[Senate Hearing 112-284]
[From the U.S. Government Publishing Office]
NOMINATION OF MARK P. WETJEN,
OF NEVADA, TO BE A COMMISSIONER
OF THE COMMODITY FUTURES TRADING COMMISSION
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
JULY 21, 2011
__________
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Committee on Agriculture, Nutrition and Forestry
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COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY
DEBBIE STABENOW, Michigan, Chairwoman
PATRICK J. LEAHY, Vermont PAT ROBERTS, Kansas
TOM HARKIN, Iowa RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota THAD COCHRAN, Mississippi
MAX BAUCUS, Montana MITCH McCONNELL, Kentucky
E. BENJAMIN NELSON, Nebraska SAXBY CHAMBLISS, Georgia
SHERROD BROWN, Ohio MIKE JOHANNS, Nebraska
ROBERT P. CASEY, Jr., Pennsylvania JOHN BOOZMAN, Arkansas
AMY KLOBUCHAR, Minnesota CHARLES E. GRASSLEY, Iowa
MICHAEL BENNET, Colorado JOHN THUNE, South Dakota
KIRSTEN GILLIBRAND, New York JOHN HOEVEN, North Dakota
Christopher J. Adamo, Majority Staff Director
Jonathan W. Coppess, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Michael J. Seyfert, Minority Staff Director
Anne C. Hazlett, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Nomination of Mark P. Wetjen, of Nevada, to be a Commissioner of
the Commodity Futures Trading Commission....................... 1
----------
Thursday, July 21, 2011
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
Chairwoman, Committee on Agriculture, Nutrition and Forestry... 1
Roberts, Hon. Pat, U.S. Senator from the State of Kansas......... 3
Introduction of Mark P. Wetjen, of Nevada, Nominated to be a
Commissioner of the Commodity Futures Trading Commission, by
Hon. Harry Reid, a U.S. Senator from the State of Nevada....... 2
Witness
Wetjen, Mark P., of Nevada, nominated to be a Commissioner of the
Commodity Futures Trading Commission........................... 5
----------
APPENDIX
Prepared Statements:
Chambliss, Hon. Saxby........................................ 22
Wetjen, Mark P............................................... 24
Document(s) Submitted for the Record:
Landrieu, Hon. Mary L.:
Written letter of support for Mark Wetjen, of Nevada to be a
Commissioner of the Commodity Futures Trading Commission... 30
Written letter of support for Mark Wetjen, of Nevada to be a
Commissioner of the Commodity Futures Trading Commission, U.S.
Chamber of Commerce............................................ 31
Question and Answer:
Roberts, Hon. Pat:
Written questions to Mark P. Wetjen.......................... 41
Thune, Hon. John:
Written questions to Mark P. Wetjen.......................... 34
Grassley, Hon. Charles:
Written questions to Mark P. Wetjen.......................... 37
Nelson, Hon. E. Benjamin:
Written questions to Mark P. Wetjen.......................... 38
Wetjen, Mark P.:
Written response to questions from Hon. John Thune........... 34
Written response to questions from Hon. Charles Grassley..... 37
Written response to questions from Hon. E. Benjamin Nelson... 38
Written response to questions from Hon. Pat Roberts.......... 41
NOMINATION OF MARK P. WETJEN,
OF NEVADA, TO BE A COMMISSIONER
OF THE COMMODITY FUTURES TRADING
COMMISSION
----------
Thursday, July 21, 2011
United States Senate,
Committee on Agriculture, Nutrition and Forestry,
Washington, DC
The committee met, pursuant to notice, at 10:08 a.m., in
Room G-50, Dirksen Senate Office Building, Hon. Debbie
Stabenow, Chairwoman of the committee, presiding.
Present or submitting a statement: Senators Stabenow,
Nelson, Klobuchar, Roberts, Lugar, Boozman, and Thune.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
AND FORESTRY
Chairwoman Stabenow. Well, good morning and thank you for
being here today. The Senate Committee on Agriculture,
Nutrition, and Forestry will come to order.
Today, the committee will consider the nomination of Mark
Wetjen to serve a five-term member, Commissioner, of the
Commodity Futures Trading Commission. Mr. Wetjen, we are very
glad to have you. Congratulations on your nomination. We extend
a warm welcome to you and your family and friends that are here
today, particularly your wife, Nicole, your son, Cullen,
mother, Sheila, and brother, Sean. So welcome to all of you. We
are very glad to have you here and I am sure you are very proud
of Mark.
I also want to take a moment to give a special welcome and
thank you to Commissioner Mike Dunn, who is here with us today.
Commissioner Dunn, we want to thank you for your service and
your commitment to the agency and to the markets in the
country. You have done very, very important work, and so we are
very grateful. We appreciate your willingness to stay with the
CFTC a little while longer as the Senate works through the
nomination process, and again, we thank you for your service.
In the same vein, I would like to thank Commissioner Jill
Sommers for coming today. She is also doing very important work
at the Commission, helping us to be able to get the rules
right. In particular, I would like to highlight her strong work
on international issues, which certainly has come up in our
oversight hearings and is certainly a priority for me. So we
want to thank you for all of your work.
I know that Senator Reid will be joining us shortly, and
when he does, I will yield to him, but let me proceed at this
point to indicate that Mr. Wetjen's nomination comes at a
crucial moment for our economy and our financial markets as the
CFTC continues to both implement important regulatory reforms
and monitor our commodity markets for manipulation, fraud, and
abuse.
The public's awareness of the CFTC has only grown in the
past year, with both the passage of the Dodd-Frank Act and the
increased volatility in our commodity markets. People have
realized just how much we need someone watching over these
markets and the CFTC is there to protect both market
participants and the integrity of the markets, making certain
that they are competitive, open, and financially sound.
I see that our Senate leader has joined us. Welcome,
Senator Reid. I am going to stop at this moment and turn it
over to you to introduce Mr. Wetjen. We appreciate always your
leadership and hard work and your willingness to join us today.
Senator Reid.
INTRODUCTION OF MARK P. WETJEN, OF NEVADA, NOMINATED TO BE A
COMMISSIONER OF THE COMMODITY FUTURES TRADING COMMISSION, BY
HON. HARRY REID, U.S. SENATOR FROM THE STATE OF NEVADA
Senator Reid. Chairwoman, on the way over here, my staff
said, here is something, that the speech has been prepared for
you. I said, if I need a speech to introduce Mark Wetjen, I am
in bad shape.
I want to be able to convey to you how fortunate we are
that people like Mark Wetjen decide they want to do public
service. Mark Wetjen was an attorney in the largest law firm in
Nevada. I received a call from one of my sons who said he knows
a man by the name of Mark Wetjen who wants to come to
Washington and work in the Federal Government. I said, well,
what does he do with the law firm? I thought maybe he was a--I
did not know what he was, but he was a lawyer doing extremely
well, very productive, making good money. But Mark Wetjen has
always wanted to be in some form of public service. He came
back and has worked for me for five or six years. How long has
it been, Mark?
Mr. Wetjen. Almost seven.
Senator Reid. Almost seven. The reason his name was sent
forward is not because I went out and hustled a job for Mark
Wetjen. It came about as a result of everyone, Democrats and
Republicans who work on Capitol Hill, realizing how good he is.
He is an expert on housing and all kinds of financing. He is
just a fine young man who will render as good of service to our
country in his new capacity as he has working in the Senate. I
think it is fair to say that he is one of the most popular
staff members on Capitol Hill. He is always available, to
Democrats and Republicans. And I am very, very fortunate that
he has worked for me for these years.
I care a great deal about Mark. He is one of those people
that you deal with that you really feel like he is one of your
sons.
Chairwoman Stabenow. Thank you very much.
Senator Reid. I hope none of you are going to ask me any
hard questions.
[Laughter.]
Chairwoman Stabenow. We have some questions about credit
default swaps we would like to ask you.
Senator Reid. Could I be excused?
[Laughter.]
Chairwoman Stabenow. Thank you very much, Leader Reid. We
very much appreciate--we know you have much to do, but this is
important for you to be here, so thank you very, very much.
Let me just remind us that in 1974, Congress created the
CFTC as an independent agency to regulate commodity futures and
options, but over the years, that role has expanded to complex
financial products, and most recently to swaps, overseeing most
of a $300 trillion notional domestic market. While the CFTC is
an agency that few Americans really think about, it is an
agency that is so important to the daily lives of Americans.
Whether it is paying for gas at the pump or paying for food to
feed our families, when these markets do not work, consumers
feel the pain. The CFTC's role in overseeing our financial
markets has significant implications for businesses around the
world, as well, and the ability for companies to grow and
create jobs.
Commissioners play an important role in protecting these
markets, writing regulations, investigating market abuses.
Stepping into the agency in the middle of a complicated
rulemaking is a heavy responsibility. As I told the White
House, I expect a smart, thoughtful, independent voice at the
Commission in this position, and I believe Mr. Wetjen will be
such a voice.
I would like to submit letters of recommendation for Mr.
Wetjen from the U.S. Chamber of Commerce, and Senator Mary
Landrieu has sent one, as well. If there are no objections,
these letters will be inserted into the record.
[The following information can be found on pages 30 and 31
in the appendix.]
Chairwoman Stabenow. Seeing none, I now turn this over to
my good friend, Senator Roberts, for his opening remarks.
STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
KANSAS
Senator Roberts. Thank you, Madam Chairwoman, and I
appreciate your calling this hearing today as we review the
nomination of Mr. Mark Wetjen, and I welcomed the appearance of
the Majority Leader to the sometimes powerful Senate
Agriculture Committee. I had hoped he would stay around so we
could talk to him about our budget responsibilities and
specific numbers, but perhaps we can do that at a later time.
Commissioner Dunn, let me associate myself with the remarks
of the Chairwoman in regards to your service on the Commission.
You, sir, have been an independent voice and I appreciate that
very much. And to Commissioner Sommers, the same in regards to
what the Chairwoman has indicated. In my view, you have been a
voice of reason and I am looking forward to your continued
service.
I met with Mr. Wetjen. He obviously is a very bright and
capable young man. I had sort of hoped that--Cullen started to
try and testify. It was obviously--I do not know if it was by
the committee's recommendation or whether it was his parents,
but I could hear him in the background indicating his support
for your nomination and offering several recommendations.
At any rate, being very bright and capable, however, Mr.
Wetjen, when confirmed, will have a very difficult job ahead of
him. One year ago today, the President signed the Dodd-Frank
Act into law. Mr. Wetjen was intricately involved in that in
terms of the process, and it involves a labyrinth of new
requirements impacting not just Wall Street and Main Street,
but every rural route throughout the countryside.
This committee has held two hearings on the general
implementation of this new law. I hope we will have more. We
have heard from folks up and down the industry chain, from end
users to dealers to clearinghouses to self- regulating
entities, all with varying degrees of concern about how the
CFTC plans to regulate futures and swaps.
I and many of my colleagues have expressed some concern
over the CFTC's proposals and I point out that that effort has
been bipartisan. For instance, I understand in May, members of
the New York delegation, of which this committee is very
fortunate to have Senator Gillibrand as a member, sent a letter
to the CFTC, FDIC, the Fed, and the Office of Comptroller of
the Currency on the issue of CFTC's attempt to regulate trades
occurring overseas between non-U.S. participants. Now, I share
their concern, but tell Mr. Wetjen that if you want an Honorary
Marshal of Dodge City to sign a similar letter next time, just
let me know.
I did not vote for Dodd-Frank for several reasons, but one
central concern was that the rules outlined in the legislation
would have the effect of driving business overseas. I am very
worried about that, moving liquidity from the United States to
our competitors. The New Yorkers' letter expressed this
concern, but we have also heard from our competitors
themselves. I included a letter from Japan into the record at
our last hearing. Following up on that theme, recently, a
Deutsche Bank executive was quoted as describing CFTC's
proposals as a terrific opportunity for European countries at
the expense of the United States. Let me repeat that, a
terrific opportunity for European countries at the expense of
our country.
I mention this today to highlight the importance for the
job for which Mr. Wetjen is nominated. I sincerely hope it was
not the intent of Dodd-Frank and those who wrote the law to
create a mass exodus of capital from the United States. I know
that was not the intent when they wrote it. But the law of
unintended effects seems to carry the day around here when we
pass such far-reaching legislation. That is why we need
Commissioners who will adhere to the law, act in accordance
with Congressional intent, and be an independent voice.
Thorough cost-benefit analysis must be completed on these
proposals so the Commissioners, Congress, and the public have a
full understanding of their consequences. By the time Mr.
Wetjen may arrive at the CFTC, there will probably be more than
40--40--final rules to consider, many of them the most complex
and controversial. The Chairman, Chairman Gensler, has
indicated that he plans to hold meetings to finalize these
rules every few weeks for the remainder of the year. That is a
tough schedule.
Now, this is not intended as a criticism of you, Mr.
Wetjen, by any means, but I wonder, and we talked about it when
you took the courtesy to come by and visit with me, how can
anyone be expected to absorb the huge amount--thousands and
thousands of pages of information--that has been collected on
each one of these rules without having the benefit of meeting
with affected parties and being involved in the entire process?
So I am going to be interested in hearing how the nominee plans
to climb this mountain of information before he is asked to
vote on a rule. I am sure he can respond very well.
Again, thank you, Madam Chairwoman, for calling this
hearing, and thank you to Majority Leader Reid for joining us
today. And again, I thank Mr. Wetjen and his very lovely family
for being in attendance.
Chairwoman Stabenow. Thank you very much.
And now I have two things that I need to do, Mr. Wetjen.
First is to administer an oath that we have for all nominees. I
would ask you to stand and raise your right hand.
Do you swear or affirm that the testimony you are about to
present is the truth, the whole truth, and nothing but the
truth, so help you God?
Mr. Wetjen. I do.
Chairwoman Stabenow. Thank you very much.
And secondly, Mr. Wetjen, do you agree that, if confirmed,
you will appear before any duly constituted committee of
Congress if asked to appear?
Mr. Wetjen. I will.
Chairwoman Stabenow. Great. Thank you very much.
At this point, I would like you to proceed with your
testimony, and welcome again.
TESTIMONY OF MARK P. WETJEN, OF NEVADA, NOMINATED TO BE A
COMMISSIONER OF THE COMMODITY FUTURES TRADING COMMISSION
Mr. Wetjen. Thank you, Chairwoman. Chairwoman Stabenow,
Ranking Member Roberts, and members of the committee, thank you
for the opportunity to be here today. I am honored to be
President Obama's nominee to be a Commissioner on the Commodity
Futures Trading Commission.
I want to thank Senator Reid for his support for my
nomination. I also want to thank him for the opportunity to
work for him and serve our country here in the Senate. I will
always admire his decency, his honor, and his devotion to
public service.
I want to thank my family, especially my wife, Nicole. I am
grateful to her for supporting my pursuit of public
service in Washington, DC, and agreeing to move our family
here almost seven years ago.
I want to recognize our little boy, Cullen Michael, as well
as my mother, Sheila, and brother, Sean, who are here with us
today. My mother was able to travel here from my home town of
Dubuque, Iowa.
I would also like to thank Commissioner Mike Dunn, who
shares Iowa roots and whom I would replace, if confirmed. And I
also want to thank Commissioner Sommers for being here today. I
commend Commissioner Dunn for his many years of service to our
country.
Growing up, I gained an early appreciation for agriculture
while spending countless days and weekends on the Wetjen family
farm near Williamsburg, Iowa. Much of the time was spent
helping my grandfather as he did daily chores, and it was there
in my grandmother's kitchen where we listened to the morning
market report on WMT Radio, hearing the latest prices for the
corn, soybeans, and hogs my family produced. I also learned
from my family there the values of hard work, listening to and
respecting different points of view, and serving others, which
I tried to bring to all of my pursuits, including my position
with Senator Reid.
During my tenure working for the Senate, our nation and the
Congress have encountered multiple challenges that at times
demanded policy responses. Many of these related specifically
to financial markets, an area where I have advised Senator Reid
for nearly seven years. From the housing crisis to the
financial crisis, the problems and the policy responses were
equally complex.
By helping Senator Reid and the Congress work through a
range of these challenges, I was asked to perform multiple
tasks, but not the least of which was to work toward consensus,
either within the Democratic Caucus, with the Republican
Conference, or in many cases both. Indeed, this goal of
achieving consensus has always been central to my
responsibilities as a Senate staffer.
I believe the experience of having worked for the Congress
these last few years while we faced a sequence of extraordinary
economic challenges and my role of helping craft solutions
through consensus should prove useful if I am given the
privilege to serve as a Commissioner at the CFTC. The
Commission is now at an important period of history as it
implements reforms to the swaps and futures markets, which for
decades have served as useful tools for managing risk. The
Commission is also in a key moment in the Dodd-Frank rulemaking
process, having just begun finalizing some of its rules.
With respect to swaps, the goals of Dodd-Frank are to
mitigate systemic risk in the financial system, increase
transparency in the derivatives markets, and combat fraud and
manipulation in the derivatives markets. I believe these goals
are nearly universally shared by market participants and policy
makers alike and that building the new framework for regulating
derivatives should be both nonpartisan and consensus-driven.
Crafting rules that properly achieve these goals is,
indeed, more challenging. The final rules will have an impact
not only on ag producers in the heartland, but all market
participants and the economy as a whole. Consequently, it is
critical that the Commission continues its work in a careful,
measured, and thoughtful way, and that the CFTC works to get
these rules right.
Likewise, it is critical that the Commission hews closely
to the intent of Congress when finalizing its rules. That
means, for instance, that the final rule should avoid imposing
unnecessary cost burdens on commercial firms that use swaps. It
also means that the final rule should seek to minimize
unintended consequences that could impair U.S. competitiveness
or the liquidity of our markets.
If, with your support and the support of your Senate
colleagues, I am given the opportunity to serve on the
Commission, I pledge to bring to the job an independent and
open mind and a balanced approach to the rulemaking process and
to the work of the Commission.
In closing, I would like to thank the committee for holding
this hearing. I am happy to answer questions.
[The prepared statement of Mr. Wetjen can be found on page
24 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Mr. Wetjen, as you discussed in your testimony, when
Congress passed the Dodd-Frank Act, we gave the regulators a
lot of new, powerful authority, but we also put in place
guidance in the statute, restrictions around those authorities,
as well, to try to create a balance. We directed regulators to
target system risk, as you talked about, and not inadvertently
pull in commercial end users who are using derivatives to
legitimately hedge and manage their risk, and we did that, in
part, through a commercial end user clearing exemption and
protections for captive financing affiliates as well as
protections for smaller institutions as well as--such as
community banks, Farm Credit, and Farmer and Rural Electric Co-
Ops.
So as a Commissioner, how would you respond to
Congressional concerns and inquiries and how do you interpret
Congressional intent when it comes to the application of margin
on end user transactions or capital finance affiliates when it
comes to the definition of a swap dealer?
Mr. Wetjen. Thank you, Madam Chairwoman, for that question.
This issue is one where I think it is quite clear in the
statute, Congress did not intend to include captive finance
companies or commercial firms in the vast majority of the
regulatory regime authorized under Title VII. The goal has to
be kept in mind, that the purpose of Dodd-Frank is to mitigate
systemic risk, as you said, but that can be done in a way
without placing unnecessary burdens on end users, commercial
end users and captive finance companies.
And so I think the statute is quite clear in that, and that
includes with respect to when the--well, when the Commission is
developing its rule on margin, it needs to acknowledge that
intent and I have every intention of, if given the honor to
serve, of working with the Commission, listening to all market
participants in approaching this problem, but staying as true
to Congressional intent as I can.
Chairwoman Stabenow. Thank you. That is something that I
know you are aware is of interest and concern on a bipartisan
basis, both in the House and the Senate, addressing what we
need to do in terms of systemic risk and following through on
Dodd-Frank, but also balancing what are legitimate uses of the
markets in terms of hedging risk, managing risk, and the
importance of that to those who use the markets for its
intended purposes. So that is something that we will continue
to be in dialogue with the CFTC about.
I wonder if you might talk a little bit more from the
perspective of being an independent voice. That is something
that you and I talked about when we met. As a new Commissioner
coming in in the middle, really, of intense rulemaking debates
and rulemaking period, how would you balance your duties to
both review and consider and in some cases even ask for changes
to new rules before they become final without unnecessarily
slowing down the process, because you are coming in at really a
unique time.
Mr. Wetjen. Thank you, Madam Chairwoman, for that question.
I have given this question a lot of thought, and the best
approach to maintain independence is, I believe, the approach I
have tried to take working here in the Senate, and that is
listen to all viewpoints. Do not come at a problem with a
predetermined decision or outcome. Learn first. Listen to all
viewpoints. Gather the information. That includes engaging with
fellow Commissioners. That includes engaging with, as I said,
market participants who are going to be impacted by these
rules. That means continuing a dialogue with Congress. And I
think by following that process and coming to a good, well-
informed, reasoned decision, I am going to be able to maintain
the independence that I think this committee expects.
Chairwoman Stabenow. Thank you.
I will turn now to Senator Roberts.
Senator Roberts. Mark, some of my questions are going to be
duplicative, but I think they are important because I think it
underscores what a lot of people are concerned about, not about
you particularly, but about the job. I appreciate your just
emphasizing learning first, listening to stakeholders,
listening to the Commissioners, doing the best job you can to
become independent, but you are going to be voting on final
rules, about 40 of them. The Chairman has a fast-track
schedule. And the other Commissioners have had months to listen
to stakeholders. You have heard me talk about this before, in
my earlier comments. So you have been parachuted in. I
recognize that you are young, bright, and very capable, but
right in the middle of voting without having the opportunity to
collect this information before you, unless you have been
spending the wee hours of the night not with Cullen, but with
studying all this information.
How are you going to make an informed decision, and is it
appropriate--and I am not asking you to do so, but would it be
appropriate for you to recuse yourself for a brief period of
time to get up to speed? Is that necessary, or do you feel like
you can hit the ground running with all of these attributes
that you have mentioned?
Mr. Wetjen. Thank you, Senator Roberts. I have been
monitoring the work of the Commission for quite some time now,
but I think the more important point I would like to make,
Senator, is that the process I laid out in response to
Chairwoman Stabenow's question is the process that I am always
going to stick to, so that is making sure I have the requisite
information to come to a well-reasoned decision. I am going to
insist on taking whatever time I need in order to do that. So I
am going to want to listen to all viewpoints. I am going to
want to listen to each person who wants to bring information to
me who might be impacted by any given rule. And I am going to
follow that process.
My focus will be on getting the rule right. I think the
more quickly the Commission can act, the better, because it is
going to provide some certainty to market participants and I
know the market prefers that or would like that. But I think
more important to them is making sure the rules are right. And
so that would be my primary goal.
Senator Roberts. I appreciate that. The Chairman seems to
think the United States should set its regulatory policy as
tight as possible and our foreign counterparts will simply
follow our lead. But as I have indicated in conversation with
you before, Japan and the EU have delivered a very different
message. The chief Japanese financial regulator has said that
because of the extraterritorial reach of proposed U.S.
regulations, Japanese institutions might have to avoid trading
with U.S. institutions. That is a pretty strong statement, to
say the least.
Are you concerned that what I would describe as regulatory
arbitrage could develop and participants may take their
business overseas if our rules are too prescriptive?
Mr. Wetjen. Senator Roberts, I think this is a very
legitimate concern, and I know it is one shared by a number of
folks here in Congress. The goal of Dodd-Frank is to protect
the U.S. financial system. It is not to disadvantage U.S. firms
that are operating overseas. The Commission needs to recognize,
as the Congress did, that there is quite a bit of
interconnectivity among global markets, and we saw that
firsthand from the crisis of 2008. But notwithstanding that, I
think this rule on margin will come out in the right place if
the Commission remains mindful that, again, the goal is to
protect the U.S. financial system and not disadvantage U.S.
firms, and I think both of those objectives can be met.
Senator Roberts. You are replacing Commissioner Dunn. I
would not say replacing is the right word. He is obviously
irreplaceable. But when the position limits rule was proposed,
the Commissioner, in his usual independent voice, expressed his
concern, quote, ``at best, position limits are a cure for a
disease that does not exist, or at worst, a placebo for one
that does.'' I am also concerned that there is no reliable
analysis proving that position limits to curb excessive
speculation in the swaps market would have any favorable impact
on commodity prices.
So do you believe it is important to have sufficient data
about the swaps market and reliable economic analysis before
adopting any position limits proposal? Obviously, the answer is
yes, but go ahead.
[Laughter.]
Mr. Wetjen. Thank you, Senator Roberts. Congress through
Dodd-Frank did give this tool to the agency to try and combat
manipulation, and that is the tool of being able to impose
position limits, as appropriate. In doing that, or in the
agency's effort to craft this rule, it needs to be very, very
mindful of the impact on liquidity in these derivatives
markets. These markets will not function well as a tool for
commercial firms if liquidity dries up. So if I were given the
honor to serve, I would want to consider market data. Again, I
go back to some of my earlier responses. I want to make sure
that every decision I make is as well informed a decision that
I can make, and that includes considering all the requisite
data.
Senator Roberts. Madam Chairwoman, my time has expired. I
do have about four or five more questions for the witnesses,
but I yield at this time.
Chairwoman Stabenow. Thank you very much.
Senator Nelson.
Senator Nelson. Thank you, Chairman Stabenow, and thank
you, Mr. Wetjen, for serving, and thank you to your family for
supporting you in this service. As Creighton alums, I know you
will bring a great deal of wonderful education to this
position.
Given your background, having grown up around agriculture,
I know you can appreciate the impact that volatility of the
market has on farmers. Their reliance on inputs such as fuel,
fertilizer, and the income their earn off the grains are really
contingent on the price of the market. This spring reminded us
of the volatility in the marketplace, and I think we all agree
on the necessity of implementing Dodd-Frank, and as you have
said, in a sound and reasonable time frame and in a sound and
reasonable way to deal with reckless speculation.
But many of my State's producers who are not really
financial end users are concerned that, somehow, a one-size-
fits-all approach will be put in place and will put regulations
on market participants hedging for legitimate purposes, tying
up capital from productive uses that would otherwise be
available. Now, Dodd-Frank contained critical protections to
ensure that non-financial end users who use futures contracts
in a legitimate manner to hedge against higher prices would not
be hampered by unnecessary regulations.
So specifically when it comes to CFTC's implementation of
rules relating to the definition of a swap dealer, the end
user, and exception limits, what are your thoughts when it
comes to CFTC following Congressional intent when it comes to
protecting commercial end users so they are not adversely
impacted by Dodd-Frank's regulatory framework? How are you
going to protect against what I call the regulatory structure
that seems to be, ``and while we are at it, let us do this,
too,'' exceeding the direction of Congress by legislation but a
well intentioned effort to, let us get that taken care of, as
well, rather than just focusing strictly on what Congress has
directed? What are your thoughts about that?
Mr. Wetjen. Thank you, Senator Nelson. I think you raise a
very important point, and as I said earlier in my statement, I
think there are few things more important to a Commissioner
than to follow closely, as closely as possible, Congressional
intent. I think if I were given the privilege to serve, one
area that I might like to look at would be to see, or to make
sure any proposal or proposed final rule is very closely linked
to specific authority in the statute.
There might be times when you might not find the
specificity that you need in order to solve a particular
problem, but I think, generally speaking, you want to make sure
that the authority is express, and so that is the approach I
would intend to take.
Senator Nelson. Well, I have always looked at a developing
bureaucracy from the standpoint of having been a Governor
dealing with bureaucracy and dealing with bureaucracy back
here, describing bureaucracy as ``we-be''s. We be here when you
come. We be here when you go. And I hope that you will be able
to corral that particular approach in your position, if
confirmed, and I believe you will be.
I guess I am speaking to the other Commissioners here in
the room, as well, and those who are not in the room, to
understand that Congressional intent, in my mind, is something
short of sacred, but it is extremely important and I hope that
that can be remembered, because while there has been a
significant delegation of responsibility to alphabet agencies
within this community, what flows from that delegation has to
be totally consistent with what was intended by Congress in
passing the legislation. It was not the beginning, and now it
is up to the alphabet agencies to take it and run with it. It
is to implement it consistent, and I appreciate your answer and
I hope that you can hold firm to that with a lot of pressures
to be, perhaps, extra- territorial in the approach, because we
have seen an awful lot of that in Washington, and I hope you
can hold back that process and participate in that manner.
Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much.
Senator Lugar.
Senator Lugar. Thank you, Madam Chairman.
Mr. Wetjen, although the Commission was founded in 1974,
not much had happened by the time I got into the Senate in the
1976 election. Herman Talmadge, who was then the Chairman of
the committee, was not deeply interested in CFTC. Senator Leahy
and I were sitting at the end of a long table in the Ag room
about 300 yards from the Chairman, and as a result, were
assigned oversight, and no one else really paid any attention.
So we have sort of grown with the process over the years. Most
recently, Walt Lukken, who was one of my valued staff members,
headed the Commission, and I appreciated from his standpoint
the difficulties that were faced.
So a part of my questioning today really comes with regard
to the success of the Commission. The debates in the press as
well as with Gary Gensler and others have been over the fact
that inadequate staff has been available for some time, just
simply to go through the enforcement of what was on the books,
quite apart from the interpretation of Dodd-Frank and recently,
in the Wall Street Journal-- yesterday, for example--the
dispute over a 15 percent cut in the budget on top of that.
While in our hearings on this, we are hearing about the
prodigious effort to understand the rules, to get the rules
going, and this does not offer a great deal of confidence to
the American people who are outside of this, either as
commercial users or as other persons, for fear that something
may be occurring even while we are still writing the rules and
with inadequate staff even looking at what we have.
Do you have any observations of this, as you have looked at
it from your current position as a valued staff member of
Leader Reid, likewise, as you have studied this? What is going
to be required in terms of the staffing of CFTC to get the job
done, first of all, and getting rules out, which we understand,
dealing with the international implications, the commercial
users versus others, and finally, at least, bringing some
confidence to the public?
Mr. Wetjen. Thank you, Senator Lugar. As you point out in
your question, while the Commission currently has
responsibilities to implement Title VII, it has other missions,
too, and one of those is through its Division of Enforcement.
And so that includes monitoring these markets and making sure
that there is not manipulation and fraud. So that is a very
important mission, obviously.
I think, given the size of the mission that is now the
overall mission that now stands before the Commission that
comes from Title VII, I think it would be hard to dispute that
the agency needs resources. It probably needs more resources.
If you just look at the size of the swaps markets, which are
exponentially larger than the futures markets that the agency
has been overseeing up until now, I think you would reasonably
come to that conclusion.
I recognize we are in difficult times here and so I think
the use of resources by the agency needs to be carefully
considered and needs to be carefully allocated, and so,
Senator, what I would want to do if given the honor to serve is
speak with my fellow Commissioners, talk to the Chairman, get a
handle on where these resources need to be allocated first, and
help try and get those resources to the extent I can
contribute.
One other thing I might add is that I know Commissioner
O'Malia has been a leader on this. Again, given the nature of
how these markets have evolved, it is also important to ramp up
the technology, the use of technology at the agency. So I think
that is another area where I would be interested in trying to
contribute.
Senator Lugar. Well, I hope as a Commissioner that you will
help to inform us of what is going on so that we can best
interpret and bring a sense of confidence to all this.
I just have, and this may be a gross oversimplification,
but there are brilliant people in America thinking about how to
game the system. I am not one ever to diminish free private
enterprise and the desire to make money on behalf of financial
institutions or anybody else. I just want to make certain that
it is a reasonably even competition among those who count upon
you and count upon us for a system that brings confidence,
transparency, the lack of systemic risk, all of the above,
because at least the testimony we heard three years ago before
this committee, as things were unfolding at that point, it
appeared that we had been outgamed. We had lost the contest
intellectually.
And so I appreciate your mention of the technology that may
be involved, but likewise, the ability to have the staff to at
least keep track of all the elements that are involved in this,
and I thank you very much for your testimony.
Mr. Wetjen. Thank you, Senator.
Chairwoman Stabenow. Thank you very much.
I am going to turn to Senator Klobuchar, and I also am
going to, at this point, Mr. Wetjen, excuse myself for an
Energy markup where they are telling me I need to be casting
votes in another part of the building. And so I am going to at
this point turn things over to the capable hands of Senator
Klobuchar as well as Senator Roberts to continue the hearing.
Let me just also indicate to my colleagues that while we
will not be voting today on the nomination, we will be polling
the members of the committee and looking for a time to hold the
vote in the near future.
So, again, welcome and congratulations. I look forward to
moving forward and working with you, and at this point, I am
going to turn it over to Senator Klobuchar.
Mr. Wetjen. Thank you, Chairwoman.
Senator Klobuchar. [Presiding.] Thank you very much. Hello,
Mr. Wetjen.
Mr. Wetjen. Hello, Senator.
Senator Klobuchar. I have to tell you, I was out and coming
back in from another hearing and saw your son out there. How
old is he?
Mr. Wetjen. Sixteen months.
Senator Klobuchar. He was reading Congressional Quarterly.
[Laughter.]
Senator Klobuchar. Senator Thune saw it, as well. He can be
my witness. He literally had it in front of him. Anyway, I was
quite impressed, so I do not even know if I need to ask you any
questions, but----
[Laughter.]
Senator Klobuchar. I think you know that your nominations
comes during a critical period in the history of the Commodity
Futures Trading Commission--all the new responsibilities under
Dodd-Frank, the risk taking that led up to the financial
crisis, the realization that we have to do things differently
so that it does not happen again.
So my questions are, first of all, pertaining to my State.
Our State boasts the largest number of agricultural co-ops in
the country and there has been a concern that they would be
classified as a swap dealer under the new rules. Senator Thune
and I Co-Chair the Congressional Farmer Co-Op Caucus and I
believe that we must maintain the ability of farmers to band
together to market their products and manage their risk in some
very difficult market times.
So, Mr. Wetjen, do you believe that this legislation should
be implemented in such a manner to protect these types of risk
management tools utilized in rural America? I am talking here
about the Dodd-Frank law.
Mr. Wetjen. Yes, Senator, I do.
Senator Klobuchar. That is good. That would be all right,
do you think, Senator Thune?
Senator Thune. Let us go home.
[Laughter.]
Senator Klobuchar. Okay.
Mr. Wetjen. No, if I can add to that, Senator, I mentioned
in the opening statement that one of the goals, as you know, of
Dodd-Frank is to try and mitigate systemic risk. I think it is
fair to say that cooperatives do not strike most people as the
sorts of entities that are going to pose that type of risk on
the financial system. So again, I think if the Commission hews
closely to Congressional intent and does so when trying to
define some of these entities, including swap dealers, I think
it is going to come out with the right result.
Senator Klobuchar. Very good. I was also pleased to see
that the Chamber of Commerce praised your work with the
business community over the last seven years while you served
as an aide to Senator Reid. In their comments, they also
pointed to the years of practical legal experience you gained
in the financial services sector prior to coming to work in the
Senate. Could you talk about this experience and how you think
it will help you at the CFTC.
Mr. Wetjen. Yes, Senator. When I was an attorney, I
practiced in a number of different areas, including financial
services, as you said, and I think probably the main benefit
that experience has for me is I understand how legislation, and
I think I understand or would be quickly able to understand at
the agency, if I am able to serve there, how the rules impact
the private sector and impact business.
And so as an attorney representing companies who are
grappling with compliance, you could see the challenges that
came with that. And so I think it gives me a practical
background that I think could serve me well if I were to serve
on the CFTC, because I have an understanding of what these
rules mean and, in fact, how they can change how businesses
operate. And so I would be sensitive to that.
Senator Klobuchar. Thank you. Obviously, I care a lot about
that. We have a lot of end users that fall under exceptions to
the rule that operate in our State. We have worked very hard to
make sure that we differentiate some of the speculation issues
from legitimate end users and those that may be playing more of
a speculative role. I want to make clear, while I care about
the exception, I also care a lot about the excessive
speculation in the energy market. I am sure you are aware that
the CFTC was required by law to implement position limits back
in January. It has not happened yet. The recent run-up in gas
prices, while they may have fallen off somewhat, have had a
significant impact on our economic recovery. I know that in my
State right now, we are struggling. Five mid-size cities are
having their airline service reduced or eliminated by Delta and
the reason given was the oil prices.
So I think the evidence is pretty clear that excessive
speculation can contribute to volatility in the market. I will
not ask you to comment on the ongoing work the CFTC is doing to
implement Dodd-Frank in this area, but I am hoping you would
share your views on this part of the legislation and position
limits.
Mr. Wetjen. Thank you, Senator. In Dodd-Frank, the
legislation provided the CFTC with an additional tool to try
and combat manipulation. Position limits have been in place, as
you know, in the futures space, but they had not been in place
for the swaps markets. So that is the goal behind the position
limits rule generally, is to give the agency an additional
tool.
As I said earlier, I think it is very important, however,
that in crafting this rule that the Commission remains mindful
of the impact the rule could have on liquidity in the swaps
markets. If liquidity dries up, there are no swaps markets, and
so these very markets that some of the co-ops and other end
users in your State rely on for risk management would be
diminished and that is not a desirable outcome, either. So some
way, the Commission needs to balance these two interests, and
that is what I would try to do if I were given the honor to
serve.
Senator Klobuchar. Thank you very much.
With that, Senator Thune, the Co-Chair of the Congressional
Farmer Co-Op Caucus. Senator Thune.
Senator Thune. Thank you, Madam Chairwoman, and I would
echo the issues and concerns that you have raised about
cooperatives and how they might be impacted by this, and Mr.
Wetjen, thank you for appearing here today and responding to
some of those concerns.
I am, in particular, concerned about the limited definition
the CFTC is looking to instate for the de minimis exception
when defining swap dealers. Elevators and local co-ops provide
important risk management opportunities for producers and they
are hardly the large systemically important entities that
Congress intended to be regulated by this law. And so including
them in the definition of swap dealers will only raise prices
for producers and limit their chances to engage in bona fide
hedging.
So I appreciate the remarks that you have already made with
regard to that issue, but I would simply say that the reason
some of this stuff is so important, if you look at the de
minimis exception in the proposed rule, if you limit the number
of swaps and options, which under options is 20 and
counterparties 15, only those that are registered and regulated
as swap dealers would be in a position to offer hedging
projects to the ag sector. And in addition to the $100
threshold--in addition, that $100 million threshold would
significantly limit the volume of hedges that could be offered
by any entity besides registered swap dealers.
Now, just to put that into context, for example, in today's
environment, it will only take about eight million bushels of
soybeans and around 15 million bushels of corn to exceed that
threshold. And just by way of comparison, the U.S. produced
last year 12.4 billion bushels of corn and 3.3 billion bushels
of soybeans.
So that is why getting this right is really important, and
the only thing I would ask is that you, as you have already
indicated, provide us an assurance that when you look at these
things, and I know there is a large amount of information to
absorb given the complexity of the rules and the broad impacts
that they are going to have, but I hope that you will take time
to understand these issues and the implications that they have
for agriculture and the needs of these commercial end users.
So I hope we can count on you to give great consideration
to those impacts and making sure that agricultural producers
have the tools that they need to manage risk in what is an
increasingly sort of volatile commodity market, and I think it
is going to be even more important that they have those tools
available to them. If you could, I guess, reassure us that that
is certainly something that you are going to give particular
attention to, I know I would certainly appreciate it, as would
some of my colleagues on the panel.
Mr. Wetjen. Thank you, Senator Thune. Well, first of all,
you have my pledge to take the time I need to make sure that I
have the information I need to make a good decision, if I were
given the honor to serve on the Commission.
Again, the goal of Dodd-Frank is to--one of the goals is to
mitigate systemic risk, and to the extent there are companies
that do not contribute to systemic risk or do not cause it,
they should not unnecessarily be wrapped up in the
implementation of Title VII. So that is my belief and that is
something that I would--that is a belief I would carry to the
Commission.
Senator Thune. Let me ask you just a couple of things about
factors that you think the Commission ought to consider when
making new capital and margin requirements. Obviously, it seems
like you would concur that you ought to consider whether an
institution is systemically important. Would you--I guess,
would it be your view that users who are not systemically
important be allowed to front less capital?
Mr. Wetjen. I think that, with respect to both the margin
and the capital rule, the approach of the agency so far has
been to focus on the swap dealers and major swap participants
and I think that is the right direction to go in this. I agree
with you, Senator Thune, that we should not be unnecessarily
adding to the cost burdens that end users have already. We need
to make sure that these swap markets and derivatives markets
continue to be made available and that is a function to some
degree, at least, a function of how profitable and how well
these end users are doing, which is a function of how much
capital they need to put up for regulatory compliance. So that
is an issue I would always take very seriously.
Senator Thune. Should the Commission consider the economic
cost of tying up capital in margin requirements, the economic
costs?
Mr. Wetjen. Well, I think the law requires the agency to
carefully go through a cost-benefit analysis of every rule that
it promulgates, and to the extent that that includes what you
just mentioned, of course, I would be supportive of that.
Senator Thune. Should end users who are hedging financial
risk be given an exemption?
Mr. Wetjen. I am sorry. Could you repeat that, Senator?
Senator Thune. Should end users who are hedging financial
risk be given an exemption? I guess what I am getting at is if
the answer is no, will it not make it more expensive for these
users to hedge their risk and, in turn, make the financial
system more unstable?
Mr. Wetjen. I agree, it could have that outcome. I think in
determining these exemptions, again, I think if the agency
stays closely to what the statute is trying to accomplish,
which is mitigate systemic risk, I think this issue, like the
rest, will be properly resolved by the Commission.
Senator Thune. Okay. My time has expired, Madam Chair.
Thank you.
Senator Klobuchar. Thank you very much, Senator Thune.
I know Senator Roberts has a few more questions.
Senator Roberts. Thank you, Madam Chairwoman.
The President issued an Executive Order January 18 in
regards to a cost-benefit analysis that should be provided
prior to any rulemaking or promulgating of rules. At first, the
independent agencies thought they were exempt, but the
President came back and said, no, you are under the scope.
Commissioner Summers has been the champion of trying to take a
look and make sure that the cost-benefit analysis is accurate
and there is enough time to do it. I think that prior to the
IG's intervention, that there was a concern that the cost-
benefit analysis on these rules--and there are so many of them,
as I have indicated--40--was superficial and that we need
enough time and that the recommendation was to bring an
economist in, hopefully one with one arm so he could not say,
``on the other hand--"
[Laughter.]
Senator Roberts. At any rate, an economist in along with
the Office of General Counsel and it was not just a superficial
look. So now you have got a team, and I know that you have
indicated to me that you think that this is a requirement.
After all, the President did indicate an Executive Order.
So if you find out that the Commission's own analysis is
flawed as determined by this cost-benefit analysis, what are
you going to do to correct it? Are you going to join with
Commissioner Summers and say, hey, this is not going to work
out very well until we find out. Make sure that this analysis
is a substantial one and is a correct one.
Mr. Wetjen. Well, Senator Roberts, I do agree that the
cost-benefit analysis has to comply with the requirements of
statute, so it has to be sufficiently rigorous, and I would
look forward to working with Commissioner Summers on this and
every other issue before the Commission.
Senator Roberts. I appreciate that. I posed to the Chairman
during our last hearing a Kansas county elevator expects in the
near future to enter into forward contracts with the area wheat
farmers at a fixed price with delivery at a later date. So to
hedge this risk, the elevator goes short on wheat futures, and
I asked the Chairman, is that a bona fide hedge? The question
has since been asked of the CFTC General Counsel and of career
staff. We now have three different answers--three. Would you
like to weigh in? What is your view? Is that a bona fide hedge?
Mr. Wetjen. Senator, I would like to weigh in by saying
that the grain elevator that you describe should be able to do
that transaction and should be able to do it without
unnecessary costs or regulatory burdens.
Senator Roberts. Well, that is a very good short answer and
I appreciate that.
I do not know why we are into a ``he said, she said'' or
whatever debate or back and forth with Europe, but I go back to
the senior Deutsche Bank executive who recently said that
Europe has a relative pragmatic approach to reforming
derivatives and it offers a terrific opportunity at the expense
of the United States, which risks scoring one of the biggest
own goals in financial market history. That was in Reuters back
in June.
A senior British regulator recently said that to suggest
that the U.S. sets a gold standard that other markets should
follow is nonsense, as in the Financial Times, June 8.
Now, we have those statements, and then you have the
Japanese letter that was on your website, and we had to refer
it to you to figure out, even though it was on your own
website--not yours, but the CFTC's, where the Japanese said,
whoa. Wait a minute. We might not even do trade with the United
States.
And then we have Secretary Geithner's statement of the same
time that European regulations are tragic, and that the U.S. is
going to bring the rest of the world with us.
And I do not understand why we have to get into an
international shouting match here. I do not get it, why we have
to be saying things like that, stirring up dust over there and
then they stir up dust over here. Lord knows, we have enough
problem with trade than doing something like this. So I think
the CFTC ought to stick to their business, and maybe--you never
get hurt by what you do not say. Any comments?
Mr. Wetjen. Well, I wish I could take your advice, but I
will give you an answer, Senator Roberts. I think that, again,
the goal of Dodd-Frank with respect to Title VII and the goal
of the agency, the goal of the CFTC, is to protect the U.S.
financial system, to try and mitigate systemic risk but to
protect the U.S. financial system. It is not to try and make
U.S. firms operating overseas less competitive.
I do think there has to be some way to meet both of these
objectives. I am confident there is a way to meet both
objectives. I recognize, again, that there is interconnectivity
between these derivatives markets globally, and so that has to
be taken into account. We have seen some of the risks of
contagion from one market to another, even here in the last
number of months with respect to the European debt crisis. So
that always has to be borne in mind. But, as I said, I think
there is a way to do this, protect the U.S. financial system
but not unnecessarily harm our U.S. firms that are operating
overseas.
Senator Roberts. Why do we not adopt a policy, instead of
taking a Brillo pad to the issue verbally, and simply smother
our friends with the milk of human kindness and reason and
maybe we would not get into some of these issues that make the
press and make our job a lot more difficult. With that, I am
way over time, and I see the distinguished Chairwoman is coming
back to make me behave.
[Laughter.]
Chairwoman Stabenow. [Presiding.] Well, I apologize for
ping-ponging back and forth this morning, but I know you
understand, Mr. Wetjen.
Mr. Wetjen. I do.
Chairwoman Stabenow. You have been here and certainly
understand our efforts in the Senate of trying to be two places
at once.
I did want to ask a couple of other questions, though, and
I apologize to my colleagues if, in fact, these have been
asked, but I did want to just reinforce a couple things that we
have been talking about.
One is regarding position limits. When we talk about the
excessive volatility in the commodity markets, especially when
it comes to oil prices and grain trading, and certainly that is
being debated in the Energy Committee, as well, there is an
ongoing debate about what forces impact that volatility. I
wonder if you might tell us what you think the role of
speculation is in moving markets and are position limits an
effective tool to curb volatility.
Mr. Wetjen. Thank you, Madam Chairwoman. I would like to
respond by making a couple of observations, if I may. The first
is that there have been a number of reports here recently, both
from the CFTC and from other financial institutions, that there
does appear to be more speculative activity in some of these
commodity markets. Meanwhile, in the last several years, I
think it is fair to say we have seen a fair amount of
volatility in the crude oil market and some others, as well.
Congress has decided to give this new authority to the CFTC to
apply position limits, if deemed appropriate, and I understand
that the goal behind that was to add another weapon in the
CFTC's arsenal to try and combat manipulation and unreasonable
price fluctuations.
So I think in deciding how to craft this tool and deciding
how to use it, the Commission needs to be very careful and
deliberative and they need to consider closely all market data
that is available to it and ensure that any rule is not going
to dry up liquidity in these markets, but I think that that
objective, or those two objectives, can be met.
Chairwoman Stabenow. Thank you. I know colleagues, as well,
have talked about the international harmonization, and we have
talked about that at other oversight hearings and a very
important piece of going forward in a global economy. I wonder
if you might just speak a little bit more about how far you
believe the CFTC's jurisdiction reaches into other countries
and territories. How do you see the relationship with the CFTC
and international regulators working right now, and how would
you work to strengthen the coordination between, and
particularly when we see Europe certainly going at a solar
pace, certainly a different timetable than we are and certainly
in Asia a very different situation.
Mr. Wetjen. Thank you, Madam Chairwoman. As Senator Roberts
has pointed out a couple of pieces of correspondence from
regulators overseas, and I think it might be fair to say that
there could be better coordination between U.S. regulators and
their counterparts abroad, and if given the privilege to serve,
I would like to help the Commission on that score.
Generally, I think the CFTC's mission is to protect the
U.S. financial system first and foremost. There is, again,
interconnection between our markets and markets abroad. But the
way the statute was drafted is to basically make sure the focus
of the agency's work is here in the United States, is focused
on transactions that are here in the United States, and then
just with few exceptions is it to drift off the shores. And I
think it is only permitted--the agency would only be permitted
to do that if absolutely necessary. But, again, I think there
is a way to do that, meet that objective while at the same time
ensuring that our U.S. firms operating overseas are not
unnecessarily disadvantaged.
Chairwoman Stabenow. Thank you. And then, finally, we are
hearing a lot of discussion and a lot of important work about
sequencing and phasing in the reforms, and I wonder how you
might respond to the tension between those who say the CFTC is
moving too slowly and those who would say the CFTC should delay
implementation.
Mr. Wetjen. Thank you, Madam Chairwoman. The market
participants are in search of clarity and they are in search of
certainty, and I think it is the agency's duty to provide both
as quickly as possible.
I think there are a number of different tools that the
agency can use to provide that, and so I would be interested in
working with the other Commissioners, working with the staff in
trying to figure out the best way to provide that clarity, to
provide that certainty, with respect to how these rules are
phased in.
And so at this moment, I do not have the best judgment
about the way to go about doing that, but I think that always
has to be the goal, and if that remains the goal, the agency
will end up with a proposal that makes sense for the markets.
Chairwoman Stabenow. Thank you.
Senator Roberts, did you have any other questions?
Senator Roberts. I am going to submit the questions for the
record, but I have just one here. The Commission acted on July
14 to issue an order to provide some relief from some of the
requirements that proved rather nettlesome, and after urging by
several members of this committee, I might add. Some observers
believe that the relief was not as clear-cut as they had hoped,
but did appreciate very much that the CFTC took action to
provide legal certainty. We did not want a swap purgatory. Many
of us are concerned, however, that this relief expires on
December 31. It is hard to figure out what is appropriate in
terms of the time frame here, but I would like to ask you to
monitor this situation and work with the other Commissioners to
ensure that meaningful relief that provides legal certainty
would continue beyond December 31 if the regulations to
implement Dodd-Frank are not complete.
Mr. Wetjen. Senator, you have my pledge to do so.
Senator Roberts. I appreciate all of your answers and wish
you well.
Mr. Wetjen. Thank you.
Chairwoman Stabenow. Thank you very much.
I want to thank everyone again today. Mr. Wetjen, thank
you. I thank your family, the Commissioners that are with us,
and particularly Commissioner Dunn, thank you for your service.
We appreciate your candid responses, Mr. Wetjen. I believe you
have proven to be a thoughtful and independent candidate. I
think this position is extremely important. It really cannot be
overstated. And the fact that CFTC Commissioners are currently
voting on rules and regulations that will fundamentally change
our financial markets and impact our economy for years to come
certainly means that this is a very, very important time. So we
wish you well. We look forward to working with you.
As I indicated earlier, we will be looking for a time--
working with Senator Roberts, we will find the time to be able
to have a vote in the committee in the near future. I
congratulate you again on your nomination.
A quick note to Senators that questions for the record are
due to the Committee Clerk by 5:00 p.m. on Monday, July 25.
The meeting is adjourned.
[Whereupon, at 11:17 a.m., the committee was adjourned.]
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A P P E N D I X
JUNE 21, 2011
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DOCUMENTS SUBMITTED FOR THE RECORD
JUNE 21, 2011
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QUESTIONS AND ANSWERS
JUNE 21, 2011
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