Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee, made the following statement today on the floor of the U.S. House of Representatives. Ranking Member Waters opposed the passage of H.R. 1256, the Swap Jurisdiction Certainty Act, under closed rule. Ranking Member Waters led the debate noting that H.R. 1256 handcuffs our regulators reach overseas, and instead forces the U.S. taxpayer to rely on foreign regulators to protect them from institutions that bet the house. By bringing H.R. 1256 up under a closed rule, the Republican Majority refused to allow any amendments on the bill, and limited debate and understanding of a bill that has broad implications for everyday Americans. The bill passed the House of Representatives with a majority of Democrats voting against it. The complete text of her floor statement follows.
As prepared for delivery:
I’d like to try to clear up some of the misunderstandings of what this bill is about. The more we debate it, the better members understand the impact of this bill on our economy.
This country has been through a terrible financial crisis. Part of the reason is that we allowed our banks and financial institutions to place unregulated bets on the mortgage markets. Remember AIG? What did AIG do? It made a really big bet that the mortgage market would go up. And it lost. And the taxpayer was put in the position of having to bail it out.
The Dodd-Frank Act enabled us to put a stop to that kind of betting going on, hidden from the rest of us, finally dragging that activity out into the sunlight. The CFTC and the SEC are finally putting in place rules of the road to prevent any one institution from threatening our livelihood again. But this bill wants to drag some of that activity back into the shadows, allowing banks and others once again to enter into transactions without even our regulators being able to see them.
You may say that this bill just concerns the limits on how far U.S. law goes. So why is it so important that the CFTC and SEC have discretion over the rules on cross-border derivatives? Because the exposure that a foreign branch or subsidiary a U.S. institution takes in foreign markets comes back home to the U.S. Moreover, U.S. banks and corporations may find that those they do business with have much more hidden exposure because of foreign transactions. This bill says that we will have to rely on the foreign regulators to protect us.
To put it simply, this bill could delay implementation of the Wall Street Reform Act’s derivatives provisions by months, if not years, and preserve the kind of opacity in our markets that led to taxpayers bailing-out AIG just five short years ago.
For example, while Europe has made considerable progress on its swaps clearing and reporting rules, Europe’s framework for implementing trading and internal business conduct standards have been caught up in delays. It is unclear at this point how strong those requirements ultimately will be. This bill increases the incentives for other jurisdictions to avoid making the tough decisions to put in a strong financial framework.
I am very disappointed and worried that this bill has been brought to the floor under a closed rule, as have more than one-third of the bills so far this Congress. I believe there are important issues concerning the structure of this bill, particularly the bill’s presumption that the rules of the nine largest foreign markets will be broadly equivalent to our own. The bill would require the SEC and CFTC to act in order to allow US rules to apply to transactions, even though the risks of the transactions will ultimately be imported back into the United States. My amendment would have reversed this presumption, directing the SEC and CFTC to jointly consider the regulatory framework of these countries to provide appropriate exemptions when jurisdictions have derivatives rules that are truly broadly equivalent to our own.
A closed rule prevents us from considering these issues. There is no reason that we should automatically grant ability to enter into these transactions without rules. We should allow the CFTC and the SEC to do their work so we know who is doing what. We should allow derivatives rules to go into effect without further challenge. We have a responsibility to protect our country from the consequences of easily evaded rules, which this bill will create.
The least we could do is have an honest debate on these issues. Why don’t we have this debate in front of the American people? We may lose, but at least we’ll have educated people as to what we’re talking about.
For all these reasons, I urge a “NO” vote.
Thank you Mr. Chairman, and I reserve the balance of my time.