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Chairman Hensarling Speaks in Support of H.R. 992, the Swaps Regulatory Improvement Act

Washington, Oct 30 -

House Financial Services Committee Chairman Jeb Hensarling (R-TX) today delivered the following remarks on the House floor in support of H.R. 992, the Swaps Regulatory Improvement Act: 

Mr. Speaker, America’s economy remains stuck in the slowest, weakest non-recovery recovery of modern times.  Millions of our fellow countrymen remain unemployed, underemployed; many because of Obamacare have just had their hours cut.  Millions lay awake at night wondering how they will make ends meet.    

Regrettably, those who create jobs in America for our constituents are drowning in a sea of red tape which is preventing them from hiring new workers.  I still vividly remember the day when one of my constituents in East Texas came to me as he shut down his small business due to red tape and said “Congressman, it got to the point where I just thought my government didn’t want me to succeed.”

Well, Mr. Speaker, today we have an opportunity to ensure that businesses succeed in America, succeed in hiring new workers.  Today just like yesterday, Mr. Speaker, Republicans and Democrats can again pass bipartisan legislation that will help grow our economy.  This legislation is H.R. 992, and I commend the bipartisan group of members who introduced the bill:  Mr. Hultgren, Mr. Himes, Mr. Hudson and Mr. Maloney.  As Chairman of the Financial Services Committee, I also want to thank the members of the committee who joined together and approved this bill on an overwhelmingly bipartisan vote of 53-6.  Again, Mr. Speaker, the vote was 53-6. 

This bipartisan bill will relieve manufacturers, farmers, ranchers and Main Street businesses of unintended consequences of one section of the Dodd-Frank Act. 

Now many Americans may not realize it but farmers, ranchers, manufacturers and other employers use a financial product called a derivative to manage risk and protect themselves from extreme fluctuations in the price of things like fuel, fertilizer and commodities. 

For example, a company like John Deere will do an interest rate swap as they finance a tractor for a farmer in East Texas in my district -- and that derivative is directly linked to the cost of that tractor for my constituent. 

Companies like Southwest Airlines, who operate in my hometown of Dallas, Texas, they will use derivatives to lock in cheaper fuel prices when the price of crude oil is on the rise.  This keeps the cost of flying more affordable for customers like the grandmother in Mesquite, Texas who travels to visit her grandchildren in Kansas City. 

Perhaps a farmers co-op in Nebraska will use derivatives to finance fixed-price diesel for truckers who haul cattle. 

Or perhaps a hospital in Los Angeles may use derivatives to hedge against the rising interest rates when financing a big investment like more beds or new life-saving technology.

And although not one single hospital patient, not one single farmer, not one single grandmother, not one single trucker caused the financial crisis, they were all swept into Section 716 of Dodd-Frank.

Section 716 requires financial institutions to “push out” almost all of their derivatives business into separate entities.  This not only increases transaction costs, which are ultimately paid by the consumers, it also makes our financial system less secure by forcing swap trading out of regulated institutions.   

In fact, Mr. Speaker, Federal Reserve Chairman Ben Bernanke said Section 716 “would make the U.S. financial system less resilient,” “weaken” our financial stability and make our economy “more susceptible to systemic risk”.

And those who are loathe to ever amend Dodd-Frank, no less of an authority than Barney Frank himself, former chairman of the committee, said “it addresses the valid criticisms of Section 716 without weakening the financial reform law’s important derivative safeguards or prohibitions on bank proprietary trading.”

So again, Mr. Speaker, no law is perfect.  We would be derelict in our duty if we didn’t put American people back to work and pass this law.