Terrorism Risk Insurance Program Reauthorization Act of 2015

Floor Speech

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Mr. REED. Mr. President, today the Senate is considering the reauthorization of the Terrorism Risk Insurance Program, which I strongly support. As I have emphasized in the past, reauthorizing TRIA is vital. In addition to serving on the Banking Committee, I also now serve as the Ranking Member on the Armed Services Committee, and it is through this dual perspective, and from what we know of the significant terrorist threats our Nation still faces, that I am convinced that there is value in reauthorizing TRIA.

We must keep markets effectively operating in light of these threats. We must continue to have policies in place to make sure our economy stays on track in the event of another attack on our nation. In short, reauthorizing TRIA is not only a matter of economic security, it is also a matter of national security.

I believe most of my colleagues share this view, and it is one of the many reasons why the Senate in the last Congress was able to pass a TRIA reauthorization bill on an overwhelmingly bipartisan basis by a vote of 93 to 4 in July of last year. This did not happen by accident but through a concerted bipartisan effort in the Senate to steer clear of controversial and ideological demands on both sides of the aisle in an earnest attempt to work together in defense of our country and our economy.

We are here today because the House of Representatives did not abide by these same principles and insisted on including in the reauthorization bill an unrelated provision that would weaken the Dodd-Frank Wall Street Reform Act. This provision effectively prevents the banking regulators, Commodity Futures Trading Commission, CFTC, and the Securities and Exchange Commission, SEC, from calling for margin or collateral protections if they happen to notice excessive risk in derivatives transactions with commercial end users. In short, this bill would prevent our financial regulators from utilizing this tool to protect our markets.

Especially in the wake of the financial crisis, it would seem that we should be providing our regulators with all the necessary tools to limit excessive risk instead of limiting their ability to protect our markets. Indeed, the financial regulators have already been exercising the discretion we gave them in Dodd-Frank to exempt commercial end users from having to post margin through a proposed rule. But by passing this provision today, we eliminate this discretion to protect our markets through this particular tool even when the facts on the ground may call for its use in the name of market integrity.

For example, in December of last year, Reuters published an article that explained the unexpected risks that certain commercial end users are facing in light of falling oil prices. The article noted, ``with oil prices tumbling faster and further than anyone had anticipated, the collar hedges left the airlines with insurance against high costs they no longer need and on the hook for protection they sold against a further slide, with potential liabilities on the rise.'' In short, even commercial end users face risks, both expected and unexpected, in their derivatives transactions, and if the circumstances call for it, we should be giving our regulators the necessary tools to police and protect our markets; not further restricting them.

All of this goes back to the need for considering these very complicated and consequential bills that impact our financial markets in a deliberative manner, not through attaching them at the last minute to unrelated and must pass bills. I voted against the Omnibus Appropriations bill in the last Congress, in part, because it repealed section 716 of the Dodd-Frank Wall Street Reform Act, which sought to prevent bank subsidiaries that are covered by federal deposit insurance or that take advantage of Federal Reserve lending programs from engaging in the riskiest derivatives trades. In essence, the riskiest derivatives trades would have been pushed out from these subsidiaries in an effort to reduce systemic risk and provide greater assurances that Wall Street gambles would not be subsidized by taxpayers. Unfortunately, this provision was repealed before it even had the chance to be fully implemented by the regulators.

During my tenure as the then-chairman of the Banking Subcommittee on Securities, Insurance, and Investment, I spent many hours working on a bipartisan basis with Senator Gregg of New Hampshire to thoughtfully and carefully develop a derivatives compromise. While our effort was transformed during the conference on the Dodd-Frank Wall Street Reform Act, I am keenly aware of just how complicated derivatives can be, and I have come to see that even the most seemingly innocuous provisions can have devastating and unintended consequences.

Everyone should understand by now that the last thing Congress should be doing is passing derivatives legislation with little deliberation as part of any must pass legislation. This assault, bit by bit, on the Dodd-Frank Act must stop. It is a disservice to the seriousness of this issue, to our constituents, and to our economy. Lately, my Republican colleagues have called for working cooperatively through the committee process, and I welcome this opportunity. While this did not happen with this particular derivatives provision, I hope my Republican colleagues will do so in the future.

For these reasons, I support the Warren amendment.

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