Chairman Bachus Announces Witnesses For Committee Hearing To Evaluate Economic and Market Impact Of Derivatives Regulation
WASHINGTON,
February 14, 2011 -
: Financial Services Committee Chairman Spencer Bachus announced the witnesses for a hearing to examine the economic and market impact of the derivatives title of the Dodd-Frank Act. The hearing will take place on Tuesday, February 15 at 10 am in room 2128 Rayburn.
Chairman Bachus said, “This is the first hearing to review the impact of the Dodd-Frank Act on the U.S. derivatives markets. The derivatives market has evolved over the past twenty-five years into a highly sophisticated market that provides U.S. businesses with the ability to protect themselves against legitimate business risks. Requiring companies that did not cause nor contribute to the financial crisis to be treated like banks will unnecessarily remove capital from the economy. We will work to ensure that the derivatives title of Dodd-Frank does not force valuable capital to sit on the sidelines or create a patchwork regulatory regime leaving market participants with conflicting regulatory mandates. Allowing either to happen would further erode America’s status as the global leader in the derivatives markets and prevent businesses from using derivatives as a way to manage risk, resulting in fewer jobs.”
Derivatives contracts are essential financial instruments for many American companies to manage interest rate, exchange rate, commodity fluctuations, and other business risks. Companies, large and small, use derivatives every day to protect themselves against unforeseen market volatility, commodity price increases or currency fluctuations. The Dodd-Frank Act requires that all derivatives contracts be cleared through a central clearinghouse and collateral posted for each contract. The hearing will review the strengths and weaknesses of the derivatives title; the potential effects on U.S. competitiveness, job creation, and the overall U.S. economy; the likelihood of international harmonization of derivatives regulation; the consequences of the derivatives marketplace shifting from the United States to foreign markets; and the establishment of margin and capital requirements for end users who engage in the legitimate hedging of business risks.
Many recent press reports have highlighted how the derivatives rules will impact various sectors of the economy:
· Wall Street Journal: “It’s the derivatives portion—the part of the bill aimed directly at Wall Street—that might end up touching most lives in rural America. The new law requires most derivatives transactions to be standardized, traded on exchanges, just like corporate stocks, and funneled through clearinghouses to protect against default. The question for these farmers is whether such rules will make hedging more expensive.”
· New York Times Op-ed, Betsy Jensen: “I am stuck in the middle of this financial overhaul. The Dodd-Frank Wall Street Reform and Consumer Protection Act may be targeted at risk-taking bankers, but the regulations have the potential to change the way I do business on the farm. On the purchasing side, I also use derivatives to protect myself from swings in the cost of fertilizer, fuel and other staples. In the past two years, my nitrogen fertilizer has ranged from $435 to $685 per ton, and my fuel bills are giving me whiplash. While reading through the Dodd-Frank act these past few weeks, I’ve been wondering: Will the regulations on swaps make it more difficult for me to hedge against market swings in prices for crops and supplies?”
Witnesses scheduled to testify are:
Panel I:
The Honorable Mary Schapiro, Chairman, U.S. Securities and Exchange Commission
The Honorable Gary Gensler, Chairman, U.S. Commodity Futures Trading Commission
The Honorable Daniel K. Tarullo, Member, Federal Reserve Board of Governors
Panel II:
Mr. Craig Reiners, Director of Commodity Risk Management, MillerCoors
Mr. Donald F. Donahue, Chairman & Chief Executive Officer, The Depository Trust & Clearing Corporation
Mr. Terry Duffy, Executive Chairman, CME Group
Mr. Don Thompson, Managing Director and Associate General Counsel, JPMorgan
Mr. Jamie Cawley, Chief Executive Officer, Javelin
Mr. Christopher Giancarlo, Executive Vice President, Corporate Development, GFI Group Inc.
