05.27.10

Leahy Named A Conferee On Wall Street Reform Bill

...Derivatives And Credit Card Reforms Take Center Stage

WASHINGTON – Senate leaders have appointed U.S. Senator Patrick Leahy (D-Vt.) as one of the 12 Senate conferees who will negotiate the final form of the landmark financial reform legislation that now has passed the Senate and the House in different forms.  The conferees will meet in June.

The Senate conferees – seven Democratic senators and five Republican senators – are senior members on either the Banking or Agriculture Committees.  From the Agriculture Committee, Leahy -- the panel’s most senior member of either party -- joins Democratic conferees Sen. Blanche Lincoln (D-Ark.), the committee’s current chair; Sen. Tom Harkin (D-Iowa); and Republican Sen. Saxby Chambliss (R-Ga.).  The Banking Committee’s delegation on the conference is led by Sen. Chris Dodd (D-Conn.), the panel’s chairman, joined by Democrats Tim Johnson (S.D.), Jack Reed (R.I.), and Charles Schumer (N.Y.), and Republicans Richard Shelby (R-Ala.), Mike Crapo (R-Idaho), Bob Corker (R-Tenn.), and Judd Gregg (R-N.H.).

A key issue to be resolved by the conferees is oversight and regulation of financial derivatives – investment contracts that are not based on actual assets or commodities, but which instead “derive” their value from market indexes such as foreign exchange rates or from traditional securities like stocks, or even insurance policies.  Trading in derivatives, using increasingly complicated formulas, has exploded on Wall Street, reaching into the trillions of dollars, and playing a central role in the near-collapse of the economy in 2008.  Leahy voted for the Senate Agriculture Committee’s plan, sponsored by the panel’s chair, Sen. Blanche Lincoln (D-Ark.), to begin regulating derivatives, and especially their use by the banks that businesses and consumers rely on for the security of their savings and investments. The reforms include a narrow end-user exemption to allow legitimate commercial interests, such as electric cooperatives and heating oil dealers, to continue hedging their business risks.

Leahy said the derivatives reforms in the Senate bill “would finally bring 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.”  He said the bill “will stop Wall Street traders from artificially driving up prices of heating oil, gasoline, diesel fuel and other commodities through unchecked speculation.  If this 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.”

Another provision that is expected to draw special interest opposition in conference is an amendment that Leahy supported to protect small businesses from complicated predatory rules that big credit card companies impose on grocers and other commercial outlets in Vermont and other states.  The Durbin Amendment would ensure that a small business would be able to advertise a discount for paying cash, or for using one card instead of another.  “I do not want Vermonters to pay more for a gallon of milk just because the big credit card companies are demanding a high fee on small transactions and are not allowing the grocer to ask for cash instead of credit,” said Leahy.

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