.

This is Washington and, frankly, the process at its worst.

So how did we get here? Every day, thousands of financial contracts attach LIBOR as the interest rate. With LIBOR phasing out, the financial system needs legal certainty on what happens to those legacy contracts that have this rate already baked in.

This bill attempts to provide a solution. It offers an alternative rate to affected parties who cannot agree on a rate to replace LIBOR.

To be clear, the rate offered under this legislation is one option. It does not prevent these parties from agreeing to something better that suits those particular needs of that contract.

Again, this bill was passed out of committee in July. Now, 4 months later, the Committees on Ways and Means and Education and Labor were finally able to include their portions of this. That is 4 months of inaction that has caused some of that now, today, concern by many on this side of the aisle.

To make this situation more frustrating, we still don't know where the Senate stands. I don't, the chair doesn't, and certainly the industry doesn't know where the Senate is. Frankly, maybe the Senate doesn't know itself. But, hopefully, today will spur them into this conversation.

The bottom line is this process could have been much, much better. In fact, it should have been much, much better. It must be better when we are talking about preventing systemic risk to our financial system.

Our regulators who supervise the financial system have stated that this is a satisfactory fix, but I would wager a bitcoin that they aren't happy with how we arrived here today.

As a whole, I would like to thank the regulators for their hard work, and, in fact, I do believe that this bill would not be here today without their guidance. But this is not the process that Financial Services Committee Republicans would have pursued, and it is certainly not quite the bill that we would have drafted. But there are trillions of dollars at stake, and the safety and soundness of our financial system is at the stake, and here we are with an eleventh hour scramble again. Unfortunately, that seems to define how Washington, D.C., is being run today.

I will not stand in the way of this process, of allowing this process, and the progress for our regulators to be able to supervise this financial system. But I do encourage my Republican colleagues to trust our regulators and support this legislation despite having some doubts about the process of what we are seeing here today.

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Mr. HUIZENGA. Mr. Speaker, I will reserve my comments for our colloquy, but the gentleman certainly knows that communication has been slim at best between staff and Members.

Mr. Speaker, I would like to ask the gentleman at this point to engage in a colloquy if he is so willing.

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Mr. HUIZENGA. I know this is an issue that is both thrilling and exciting, but let me just state that the problem I am hearing from some of my colleagues is they don't necessarily understand the depth, breadth, and work that has gone into this for years prior to this. They know that it is showing up. They are questioning whether there was a hearing; they are questioning whether there was a proper markup; and sadly, they are questioning that because it seems to be following a pattern as of late. That is why there are questions.

Mr. Hill, others from the committee, and I are trying to alleviate that. A number of our colleagues have expressed they haven't had time to really dive into it and come to us with those types of questions. So we are trying to deal with that.

But as far as our colloquy here, we both described in our respective remarks that it is regulators who ultimately worked on that.

Mr. Chairman, is that correct?

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Mr. HUIZENGA. I yield to the gentleman from California.

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Mr. HUIZENGA. Yes, and the Securities and Exchange Commission, OCC, FHA, CFPB, and, of course, the Fed. I appreciate the technical advice that each of them has lent and, ultimately, their comments. They actually reviewed every change that was made to this bill as sufficient to address the issue.

It is fair to say that it is a fix that these regulators have requested. Is that fair?

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Mr. HUIZENGA. Let's turn to the Senate here.

It is my understanding, however, that there is no consensus in the Senate and that it is unlikely, frankly, that any action in the Senate will specifically, exactly reflect this bill.

Would that be a characterization that you have as well?

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Mr. HUIZENGA. I think we can let that reflect as a yes.

The Senate will probably be acting. We know that they will be acting, as has been expressed by the players on the Senate.

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Mr. HUIZENGA. Please.

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Mr. HUIZENGA. Mr. Speaker, reclaiming my time on that; that would be my understanding of that. And a concern that I had of not having ``coercion'' is the word that I would use, that private entities could be coerced into using a particular declared rate.

Mr. Speaker, I am prepared to close. I continue to reserve the balance of my time.

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Mr. HUIZENGA. And I will just make a few final points on this bill.

There are trillions of dollars that are caught up in this, and this is about the safety and soundness of our financial system. Whether it is mortgages, car loans, you name it, this is an international stage where this is being played out on.

And as I have said, we could do better than an eleventh-hour scramble; should have done better than an eleventh-hour scramble, but here we are.

Again, this is not the process that I would have chosen or my colleagues on the Republican side would have pursued. It is not the bill necessarily that we would have drafted. But I will not stand in the way of allowing our regulators to supervise the financial system within checks, within proper checks.

This is not giving them free rein. I do expect that there will be changes to occur from the Senate. I look forward to hearing and listening to the regulators on those changes.

I do encourage my Republican colleagues to listen to our regulators, but, more so, listen to your Republican colleagues who have been working on this issue. And I ask that they support this legislation.

And, no, we will not see an increase in government. No, we will not see an increase in the regulatory footprint. It clarifies how we are going to be dealing with and how these private companies are going to need to move forward with the legacy contracts that they have that no longer are within the parameters that are allowed because of this fraud that had happened within the LIBOR system.

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