Credit Cardholders' Bill Of Rights Act Of 2009

Floor Speech

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Ms. CANTWELL. Madam President, I rise to discuss what I hope will be a turning point on our road to economic recovery. The Obama administration yesterday asked Congress to swiftly pass sweeping and historic regulatory reforms on derivatives, credit default swaps, commodities trading, and other sectors of the financial marketplace that collapsed last year under the weight of unrestrained speculation. The road to this point has not been easy. For months I have been urging the administration to move quickly to propose strong regulatory controls on these markets, require transparency in derivatives trading, and restrict market manipulation. With the announcement yesterday by Treasury Secretary Geithner in a letter he sent to Senate and House leaders, the administration has come down decisively on the side of imposing order on a marketplace whose collapse made this current recession so much deeper and more painful for the average American than it needed to be.

The administration clearly supported in writing bringing the unregulated ``dark'' over-the-counter derivative markets under full regulation for the very first time. The administration has correctly identified the top three key goals of regulatory reform in the unregulated over-the-counter derivatives market. First, transparency on all dark markets. All derivative transaction dealers will be brought under prudential regulation and supervision which means capital adequacy requirements, antifraud and antimanipulation authority, and very clear transparency and reporting requirements.

Second, all standardized trading of physical commodities and other derivatives will finally be required to be traded on fully regulated exchanges.

Third, imposing position limits on regulated markets to prevent any market player from amassing large positions that can harm the market. I have received in e-mail additional assurances from the administration that they believe these position limits should be applied in the aggregate across all contract markets to prevent fraud and manipulation.

Mr. Geithner's announcement yesterday was truly historic. Americans have suffered through an era of deregulation that is primarily the cause of this economic crisis. How did we get here and why is this historic?

A decade ago Congress passed, in the dark of night at the end of the Congress in 2000, a law known as the Commodities Futures Modernization Act that provided ironclad protections from regulation for financial tools. One courageous regulator, then Commodities Futures Trading Commission Chairwoman Brooksley Born, warned Congress and the financial community that unregulated derivatives could cause potential serious dangers to the economy. But some in Washington blocked her efforts, including Wall Street and senior administration officials.

One high-ranking Treasury official charged with pushing this deregulation bill through Congress was Gary Gensler, a former high-ranking executive at Goldman Sachs. As Under Secretary of the Treasury, Mr. Gensler testified before Congress that he ``unambiguously opposed'' regulating the derivatives market. Mr. Gensler was wrong. For Brooksley Born's courage in standing up to powerful financial interests in proposing tougher rules, she is being awarded the Profiles in Courage award by the John F. Kennedy Foundation this year.

With yesterday's announcement, this administration embraces the reforms that Brooksley Born argued we needed a decade ago. This was an uphill battle. There were too many people with a financial stake in the old, unrestrained trading system. But it was because of my concern that the President's commitments to government reform and increased transparency would be overshadowed by those willing to take a go-slow approach to regulatory reform that I placed a hold on the President's nomination of Gary Gensler to be Chairman of the Commodities Futures Trading Commission. In my view, Mr. Gensler helped perpetuate the lax regulation that contributed to our current economic crisis while he was Under Secretary of Treasury during the latter years of the Clinton administration.

While Mr. Gensler has recently stated he supports stronger regulatory rules for financial markets, in 2000, he supported legislation that provided ironclad protections against regulation of financial products such as credit default swaps and derivatives. I hardly need to remind my colleagues of the disastrous results of that course of action.

The world of derivatives and credit default swaps is foreign to most Americans. The vulnerability of these markets to rampant speculation and the complex set of regulatory structures needed to address the problems are not easy to grasp, even for insiders of the financial industry. But my constituents in Washington State know all too well the consequences of inaction and lax oversight. To us, the financial meltdown is not just an object lesson in greed and avarice playing out on the other coast; it is an issue that has affected our daily lives. We remember when the lights went out over the energy crisis brought on by Enron's predatory speculation that threw the western power grid into disarray. This perfect storm--a combination of drought, botched regulation, and Enron's market manipulation--cost west coast consumers more than $40 billion, and it took years to unravel the mess.

The rules of the financial game may be esoteric, but the consequences of a financial meltdown are well understood by my constituents. It is because of my involvement in bringing Enron's speculative schemes to light and seeing the type of business abuse in the financial markets that I am determined to take steps to ensure that such abuse does not happen again. I am glad President Obama has listened to those on Capitol Hill and those within his own administration who believed strongly that bold and timely action was critical to ensure stability of our financial markets. I continue to have concerns about Mr. Gensler's appointment to head the agency responsible for regulating swaps and other derivatives whose collapse amid unrestricted speculation caused so much damage to the economy. But in light of the administration's significant and potentially historic stand on new controls over derivative markets, I am prepared to lift my hold on his confirmation and, instead, focus on ensuring that the legislation we pass includes the recommendations the administration has made.

I say that I hope the administration's new policy will become a turning point, because we have more work to do to make sure these concepts become law. The Treasury Department announcement was not a piece of legislation but, rather, a policy outline, a statement of the kind of bill the White House would support. It is now up to us in Congress to turn this into law. I am committed to working with Senate leadership to ensure that the resulting legislation closes loopholes and that we get about making sure that the previously poorly designed controls are eliminated.

Where necessary, we must be willing to go even further than the administration in crafting a bill that puts an end to destructive and predatory forms of speculation. But I applaud the bold position outlined in the Treasury Secretary's letter to House and Senate leadership yesterday.

The idea here is not to impose regulation for regulation's sake. The idea is to protect the American people from the consequences of unrestrained speculation. Our constituents are justifiably angry, because they have seen millions of jobs and trillions of dollars in savings evaporate while speculators who aggravated the crisis floated away on golden parachutes.

Undoubtedly, in the weeks to come, Wall Street interests will have a lot to say about regulatory reforms. They should say it to the average American who has been taking a crash course in the financial crisis over the past year. Our obligation is not to these speculators. It is to the people who work hard, whose ingenuity and extraordinary productivity have provided the lift that has made our economy the envy of the world. It is now our time to do our job to put in the robust reforms that will make their hard work pay off in the days ahead.

I ask unanimous consent that Treasury Secretary Timothy Geithner's letter be printed in the Record.

There being no objection, the material was ordered to be printed in the RECORD

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