Chairman Bachus Statement On H.R. 1573, To Restore Order To The Dodd-Frank Derivatives Rulemaking Process
Washington,
May 24, 2011 -
Financial Services Committee Chairman Spencer Bachus made the following statement today during consideration of H.R. 1573, legislation to restore order to the Dodd-Frank derivatives rulemaking process, promote regulatory coordination, and ensure the U.S. economy is not placed at a competitive disadvantage with other countries
“The Committee meets this morning to markup important legislation, H.R. 1573, that is needed to restore order to the Dodd-Frank derivatives rulemaking process. This bill was referred to the Financial Services Committee after winning approval from the House Agriculture Committee under the leadership of our colleague Chairman Lucas.
“H.R. 1573 will ensure that the United States is not placed at a competitive disadvantage with other countries. There is no need to rush to meet arbitrary deadlines when the rest of the world is at least 18 months behind the United States. In fact, the Financial Stability Board, which co-ordinates the work of national regulators globally, recently warned it was ‘concerned with the substantial variation across jurisdictions in the pace of implementation’ of derivatives market reform.
“Former Democratic SEC Commissioner Annette Nazareth has stated that the timetables imposed by the reform law are ‘wildly aggressive’ and that – in her words – ‘these deadlines could actually be systemic-risk raising.’ SEC Chairman Mary Schapiro stated before this committee in February that ‘the OTC derivatives markets are large and interconnected. The issues are complex and do not lend themselves to easy solutions.’
“But if you don’t want to heed the warnings from the Financial Stability Board, Commissioner Nazareth or Chairman Schapiro, then listen to the warning issued last week by our colleagues on this Committee from New York. These members – Republicans and Democrats – wrote regulators on May 17th expressing concerns that the proposed Dodd-Frank rules governing derivative contracts could put U.S. banks at a competitive disadvantage to their foreign competitors. As they said in their letter ‘absent harmonization between new rules here and abroad, disparate treatment of U.S. firms will only encourage participants in the derivatives markets to do business with non-U.S. firms. Accordingly, it is important to strike a balance between implementing the new safeguards and harming the competitiveness of U.S. financial institutions vis-à-vis their international counterparts.’
“Our colleagues from New York are exactly right. If we create a prohibitively expensive and rigid climate for the use and trading of derivatives in the United States, the market could very well shift overseas, and once markets leave they will not return. Undoubtedly, foreign markets are closely examining how U.S. regulators are implementing Dodd-Frank and stand ready to create a competing non-punitive derivatives marketplace.
“This need not be – and should not be – a partisan issue. After all, the concerns expressed about the rulemaking process have not been partisan. But, unfortunately, some of our colleagues on the Democratic side have claimed this bill ‘will prevent any substantive regulation of the derivatives market,’ when – in fact – the bill merely extends rule writing deadlines on some provisions but leaves the Title VII reforms intact. Another partisan attack against H.R. 1573 is that Republicans want to pass it in the hope there will soon be a Republican Senate or Republican President to repeal the law entirely. But, in fact, the Title VII provisions will go into effect prior to the next President assuming office, under both the bill as introduced and the amendment that Chairman Garrett will offer.
“H.R. 1573 will provide regulators with vital information about derivatives transactions to ensure transparency and market safety. The additional time and information provided by this bill will allow the regulators to engage in the proper due diligence needed to get the derivatives rules right from the start. I urge the Committee to heed the bipartisan warnings, including from those who serve on this Committee, reject the partisan attacks, and approve this bill.”
