Consumer Protection and End User Relief Act
Floor Speech
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Ms. WATERS. I thank the gentleman from Minnesota for yielding.
Mr. Chairman, I rise in opposition to our H.R. 4413 legislation that would reauthorize the Commodity Futures Trading Commission. This measure addresses an important goal for this Congress: reauthorization of the CFTC, our regulator whose mission it is to ensure fair rules of the road for the majority of derivatives traded by U.S. firms.
I know that Representative Peterson and Representative Scott, the ranking members of the committee and subcommittee respectively, have worked in good faith to improve this legislation and that they care deeply about making the CFTC work for farmers, manufacturers, and other businesses that use futures and derivatives. I thank them for their efforts.
However, I am concerned about provisions in the bill unrelated to the reauthorization of the Commission that I believe would undermine the CFTC's authority and hamstring its ability to regulate a complex and important marketplace. Mr. Chairman, this legislation imposes heavy administrative burdens that will prevent, delay, or weaken CFTC's efforts to implement important reforms called for by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
H.R. 4413 would also make it much more difficult for the CFTC and the SEC to regulate derivatives transactions involving foreign operations of U.S. banks. It does so by establishing hard-to-overturn exemptions that allow their operations to substitute Dodd-Frank rules in favor of more lenient foreign rules in foreign markets, despite the fact that the risks may come back to the United States.
These types of derivatives transactions contributed to the massive taxpayer bailout of AIG in 2008, created enormous losses to JPMorgan in the London Whale episode in 2012, and brought down the hedge fund Long-Term Capital Management in the 1990s. This bill makes the job of the CFTC and the SEC to police derivatives operations of large U.S. banks and their foreign affiliates much more difficult.
In addition, under the guise of cost-benefit analysis, the bill imposes heavy administrative hurdles and new litigation risk on the CFTC, significantly impairing the Commission's ability to do its job of regulating our derivatives markets.
Like other agencies, the CFTC already considers the costs and benefits pursuant to numerous existing laws, and unlike any other regulator, the CFTC goes even further, considering the protection of market participants and the public, the effect on futures markets, price discovery, sound risk management practices, and other public interest matters.
Even the courts have weighed in, finding that the CFTC has fulfilled its duty to consider the cost and benefits.
H.R. 4413 not only burdens an agency already facing limited funding with additional administrative burdens, but it also opens up new avenues for special interests to endlessly challenge the CFTC in court.
Former CFTC Chairman Gensler noted that, if this provision in H.R. 4413 is enacted, ``It may well be hard to get any rule out of the building.''
Together, these changes undermine the CFTC's ability to guard against some of the most complex and risky activities in our financial system, and it is all just part of a multifaceted Republican effort to undercut laws and regulations that protect consumers, investors, and the economy.
It also comes just a week after House Republicans proposed an appropriations measure that dangerously underfunds the CFTC at 22 percent below the President's request, a level which will lead to either agencywide closures or employee layoffs.
Mr. Chairman, we cannot continue to undercut and underfund Wall Street's top derivatives cop with the authority to ensure compliance with the law. This bill is widely opposed by the Obama administration, the AFL/CIO, broad coalition groups like Americans for Financial Reform and the Consumer Federation of America, as well as derivatives end users like the Petroleum Marketers Association of America.
So I would urge my colleagues to oppose this legislation. I insert in the Record the opposition, including the White House opposition to this legislation.
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Ms. WATERS. Mr. Chairman, I urge support for this amendment to ensure that the Commodities Futures Trading Commission can adequately regulate our financial markets and address some of the very practices that so seriously harmed our economy just a few years ago.
This amendment modestly improves the onerous cost-benefit considerations included in this bill, a provision that would open the Commission up to expensive legal challenges.
It does so by adding in language from the President's executive order on cost-
benefit analysis that prohibits judicial review. The bill's sponsors cite this order as the model of good analysis and incorporate many provisions of that order in this legislation.
However, the measure before us today inconsistently omits the order's prohibition on judicial review, thereby subjecting the CFTC's most cost-benefit considerations to increase litigation risk--risk that no other agency complying with the executive order has faced.
My amendment would correct this oversight and prevent special interest groups from using the cost-benefit provision as a club to delay, weaken, or kill financial reform.
My colleagues--Representative DelBene, Representative Gibson, and Representative Vargas--share my concerns and have proposed an amendment that would establish a heightened standard of judicial review.
While I support this amendment, it does not go far enough, in my view, to fix the problem. I believe that judicial review with regard to the heightened cost-benefit provisions in the underlying bill should be prohibited entirely.
Make no mistake, even if the amendment offered previously by my colleagues on judicial review--or, for that matter, my amendment--is adopted, the bill would still impose heavy administrative hurdles on the CFTC.
The Commission is already required to consider the costs and benefits when promulgating rules and issuing orders pursuant to the Paperwork Reduction Act, the Congressional Review Act, and the Regulatory Flexibility Act, as other agencies do.
Unlike any other financial regulator, the CFTC is also already bound by the Commodity Exchange Act to consider the impact of their rules on the full range of market stakeholders.
The courts have weighed in as well, finding that the CFTC has fulfilled its duty to consider the costs and benefits, as in the rule related to commodity pool operators.
The CFTC will still have to expand resources to comply with this provision that Republicans are unwilling to provide. Instead, the CFTC will have to take funds from examinations and enforcement to pay for redundant economic analysis.
Mr. Chairman, this is a commonsense amendment that will simply prevent our Nation's top directives cop from spending excessive time and resources fighting off superfluous legal challenges and would make the underlying bill consistent with the President's executive order.
I urge my colleagues to support this amendment, and I reserve the balance of my time.
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Ms. WATERS. Thank you very much, Mr. Chairman.
I just want to make clear my opposition to anything other than preventing judicial review on cost-benefit analysis.
Again, I am very appreciative to my colleagues who also share my concerns and, again, have proposed an amendment that would establish a heightened standard of judicial review, and I support that amendment.
I do not want anyone to be confused that I believe that that amendment would solve the problem. I still think that, if that amendment is adopted, the bill would still impose heavy administrative hurdles on the CFTC.
This is not about simply reauthorization at any cost with anything in the bill. This is about having a CFTC that really works, that is not burdened with the kind of cost-benefit analysis that we have seen burdening other of our agencies that have tried to do their job, including the SEC.
I would ask my friends who are listening to differentiate between that amendment of my colleagues, who are addressing this concern in their way, and my amendment that would prevent judicial review altogether.
I yield back the balance of my time.
Mr. CONAWAY. Mr. Chair, I, too, agree with the gentlewoman that we all want a very effective CFTC.
Reauthorizing the agency ought to be a part of looking at its operations. Given the work that it did and didn't do during the Dodd-Frank regulatory scheme that put in place 60 new rules, we don't believe that the cost-benefit rules that were in place under section 15(a) were properly used and did not generate the benefits that the impact of a properly vetted cost-benefit analysis would have on each and every rule.
With that, I urge my colleagues to vote against the amendment, and I yield back the balance of my time.
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Ms. WATERS. Thank you very much for yielding additional time to me to talk about cost-benefit analysis.
I think the gen tle lady has made a real case for what we are dealing with here.
First of all, we know--and I guess we all agree--that prior to the meltdown that we had that caused the recession in this country, we did not have the kind of oversight that we needed on derivatives.
We worked very hard to bring about transparency. We worked very hard to get a handle on the role that derivatives played in this meltdown we had that caused us almost to go into a depression. And here we are trying to implement the reforms, trying very hard to protect the American public and those ends users that have been talked about so much today.
Cost-benefit analysis is just another way that has been injected into this whole attempt to regulate that would place unreasonable burdens on the CFTC and basically prohibit them from doing their job.
In offering this amendment, the gen tle lady has made it very clear, and she has added additional support to what we have been talking about today relative to cost-benefit analysis. And so I hope that not only the information we have presented, but the information that she has presented is enough to have people understand what we need to do in order to protect the CFTC's ability to do its job and to carry out its mission.
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