Leahy: Derivatives Reform Should Remain An Ingredient Of Wall Street Reform
[Following are the opening remarks of Senator Patrick Leahy (D-Vt.), a Senate conferee on the House-Senate conference on the Wall Street reform bill. The first meeting of conferees was held today (Thursday).]
I want to congratulate Agriculture Chairwoman Blanche Lincoln and Banking Committee Chairman Chris Dodd for shepherding this significant piece of legislation through the United States Senate. Getting to this point was no small feat, and Senators Lincoln and Dodd – along with Majority Leader Harry Reid – have persevered because they know that fixing our troubled financial system is absolutely and unequivocally in the best interests of our country and its citizens. It is time to reign in Wall Street for the benefit of Main Street.
The bill before us goes directly at the heart of the Wall Street excesses that brought our economy to the brink. If this financial crisis has taught us anything, it is that the look-the-other way, hands-off deregulatory policies that were in vogue in recent times can jeopardize not only private investments, but our entire economy. We need more transparency and oversight of Wall Street – and we need to prohibit financial institutions from growing “too big to fail.”
I am hopeful that the final bill will include provisions I have been working on as Chairman of the Senate Judiciary Committee to ensure that law enforcement and federal agencies have the necessary tools to investigate and uncover financial crimes; that whistleblowers who help uncover these crimes are protected; that the American people have access to critical information about the complex operations of large financial institutions and the federal agencies that regulate them; and that competition authorities maintain their vital role in regulating the financial industry.
The Agriculture Committee’s derivatives section is a major step toward finally bringing the $600 trillion derivatives market out of the dark and into the light of day – ending the days of backroom deals that put our entire economy at risk. A narrow end-user exemption will allow legitimate commercial interests – like electric cooperatives and heating oil dealers – to continue hedging their business risks, but it will stop Wall Street traders from artificially driving up prices of heating oil, gasoline, diesel fuel and other commodities through unchecked speculation. We need to keep this narrow end-user exemption – and we need to end government bailouts of these risky swap endeavors.
The American people see harmful effects of legal loopholes that powerful interests have convinced Congress to enact over the years, like limiting their liability for such things as oil spills. They see the Supreme Court narrowly voting to cap Exxon’s liability for an earlier oil spill. They see yet another recent Supreme Court case that opens the way for corporate interests to drown out the voices of real people.
And, directly to the point of the legislation before us, they see the frenzied invention and trading of complex derivative investment schemes. These have all the trappings of games played on paper, by the rich and the well-connected on Wall Street. And that’s certainly how it looks from the outside, to the everyday Americans who play by the rules; who buy homes to live in, not merely to flip; who invest in their children’s education, and who try to sock some money away for their own retirements. The problem is: These bets on derivative schemes are usually made with other people’s money, and in magnitudes that can, and have, threatened to bring the entire economy crashing down. That’s not a game; it’s risking the livelihoods of millions of American families. And this is everyone’s economy, not just theirs.
Mr. Chairman, we are on the cusp of a major victory for the American people with a bill that will reign in Wall Street abuses, end government bailouts, and give everyday Americans the consumer protection they deserve and expect. I believe that cleaning up these Wall Street abuses will help build confidence in our economy and continue our progress toward economic recovery.
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Press ContactDavid Carle: 202-224-3693
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