[Senate Hearing 113-555]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 113-555

                  COMMODITY FUTURES TRADING COMMISSION
                   NOMINATIONS OF TIMOTHY G. MASSAD,
                          SHARON Y. BOWEN AND
                        J. CHRISTOPHER GIANCARLO

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION


                               __________

                             MARCH 6, 2014

                               __________

                       Printed for the use of the
            Committee on Agriculture, Nutrition and Forestry

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            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi
TOM HARKIN, Iowa                     MITCH McCONNELL, Kentucky
SHERROD BROWN, Ohio                  PAT ROBERTS, Kansas
AMY KLOBUCHAR, Minnesota             SAXBY CHAMBLISS, Georgia
MICHAEL BENNET, Colorado             JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York         JOHN HOEVEN, North Dakota
JOE DONNELLY, Indiana                MIKE JOHANNS, Nebraska
HEIDI HEITKAMP, North Dakota         CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, Jr., Pennsylvania   JOHN THUNE, South Dakota
JOHN E. WALSH, Montana

             Christopher J. Adamo, Majority Staff Director

              Jonathan J. Cordone, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Thomas Allen Hawks, Minority Staff Director

       Anne C. Hazlett, Minority Chief Counsel and Senior Advisor

                                  (ii)

















  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Commodity Futures Trading Commission Nominations of Timothy G. 
  Massad, Sharon Y. Bowen and J. Christopher Giancarlo...........     1

                              ----------                              

                        Thursday, March 6, 2014
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1
Cochran, Hon. Thad, U.S. Senator from the State of Mississippi...     3
Walsh, Hon. John E., U.S. Senator from the State of Montana......     3
Johanns, Hon. Mike, U.S. Senator from the State of Nebraska......     5
Blumenthal, Hon. Richard, U.S. Senator from the State of 
  Connecticut....................................................     8

                               Witnesses

Massad, Timothy G., of Connecticut, to be Chairman and a 
  Commissioner of the Commodity Futures Trading Commission.......     6
Bowen, Sharon Y., of New York, to be a Commissioner of the 
  Commodity Futures Trading Commission...........................    11
Giancarlo, J. Christopher, of New Jersey, to be a Commissioner of 
  the Commodity Futures Trading Commission.......................     9
                              ----------                              

                                APPENDIX

Prepared Statements:
    Roberts, Hon. Pat............................................    34
    Cochran, Hon. Thad...........................................    35
    Thune, Hon. John.............................................    36
    Bowen, Sharon Y..............................................    38
    Giancarlo, J. Christopher....................................    41
    Massad, Timothy G............................................    45
Document(s) Submitted for the Record:
    Public 5 day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by Sharon Y. Bowen....... 52-86
    Public 5 day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by Christopher J. 
      Giancarlo..................................................87-116
    Public 5 day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by Timothy G. Massad....117-156
Question and Answer:
Bowen, Sharon Y.:
    Written response to questions from Hon. Debbie Stabenow......   158
    Written response to questions from Hon. Pat Roberts..........   187
    Written response to questions from Hon. Tom Harkin...........   161
    Written response to questions from Hon. Sherrod Brown........   166
    Written response to questions from Hon. Amy Klobuchar........   169
    Written response to questions from Hon. Joe Donnelly.........   171
    Written response to questions from Hon. Heidi Heitkamp.......   172
    Written response to questions from Hon. John E. Walsh........   175
    Written response to questions from Hon. Thad Cochran.........   177
    Written response to questions from Hon. Saxby Chambliss......   192
    Written response to questions from Hon. Charles Grassley.....   194
    Written response to questions from Hon. John Thune...........   195
Giancarlo, Christopher:
    Written response to questions from Hon. Debbie Stabenow......   199
    Written response to questions from Hon. Pat Roberts..........   232
    Written response to questions from Hon. Tom Harkin...........   204
    Written response to questions from Hon. Sherrod Brown........   213
    Written response to questions from Hon. Amy Klobuchar........   216
    Written response to questions from Hon. Joe Donnelly.........   218
    Written response to questions from Hon. Heidi Heitkamp.......   220
    Written response to questions from Hon. John E. Walsh........   223
    Written response to questions from Hon. Thad Cochran.........   225
    Written response to questions from Hon. Saxby Chambliss......   238
    Written response to questions from Hon. Charles Grassley.....   240
    Written response to questions from Hon. John Thune...........   241
Massad, Timothy G.:
    Written response to questions from Hon. Debbie Stabenow......   246
    Written response to questions from Hon. Pat Roberts..........   274
    Written response to questions from Hon. Tom Harkin...........   248
    Written response to questions from Hon. Sherrod Brown........   253
    Written response to questions from Hon. Amy Klobuchar........   256
    Written response to questions from Hon. Michael Bennet.......   258
    Written response to questions from Hon. Joe Donnelly.........   259
    Written response to questions from Hon. Heidi Heitkamp.......   261
    Written response to questions from Hon. John E. Walsh........   264
    Written response to questions from Hon. Thad Cochran.........   266
    Written response to questions from Hon. Saxby Chambliss......   279
    Written response to questions from Hon. Charles Grassley.....   281
    Written response to questions from Hon. John Thune...........   282


 
                  COMMODITY FUTURES TRADING COMMISSION
                   NOMINATIONS OF TIMOTHY G. MASSAD,
                          SHARON Y. BOWEN AND
                        J. CHRISTOPHER GIANCARLO

                              ----------                              


                        Thursday, March 6, 2014

                              United States Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:30 a.m., room 
328A, Russell Senate Office Building, Hon. Debbie Stabenow, 
Chairwoman of the Committee, presiding.
    Present or submitting a statement: Senators Stabenow, 
Brown, Klobuchar, Donnelly, Heitkamp, Casey, Walsh, Cochran, 
Chambliss, Hoeven, Johanns, and Thune.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
 OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION 
                          AND FORESTRY

    Chairwoman Stabenow. Good morning. The Senate Agriculture, 
Nutrition, and Forestry Committee will come to order.
    As we begin, this is the first meeting we have had since 
the passage of the Farm Bill, and I just want to say thank you 
to every member of the Committee. I am very proud of the fact 
that the bill originated in the Senate, not once but twice, and 
Senator Cochran and I were, I know, both are very proud to have 
the opportunity to work with all of you.
    I hope that now that we are done I am sure it is true that 
you are feeling as good as we are that it is not only done but 
that it is the product that it is.
    Thanks very much. I am very grateful and proud of not only 
of our whole Committee but of all the staff and having a chance 
just to say a little bit of a thank you this morning before the 
meeting just is a small----
    [Applause.]
    Chairwoman Stabenow. Yes, to all of our staff. Thank you.
    Lots of details, lots of work. I tell people all the time 
that with 12 titles it is like 12 separate bills, any one of 
which could be a major piece of legislation on its own.
    The staff work really, really well together and I want to 
thank Chris Adamo on my team and T.A. Hawks on Senator 
Cochran's team for the great work.
    I also want to welcome and recognize our newest member of 
the Committee.
    Senator Walsh, we are glad to have you and we know you are 
going to continue the strong Montana presence on this Committee 
and look forward to working with you to make sure that your 
farmers and ranchers have what they need, as we go forward on 
so many issues including implementation of the Farm Bill.
    I know from Senator Baucus that the Big Sky State's economy 
was something that was always on his mind, and I know already 
from talking to you that it is on yours as well. So, welcome.
    Senator Walsh. Thank you very much.
    Chairwoman Stabenow. Yes, it is good to have you.
    I know in a moment that Senator Blumenthal did want to 
come. When he comes, we will let him. He wanted to have the 
opportunity to introduce Timothy Massad and we will let him do 
that at that point, I do not believe I see him. So, we will 
proceed with opening statements and then turn to him when he 
arrives.
    We are meeting this morning, as we all know, to consider 
the nomination of Timothy Massad to be the next Chairman of the 
Commodity Futures Trading Commission as well as the nominations 
of Sharon Bowen and Christopher Giancarlo to be Commissioners 
at the CFTC.
    We very much appreciate all of you being here. I know that 
family members are here as well, and we certainly, as you make 
your opening statements, want to give you an opportunity to 
introduce your families.
    The last time we met as a Committee to confirm a new Chair, 
we were in the middle of the global financial crisis so deep 
that eight million jobs were lost.
    Today, the economy is adding jobs and our financial markets 
are getting safer although we certainly have more to do on both 
accounts, but thanks in part to the work of the Commission, the 
Wall Street Reform and Accountability Act ushered in a new era 
of accountability and transparency in the markets, but that 
only works if the law is implemented and enforced correctly, 
and a significant part of that falls to the important work of 
the CFTC.
    You have been nominated, each of you, to implement the law 
that this Committee helped to write and Congress passed to help 
ensure that we do not have another global financial crisis and 
all that came with it.
    If confirmed, you will have the opportunity to make sure 
the future, swaps, and options markets are safe for trading and 
free of fraud and manipulation.
    These markets are important to the everyday lives of 
Americans as we all know, including companies in each of our 
states and consumers in all of our states. You will need to 
make sure companies like commercial end-users, energy firms, 
and agriculture producers are able to use these markets to 
manage their risks and to find fair prices for a wide range of 
products from corn to natural gas to aluminum.
    If confirmed, you will also need to ensure that the agency 
is keeping a watchful eye on market participants like 
clearinghouses, exchanges, swap dealers, to make sure that they 
are managing risk carefully and doing all that they can to 
prevent market abuse.
    You will have an obligation to make sure that we never see 
another MF Global or Peregrine Financial shatter faith in 
either the markets or the ability of regulators to oversee 
these markets. This is an enormous responsibility and it is our 
job to work with you to make sure that you are up to the task.
    The Commission has much more responsibility than it ever 
did even a few years ago, unfortunately, with very limited 
resources which we also need to address as a Committee.
    The agency needs to harmonize with regulators around the 
world and balance between moving forward with strong reform and 
being sensitive to different regulatory approaches and time 
lines for reforms.
    The agency needs to work closely with other U.S. agencies 
to share information, remove unnecessary differences in 
regulations; and the agency needs to keep up with technological 
changes like automated trading and challenges like cyber 
security threats.
    I have enjoyed meeting with each of you and look forward to 
your answers today; and if confirmed, I fully expect each of 
you to work with this Committee, with our members, with 
Congress and to show a commitment to open dialogue and 
pragmatic problem-solving. We are committed to that on this 
Committee.
    So, I thank each of you and would now turn to the 
distinguished Senator from Mississippi, my Ranking Member, 
Senator Cochran.

STATEMENT OF HON. THAD COCHRAN, U.S. SENATOR FROM THE STATE OF 
                          MISSISSIPPI

    Senator Cochran. Madam Chairman, we appreciate your 
leadership as Chair of this important exercise in reviewing the 
nominations that are being made by the Administration for 
service on the Commodity Futures Trading Commission.
    We have before us nominees including Timothy Massad to be 
Chairman and a Commissioner of the CFTC, Sharon Bowen to be 
Commissioner, and Christopher Giancarlo to be a Commissioner of 
the CFTC.
    First of all, I want to congratulate each of you for 
accepting the nomination to serve on this important Commission. 
It is our responsibility to review the nominations and to make 
a recommendation to the full Senate regarding confirmation and 
to also, through oversight, be sure that the intent and the 
clear language of the statute creating the Commission are 
adhered to and that the purposes for which the Commission was 
created are well served.
    With that, I am happy to defer any additional comments and 
look forward to the question and answer period of this hearing.
    Chairwoman Stabenow. Thank you for much, Senator Cochran; 
and in the interest of time, we will ask other members, as we 
always do, to put their opening statements into the record and 
I do want to say, though, before giving the oath to each of our 
nominees I know that, Senator Walsh, we want to give you an 
opportunity as the newest member if you would like to make any 
comments.

STATEMENT OF HON. JOHN E. WALSH, U.S. SENATOR FROM THE STATE OF 
                            MONTANA

    Senator Walsh. Thank you, Chairman Stabenow, and thank you 
for the kind words. I am very impressed by your success on the 
Farm Bill as all Montanans are. It was a monumental task and 
you helped pull together a bill that works for farmers and 
ranchers across the country and that includes Montana, and so 
we all thank you very much for that.
    I want to thank you for your leadership of this Committee. 
I look forward to working with you in the future.
    I am excited to represent Montana on the Senate Agriculture 
Committee. As many know, one in five Montana jobs is tied to 
agriculture and Montana is one of the most rural states in our 
country.
    As the only member of Montana's congressional delegation on 
the Ag Committee, I will have the opportunity to bring 
Montana's agriculture and rural priorities to the forefront of 
the national discussion, and this is a responsibility that I 
take very seriously, whether it is providing a farm safety net 
against natural disasters, spurring rural economic development, 
or promoting our top-notch products around the world, programs 
under this Committee's jurisdiction help keep Montana strong.
    This is a critical time as well. As a member of this 
oversight committee, I will fight to make sure the Department 
of Agriculture keeps Montana in mind as they move to implement 
policies in the new Farm Bill.
    Now, on to the task at hand--the CFTC nominees. The 
regulators were not on the clock when MF Global stole customer 
funds, and Montana producers and businesses were the victims. 
It took them years to get their money back, money that they 
believed was as safe with MF Global as it was in the bank. That 
must never happen again.
    I look forward to hearing your ideas for further reforms to 
consider as we move into re-authorization, and you can bet that 
I will fight for Montana priorities every step of the way.
    Thank you, Madam Chairwoman.
    Chairwoman Stabenow. Thank you very much. Again we are 
proud to have you and, of course, implementation of the Farm 
Bill is something we all care deeply about and we will be 
working together with the Department to make sure that is done 
right.
    So, let me turn now and I believe that I do not yet see 
Senator Blumenthal. Certainly if he comes, we are happy to 
accept his thoughts but we are going to first begin by asking 
each of you to stand. You can stand together and raise your 
right hand.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth so help you God?
    Mr. Massad. I do.
    Ms. Bowen. I do.
    Mr. Giancarlo. I do.
    Chairwoman Stabenow. Do you agree to appear and testify 
before a duly constituted Committee of Congress?
    Mr. Massad. I do.
    Ms. Bowen. I do.
    Mr. Giancarlo. I do.
    Chairwoman Stabenow. Thank you very much. You may be 
seated.
    Let me proceed to introduce each of you and then we will be 
happy to take opening statements. As you know, we are happy to 
take whatever information you have for the record. We would ask 
that your verbal comments be five minutes so that we have ample 
time for questions.
    Mr. Timothy Massad is currently the counsel to the 
Secretary had the United States Treasury. He was the Assistant 
Secretary for Financial Stability at the Treasury from June 
2011 to October 2013 where he supervised the wind down of TARP, 
the Troubled Asset Relief Program. Previously, he worked for 
the Office of Financial Stability at Treasury and was a partner 
at the law firm of Cravath, Swaine, and Moore.
    Secondly, we have Sharon Bowen, who is a partner in the New 
York office of Latham and Watkins where she represent clients 
on a range of corporate finance and securities transactions, 
including mergers and acquisitions, private equity and 
corporate restructuring.
    She was appointed by President Obama to serve as the Vice 
Chairman, and then Acting Chair of the Board of Directors of 
the Securities Investment Protection Corporation.
    Last and certainly not least, Christopher Giancarlo. Let me 
proceed and then I will turn to Senator Johanns who wanted to 
make a comment as well.
    Mr. Giancarlo is an executive vice president of GFI Group 
which provides wholesale market brokerage services in a range 
of global, over-the-counter, and exchange listed cash and 
derivatives markets.
    He began his career as a lawyer practicing corporate and 
securities law at the New York firm Brown, Raysman, Millstein, 
Felder and Steiner. Until early 2013, Mr. Giancarlo was the 
Chairman of Wholesale Markets Brokers Association, Americas, 
which represents the world's largest wholesale brokers.
    Senator Johanns, I believe you also wished to provide some 
remarks.

STATEMENT OF HON. MIKE JOHANNS, U.S. SENATOR FROM THE STATE OF 
                            NEBRASKA

    Senator Johanns. Madam Chair, thank you very much. I 
appreciate the privilege of just offering a few words because I 
cannot be here too long today.
    I also want to say congratulations on the Farm Bill. It was 
a remarkable achievement; and for somebody who has been on the 
other side of that from the administration standpoint, they are 
not only tough to put together, they are tough to get the votes 
to get passed. So, congratulations and to our Ranking Member 
too. He was a great partner in that effort.
    I want to say to each of you welcome; but if I might just 
use a little speaker's privilege to say to you, Mr. Giancarlo, 
a special welcome. As you know I know family members very well 
and they speak very highly of you, and for all of you this is a 
great day. Your family members can be proud that you are here, 
that you have been nominated, and I wish you all the best.
    If I were to make one pitch, I would ask you to take a very 
close look at the end-user issue. I do not think there is any 
controversy over this, and we are hoping to get that to the 
finish line.
    So, I will end there. I will not abuse the privilege of 
offering a few words but thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Mr. Massad, we will start with you. Welcome.

TESTIMONY OF TIMOTHY G. MASSAD, OF CONNECTICUT, NOMINATED TO BE 
 CHAIRMAN AND A COMMISSIONER OF THE COMMODITY FUTURES TRADING 
                           COMMISSION

    Mr. Massad. Thank you. Chairwoman Stabenow, Ranking Member 
Cochran, and members of the Committee, it is a privilege to 
appear before you today, it is a privilege to appear before you 
today as President Obama's nominee to be the next Chairman of 
the Commodity Futures Trading Commission.
    I would like to introduce the members of my family who are 
here with me today. My wife Charlotte, my children Emil and 
Jayne, my mother Delores, and my brother Steve.
    Chairwoman Stabenow. Let us have them stand up so that we 
can welcome them officially. Welcome.
    [Applause.]
    Mr. Massad. My children may sneak out early to get back to 
school. I am deeply indebted to them for their love and 
support.
    For decades, the CFTC has had the vital mission of 
preventing fraud and manipulation in our futures markets. These 
markets are critical to many farmers, ranchers, and businesses.
    Today, the CFTC's role is even more important, because it 
has the responsibility to bring much-needed regulation to the 
markets for over-the-counter derivatives. I am honored to have 
the opportunity, if confirmed, to lead the CFTC in carrying out 
this essential mission.
    I have spent the last five years helping our nation recover 
from the worst financial crisis since the Great Depression. 
Excessive risk related to derivatives, particularly at American 
International Group, was one of many factors that contributed 
to that crisis.
    Today, we have recovered every dollar of the taxpayer funds 
committed to prevent the collapse of AIG, as well as a profit; 
and indeed, today, we have recovered more on all the crisis 
investments than was disbursed.
    But it was awful and unfair that we had to take these 
actions in the first place. We must never forget that the true 
cost of the financial crisis is not the fiscal cost of the 
programs. It is the millions of jobs lost, the homes 
foreclosed, the retirements postponed and the dreams deferred. 
That is why it is so important to continue to implement strong 
financial reform; and that is a major reason why I embrace the 
opportunity to lead the CFTC at this time.
    I would like to take a moment to tell you about my 
background before briefly discussing the issues facing the 
CFTC. I was born in Louisiana and lived in Texas, Oklahoma, and 
Connecticut as a child.
    My grandparents were immigrants from Lebanon who came to 
this country as teenagers, barely able to speak English and 
with nothing more than a suitcase.
    My parents grew up during the Great Depression. They worked 
hard to provide our family with more opportunities than they 
had, and I have been fortunate as a result.
    I spent twenty-five years in private law practice before 
coming to Washington to serve my country. During my career as a 
lawyer, I worked on all types of complex financial 
transactions, and I worked throughout the world, including in 
New York, London and Hong Kong.
    I had substantial experience with derivatives as a lawyer. 
I helped to draft the original standardized agreements for 
swaps in the late 1980s. Throughout my career as a lawyer, I 
helped many businesses negotiate and execute transactions to 
hedge exposures in commodities and derivatives markets. I saw 
from personal experience how important these markets are to 
businesses of all types, including those of farmers and 
ranchers.
    The United States of America has the best financial markets 
in the world, the most efficient, most innovative and best 
regulated; and if confirmed as the next Chairman of the CFTC, I 
want to help make sure that the United States continues to lead 
the world.
    Chairwoman Stabenow, If I may pause, I know Senator 
Blumenthal's time is limited. Should I perhaps break and allow 
him to speak?
    Chairwoman Stabenow. If you have a moment, Senator 
Blumenthal, we can allow you to complete your statement and 
then we will be happy to hear Senator Blumenthal as well. Thank 
you.
    Mr. Massad. Let me just say thank you to Senator Blumenthal 
for appearing today and for supporting my nomination. I am very 
grateful.
    If confirmed, I look forward to addressing the many 
important issues facing the CFTC. First, I believe there is 
nothing more important than a robust enforcement program in 
order to protect the integrity of our financial markets.
    We must aggressively pursue wrongdoers, whatever their 
position or size, and we must deter and prevent unlawful 
practices. Strong enforcement is vital to maintaining the 
public's confidence in our markets. Therefore, I will make it a 
top priority to fulfill the CFTC's responsibility to enforce 
the laws protecting these markets vigorously.
    Second, the CFTC has promulgated almost all of the new 
rules required by Congress. Now the Commission must make sure 
that the rules work, that participants comply with the 
requirements and that the markets operate transparently and 
effectively. This is true not just for the swaps markets where 
the new rules have received great attention, but for the 
futures markets as well.
    As we implement important reforms, we must make sure the 
markets continue to serve their essential functions of 
providing hedging and price discovery for end-users. In this 
regard, I look forward to listening to the concerns of 
traditional end-users such as agricultural stakeholders, as 
well as participants in the markets newly subject to the CFTC's 
jurisdiction.
    The Commission must also work closely with international 
regulators. The derivatives markets are global, and we must 
ultimately achieve strong international regulatory standards.
    The United States should be a strong leader in developing 
such standards, as it has been in regulating the securities 
markets since the 1930s.
    Third, the CFTC faces important technological and data 
challenges. The markets it regulates are, like all financial 
markets today, heavily dependent on technology. We must focus 
on the issues this creates and make sure the Commission has the 
up-to-date capabilities to do its job.
    In addition, the law requires the collection of vast 
amounts of data concerning the derivatives market. We must make 
sure this data is collected wisely and efficiently so that it 
can be used to monitor and mitigate excessive risk and bring 
much-needed transparency to these markets.
    There are many other areas where the Commission has 
important responsibilities, such as final action on a position 
limits rule for physical commodities, margin requirements for 
uncleared swaps, and ensuring adequate protection of customer 
funds. If I am confirmed, I pledge to work tirelessly to lead 
the CFTC in fulfilling its responsibilities.
    In conclusion, I consider public service the highest 
calling, and it would be an honor and a privilege to serve as 
the next Chairman of the CFTC.
    If confirmed, I look forward to working closely with the 
Members of this Committee and your colleagues as you conduct 
your important legislative and oversight role.
    Thank you for considering me for this important position 
and for the opportunity to appear before you today. I would be 
happy to answer any questions.
    [The prepared statement of Mr. Massad can be found on page 
XX in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Senator Blumenthal, we are happy to have you with us.

 STATEMENT OF HON. RICHARD BLUMENTHAL, A U.S. SENATOR FROM THE 
                      STATE OF CONNECTICUT

    Senator Blumenthal. Thank you so much, Madam Chairwoman. I 
apologize for being a little bit late. As all of you are doing 
I am sure, I am trying to juggle multiple Committee 
commitments, and I am so appreciative for the opportunity to be 
with you today and a support Tim, who is a longtime friend, and 
I am going to refer to him as Tim if I may because I have known 
him for a couple of decades and to say that he is well 
qualified for this job is a supreme understatement.
    As you have heard about his background and I am not going 
to repeat it but I am very, very proud to be here today because 
he is a Connecticut resident, still has a home in Norwalk, 
Connecticut, has been a public servant not only at the global 
level as you heard but he has also been Vice Chairman of the 
Norwalk redevelopment agency and president of the Norwalk 
Community College Foundation among his many local and State 
involvements.
    So, he is someone who lives public service, and I think his 
assignment at this point, as everybody on this Committee knows, 
is absolutely critical to avoid the kind of excesses and abuses 
that he has helped the Nation to recover from.
    He has been in charge of unwinding the TARP program, first 
overseeing TARP's hundreds of billions of dollars of 
investments and eventually reducing them and unwinding them, 
and he has played a key role in helping our economy and 
financial system recover from that precipice of disaster and I 
think President Obama said it best in thanking him for that 
job, and I am quoting, ``I think it is safe to say that he 
never wants to have to manage something like TARP again''.
    He did it well; but in his new role, he will help the 
Nation avoid those kinds of laxity and laggardness in law 
enforcement that brought the Nation in part to the problems 
that it encountered.
    That is what I really welcome in his approach. He stated it 
well today, his focus on strong enforcement to keep the 
financial system safe and secure from unchecked risk as we work 
with our international partners.
    On their efforts at derivatives reform, the CFTC must also 
make sure to contain the rifts that we encounter here and that 
flow from offshore back to the U.S. economy, and that means a 
strong regulatory regime here and in the international sphere 
going forward. I think he will help to impose that standard, 
the high bar that we need on the international regime.
    So, he has a very challenging and important assignment 
ahead. I am very, very proud to support him here and hope that 
his nomination will move swiftly.
    I also want to thank the others who are with him today for 
their public service. This body, the CFTC, is not a household 
name as we all know but it has implications and impacts on all 
of the households throughout the country, on farmers, on Wall 
Street, on Main Street, across the United States.
    I want to thank you again, Chairwoman Stabenow and Ranking 
Member Cochran for the opportunity to be with you today. Thank 
you so much.
    Chairwoman Stabenow. Thank you very much. We appreciate 
your being here and your comments.
    We will now turn to Mr. Giancarlo. Welcome.

TESTIMONY OF J. CHRISTOPHER GIANCARLO, OF NEW JERSEY, NOMINATED 
     TO BE A COMMISSIONER OF THE COMMODITY FUTURES TRADING 
                           COMMISSION

    Mr. Giancarlo. Thank you, Chairwoman Stabenow, Ranking 
Member Cochran, and members of the Committee, I am honored to 
be here before you today. I would like to thank Senate Minority 
Leader Mitch McConnell, for recommending me to the President 
and to President Barack Obama for nominating me for this 
position.
    With your permission, Madam Chairwoman, I would like to 
introduce members of my family who are here with me today. I am 
joined by my dear wife, Regina, and our three children, Emma, 
Luke, and Henry. I am also pleased to introduce my mother, Mrs. 
Ella Jane Keegan, and my father, Dr. Hector Giancarlo.
    Chairwoman Stabenow. Please stand. We would love to 
recognize you. Welcome. We are happy to have you at the 
Committee.
    [Applause.]
    Mr. Giancarlo. Madam Chairwoman, I hail from a line of 
nurses and physicians and business owners. They were children 
of simple emigrants who came to America to work hard and raise 
their families. They raised and educated their families and 
served their local communities. They volunteered, fought and 
died for our country in time of war. They would beam with pride 
if they saw one of their own here today.
    But I was the black sheep in the family by choosing law 
over medicine. I practiced law for 16 years in New York and 
London where I advised many early stage technology companies in 
bringing their products into U.S.
    In 2000, I joined a client firm that produced cutting-edge 
software that brought transparency to the pricing of currency 
options. I was then introduced to the global markets for swaps 
and derivatives. I have served over a decade as a senior 
executive of one of the primary intermediaries in the world's 
wholesale financial markets. In 2005, I directed the firm 
initial public offering.
    In September 2008, Lehman Brothers filed for Chapter 11 
bankruptcy protection. A typical ``run on the bank'' ensued 
with rapidly falling asset values that prevented lenders from 
meeting their cash obligations. This marked the beginning of a 
financial crisis that was devastating for far too many 
businesses and families. As you noted, 8 million jobs were lost 
here in America.
    Without question, counter party exposures related to 
bilaterally cleared over-the-counter swaps helped amplify and 
spread the financial crisis. Inadequate collateralize and 
little public information about exposures among swaps users 
caused third-parties to become less willing to provide credit. 
Fear of the stability of the U.S. banking system forced the 
federal government to place emergency capital in the largest 
U.S. banks and insurance companies at tremendous expense to 
U.S. taxpayers.
    While U.S. swaps markets continued to function during the 
financial crisis, trading liquidity dried up. I had been a 
proponent of central counter party clearing since before the 
financial crisis. During the Dodd-Frank Legislative debate, I 
publicly called for increased central counter party clearing, 
regulation of trading platforms, and increased regulatory and 
marketplace transparency.
    My support for these three reforms is based not on academic 
theory or political ideology. It is based simply on my 
practical experience in the markets. But I am also a strong 
believer that vibrant, open and competitive markets are 
essential to a strong economy. Proper regulatory oversight can 
go hand-in-hand with open and competitive markets.
    But if excessive regulation arbitrarily increases the cost 
of risk management to end-user, the overall economy will 
suffer. If confirmed, I will commit myself to ensuring the 
proper balance.
    In the almost four years since the passage of Dodd-Frank, 
the CFTC has outpaced its peer financial service regulators in 
the implementing rules, and I compliment the agency staff for 
their extraordinary work.
    But regulatory effectiveness must be a higher priority than 
speed. It is essential that we get the details right in 
implementing the core reforms of Title VII. If confirmed, I 
look forward to bringing my practical business experience and 
legal judgment to bear in completing the implementation of 
Dodd-Frank.
    While my professional work over the past decade has been 
focused on financial swaps, I am very conscious that the U.S. 
futures markets were initially created to hedge price exposure 
in agricultural commodities. It is essential that U.S. futures 
and swaps markets continue to serve the needs of farmers, 
ranchers, feed yards, grain elevator operators, energy 
producers, refiners, wholesalers and, yes, manufacturers that 
are the backbone of our U.S. economy. If confirmed, I will 
commit myself to attending to concerns of end-users of swaps 
and futures.
    The goal of swaps market reform is to enhance the safety 
and soundness of hedging markets. The CFTC must fulfill its 
mission to implement the reforms of Dodd-Frank in a practical 
manner while continuing to oversee these critical risk hedging 
marketplaces. If confirmed, I will work faithfully with my 
fellow Commissioners to further that essential mission.
    On a final note, my nomination is to fill the seat vacated 
last year by Commissioner Jill Sommers, who served the CFTC 
with distinction and dedication.
    Thank you again for the honor of appearing before you. I 
will be pleased to answer your questions.
    [The prepared statement of Mr. Giancarlo can be found on 
page XX in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Ms. Bowen.

 TESTIMONY OF SHARON Y. BOWEN, OF NEW YORK, NOMINATED TO BE A 
    COMMISSIONER OF THE COMMODITY FUTURES TRADING COMMISSION

    Ms. Bowen. Chairwoman Stabenow, Ranking Member Cochran, and 
other distinguished members of the Committee, I am honored to 
have been nominated by President Obama to serve as Commissioner 
of the Commodity Futures Trading Commission.
    I want to thank the Committee members and staff for meeting 
with me and for making time for this nomination hearing. I also 
want to thank Senator Gillibrand from my home State of New 
York.
    I too would like to take this opportunity to introduce my 
family members who are here today. My sister Sheila Taylor. My 
sisters-in-law Rita Bowen and Emily Morse Campbell. My niece 
and nephews Alessandra and Carrington Campbell. A good close 
family friend Neal Cross Castelly. I want to acknowledge and 
thank especially my incredibly supportive husband of twenty-
seven years, Larry Morse.
    Chairwoman Stabenow. Wonderful. Let us ask them to stand as 
well. It is so wonderful to see all the family members.
    [Applause.]
    Ms. Bowen. Although other members of my family could not be 
here, I want to thank them for their consistent love and 
support. Also for family members who are no longer with us, I 
want to acknowledge the support and inspiration they instilled 
in me to do my best and be my best whenever I could.
    As the youngest of five children growing up in the 
segregated, small town of St. Julien's Creek, Virginia, I 
understand the importance of being the voice of the under-
represented who have not had a chance to have a seat at the 
table, as I do today.
    My commitment to public service runs deep and is not only 
evidenced by my role as the Acting Chair of the Board of 
Directors for the Securities Investor Protection Corporation 
but also by my personal contributions and leadership on behalf 
of my community. In order to serve your community, you must 
understand your community's strengths and challenges.
    I have been involved in numerous pro bono, educational, 
diversity, and civic efforts that address critical issues 
related to the ethics and sustainability of the legal 
profession, as well as the needs of the residents and families 
of New York City.
    I currently serve as a member of the Emeritus Board of New 
York Lawyers for the Public Interest, the Boards of New York 
City Economic Development Corporation, Northwestern University 
Law School, and, until recently, the New York City-based 
nonprofit PENCIL through which my colleagues and I have 
partnered with middle schools in Harlem and the Bronx for over 
a decade.
    I have served in several professional leadership positions, 
including co-chair of the Global Diversity Committee of my law 
firm, Latham & Watkins. I am also co-founder and head of 
Latham's Women's Initiative. I want to thank my partners and 
colleagues at Latham, especially my assistant, Audrey Leff, who 
have been staunch supporters and friends during my twenty-five 
years at the firm.
    My interest in finance started early. After receiving a 
degree in Economics from the University of Virginia, I received 
an MBA and JD from Northwestern before moving to New York to 
begin my legal career.
    I have over three decades of experience as a securities 
lawyer focused on financial markets and regulations. I maintain 
a deep understanding of regulatory requirements and disclosure 
obligations, and I understand the importance of, and risks 
associated with, derivatives.
    A fair and efficient financial market not only helps 
investors but also has a positive impact on farmers, ranchers, 
manufacturers, and ultimately, consumers and job creation.
    As the Acting Chair of SIPC, I have significant experience 
with the issues and procedures of dealing with failed broker-
dealers and futures commission merchants in the financial and 
derivatives markets.
    Early in my career, I worked on swaps and asset 
securitizations. I have advised companies and financial 
institutions in the purchase and sale of assets and distressed 
securities in the bankruptcy context. So, I understand what 
happens when our markets do not function as expected.
    These experiences make me uniquely positioned to 
effectively guide and help the CFTC as it finalizes its 
regulatory rulemaking of Dodd-Frank.
    The next phase of the CFTC's mandate requires effective 
implementation of these rules, with the participation and 
coordination of regulatory bodies both inside and outside of 
the U.S. I believe my strong analytical skills and reputation 
for building and leading teams with diverse perspectives across 
the globe will bring a unique contribution to the CFTC.
    I firmly believe that the CFTC should cooperate and work in 
harmony with foreign regulators. At the same time, though, we 
must move forward in implementing the rules and mandate of 
Dodd-Frank.
    I know that Congress, in directing the CFTC to establish an 
expanded regime for financial oversight, recognized that 
excessive risk-taking in the swaps market and what it did to 
contribute to the devastation that afflicted our economy in the 
wake of the financial crisis.
    If confirmed, I would bring to my role as Commissioner an 
understanding of the securities and futures markets laws and 
regulations, the importance of both markets to the economy, and 
the terrible cost to the public when those markets fail.
    Capital formation in the securities market is different 
from the management of risk and price volatility in the futures 
markets. Yet, each has its own nuances that impact consumers 
and end-users.
    I recognize that our physical commodity markets need to be 
protected from excessive speculation and manipulation, and we 
must acknowledge that esoteric and other creative financial 
products do not always benefit consumers.
    It would be an honor for me to bring my experience in 
finance and securities to my role as Commissioner of the CFTC, 
if confirmed. I have a record of bringing teams together to 
find solutions, and I believe that my substantive experience 
and ability to bring my own voice to the table would be of 
value to a historically independent government agency like the 
CFTC.
    My door is always open and I am really ready and willing to 
learn and to listen and bring the best of my experience to my 
role. I believe I have the knowledge and the integrity to 
foster open, competitive, and financially sound markets; and I 
look forward to working with you in making our financial system 
stronger, and one that benefits everyone.
    Thank you for your time and consideration. I also look 
forward to taking questions.
    [The prepared statement of Ms. Bowen can be found on page 
XX in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    We will proceed with questions. We will do five-minute 
rounds, and then if we have time, if there is interest, we 
certainly can do a second round. I believe there is a vote at 
11:20 today. So, we will proceed with that in mind.
    To each of you, I would like to start out taking about the 
physical markets. While the futures markets have evolved over 
the years and they are used by both hedgers and speculators, 
fundamentally these markets were designed for risk management 
and price discovery.
    The functions are very important to commercial end-users. 
You will hear that from every single member of our Committee 
and those in agriculture, energy, and the metals space.
    So, could each of you talk--we will start with Mr. Massad--
about the importance of futures, options and swap markets to 
our end-users-agriculture, energy, metals industries, and how 
your experience, specifically the kind of work you have done, 
would relate to the CFTC, particularly in this regard.
    Mr. Massad. Certainly. Thank you, Chairwoman Stabenow for 
the question, and I think you have said it best. These markets 
are incredibly important to end-users and we must make sure 
that they continue to function well so that end-users can hedge 
exposures and achieve price discovery.
    In the course of my career as a lawyer, I advised a wide 
range of businesses, for example, many of them touched on the 
agricultural sector just because the agricultural sector is so 
important to our economy and it touches on so many businesses.
    Those include, for example, a fertilizer company that 
hedged its exposure to price risk on natural gas which is an 
important component of fertilizers.
    A major lender to rural electric co-ops. Just about any 
business I dealt with I would say hedged forms of risk in these 
markets of one kind or another.
    So, it is extremely important and I intend as Chairman to 
make sure that we are listening to the concerns of stakeholders 
of all types, including the traditional ones in the 
agricultural markets where the CFTC's jurisdiction really 
started as well as the other physical commodities.
    I look forward to working with you and your staff and the 
other members of this Committee and their staffs on making sure 
that we hear their concerns and that we address those concerns.
    Chairwoman Stabenow. Thank you very much.
    Mr. Giancarlo.
    Mr. Giancarlo. Thank you, Madam Chairwoman.
    This Committee and this Commission started out with a focus 
on Ag interest in the physical markets. That is where the 
origins are; and through the development of other markets and 
increasing of the jurisdiction and responsibility of the CFTC, 
those interests now are less than 10 percent of its mission but 
they are still a very important component of that.
    End-user concerns, whether it be in physical markets or in 
cash-settled markets, there are a number of concerns of the 
end-users that deserve our attention carefully at the 
commission.
    There are concerns about inter affiliated swaps and 
Treasury functions for end-users, and we need to make sure we 
get that right. There is concern about margin on unclear to 
swaps and those concerns CFTC has a rule proposal and that has 
not yet been finalized. We need to make sure that is finalized 
in a way that suits the interests of end-users.
    Its concerns about position limits. As you know, a major 
per policy proposal is put forward. Thousands of pages have now 
been received, and it will be for the work of this Commission 
going forward to wade through those comments and make sure that 
we get that right.
    We do not want to create loopholes but we need to make sure 
that end-users have the right outcome on position limits so 
they can hedge real risks as they are meant to, whether that is 
in physically settled or cash-settled instruments.
    So end-users have a number of concerns. They will be the 
foremost on our list.
    On the agricultural side, that will be something that I 
will be keenly focused on to learn those issues, to get out 
into the field to meet with the constituents that have concerns 
about physically settled agricultural issues and be there to 
understand those issues.
    Chairwoman Stabenow. Thank you.
    Ms. Bowen.
    Ms. Bowen. Yes. I understand the importance of the 
integrity of the markets to the agriculture community, as well 
as end-users. I am also aware of the long-standing and 
important role of agriculture in the history of the CFTC.
    A critically important role of the CFTC, though, is to 
protect against excessive speculation and manipulation which 
has been a long-standing concern.
    Our markets need to work for farmers, ranchers, and end-
users. So, our rules must be balanced and not create undue 
costs and burdens.
    As a consumer, I am also aware of the high impact of gas 
prices and food and electricity on our families and neighbors. 
We all pay when our markets do not work. I will bring the full 
enforcement powers of the CFTC to bear, frankly, to protect 
against this type of excessive speculation and manipulation of 
the market.
    I frankly look forward to working with all of the 
stakeholders and to hear their concerns and address their 
issues.
    Chairwoman Stabenow. Thank you very much. I have, 
obviously, many other questions. I am going to stop to give 
others the opportunity to hold to five minutes but I do want to 
come back to issues on position limits and cross-border issues. 
But at this point, I am going to turn to Senator Cochran.
    Senator Cochran. Madam Chair, thank you.
    Let me begin by asking each of the nominees what your 
impression has been of the role of the CFTC in managing abuses 
that have led to investor losses through trading contracts or 
in trying to deal with the situation such as the Ponzi scheme 
of recent years that involved Mississippi and a lot of other 
states too and investors, this so-called Stanford Ponzi scheme.
    What is your reaction about how the Commission can act to 
help safeguard communities and investors in dealing with 
situations like this?
    Mr. Massad. Ranking Member Cochran, thank you for the 
question, it is a very important issue that you have raised.
    The incidents involving MF Global and Peregrine are 
obviously very, very damaging to the participants with those 
firms as well as to confidence in these markets generally.
    The Commission must do all it can to prevent that type of 
thing. It is my understanding the Commission has taken some 
actions with respect to protection of customer funds that are 
designed to address this. I want to make sure, if I am 
confirmed, that we have done all that we can and I look forward 
to talking with the staff about this and also talking with you 
and your staff about actions we might take.
    It is also a question of resources. As you know, the 
Commission relies on self-regulatory agencies to do a lot of 
the reviews of FCMs and so forth.
    But the agency needs to make sure that it does all it can 
within its capabilities to minimize this. We must take strong 
enforcement action when we discover any type of improper 
behavior.
    I look forward to making this a priority.
    Senator Cochran. Thank you.
    Mr. Giancarlo. Thank you, Senator.
    Those two instances you mentioned were tremendously 
damaging to market places. It is true that many years later 
people that lost money in those have gotten most of their money 
back but that is not really a complete solution because the 
loss of that money during that period of time would have been 
devastating to their agriculture business or to their 
manufacturing business.
    But even more broadly as an operator of markets, I know how 
important market credibility is; and what suffered in those two 
events is the credibility of the market places.
    As the overseer of the marketplace, the CFTC that is 
unfortunately a black guy. We need to make sure that does not 
happen again. There has been a number of steps taken, as you 
may know, some very good steps taken by the agency but also by 
the NFA working together with CME at the direction of the 
agency, the Tack Committee, to have electronic confirmation of 
customer accounts is a very good step forward.
    But I think there are other things that can be done as 
well. I know there are some suggestions about changes in the 
bankruptcy code that can be looked at.
    Commissioner O'Malley has made, I think, a very good 
suggestion about a super lien. As you know, many of these FCMs 
now are part of much a larger financial institution, and yet in 
the lean in favor of the customers exists at the subsidiary 
level.
    His proposal is that maybe that lien needs to be moved to 
the top of the house so the entire financial institution will 
recognize the concerns of customers as a top priority for the 
entire institution.
    I think that it is a suggestion worth looking at. But I 
look forward to working on these and other ideas with your 
staff and others as we go forward.
    Senator Cochran. Thank you.
    Ms. Bowen. Thank you. In my acting role as Acting Chair of 
SIPC, I am particularly mindful of the importance of consumer 
protection. I have seen first-hand the devastating effect on 
everyday people who did nothing, to have their funds being 
misused and transferred to other entities, essentially creating 
investment banks.
    I think what we should do and I think what Dodd-Frank gives 
us to do is the enforcement authority which has been enhanced 
to guard against this type of misbehavior and fraud.
    I understand that resources are critically important for us 
to have the proper oversight, and I agree with Mr. Giancarlo in 
the sense that the type of work that Commissioner O'Malley is 
doing with respect to technology is critically important.
    We need to have those resources to make sure that the 
reporting obligations are accurate and effective and useful, 
and I obviously look forward to working with you and the rest 
of the Committee members on this important issue, including in 
the bankruptcy context, as you know I have expertise in that 
and would be happy to participate in those discussions.
    Senator Cochran. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Chairwoman, and a 
thank you to our nominees.
    I am going to direct my questions to Mr. Massad and it is 
not under any disrespect for the other two nominees but only 
because there is a five minute limit. So, I will put my 
questions in writing.
    I also wanted to greet our Minnesotan here. Charlotte, Mr. 
Massad's wife. I know this means you will bring some Midwestern 
sensibility to the board. We are excited about that.
    I guess I will start with that and just began following up 
on Senator Cochran's questions. The MF Global and Peregrine 
abuses really hurt a lot of people in my State. In fact, one 
farmer unfortunately had invested through both of them, and we 
had a number of problems because of that. I would just 
reiterate the importance of doing everything you can to be 
aggressive with those kinds of practices.
    I have also been very involved in the speculation issue, 
serving as a hub for Delta, agreeing with their CEO and also 
for a number of people who were hurt very much when there is 
speculation in the market and urge you to be aggressive about 
that.
    I do have a question on position limits or hard caps on a 
range of commodities including energy products. I think 
commercial hedges are based on an actual physical product like 
corn or wheat are exempt from the position limits.
    However, many of the commercial practices used in 
agriculture are caught by the position limits. For example, 
farmers will place a hedge on the price of grain from a silo 
that is to be delivered to market in the future before the 
grain is delivered to the silo. This provides the farmer with a 
set price for the grain and budget certainty.
    My first question is: Are speculative financial hedges 
different, do you consider them different, Mr. Massad, than the 
types of hedges used in common commercial practices used in 
agriculture?
    Mr. Massad. Thank you for the question, Senator Klobuchar. 
You have raised a very important issue, and Congress obviously 
was very concerned about this issue also in directing the 
agency to look at the issue of excessive speculation in 
position limits, and the agency has re-proposed a rule on this.
    I think, as we consider that, if I am confirmed, I will 
clearly want to be thinking about making sure that commercial 
end-users can still properly engage in the activities they need 
to engage in, can engage in bona fide hedging at the same time 
that we address the risk of excessive speculation which can 
lead to manipulation.
    I look forward to working with the staff on that and am 
happy to work with you and your staff to make sure that we take 
action in this area that is clear, that works for end-users, 
that addresses the concerns that Congress had and that is 
sustainable.
    Senator Klobuchar. Thank you. I think we just want to make 
sure that the rule will allow for normal practices of these 
types of businesses.
    I have some questions on commercial end-users and 
exemptions to the margin requirements. I think I will put those 
on the record and get to something that you and I discussed 
when we met, and that is the importance of the renewable fuel 
standard for many jobs in my State, Senator Donnelly's State, 
Senator Hoeven's State.
    In fact, we had 16 senators that met recently with the EPA 
Administrator about this issue and some proposals that came out 
of the EPA. This industry generates $5 billion in economic 
output, sustains tens of thousands of jobs, and we are 
concerned about this rule that recently has been proposed.
    It is not really in your jurisdiction. But what is in your 
jurisdiction is speculation, and we are concerned with the 
renewable fuels standard's RIN market which we talked about. It 
was volatile last year and there were questions raised about 
the impact of excessive speculation in the market that may have 
caused this volatility that led to this proposed rule.
    What role do you believe the CFTC can play to reduce 
volatility and enhance transparency which is what we really 
want in the RIN market?
    Mr. Massad. Thank you, Senator.
    It is a very important issue and an area for us to be 
looking at. We have the responsibility to address excessive 
speculation. We have the responsibility to prevent fraud and 
manipulation in this market and the RIN market is one that we 
should be actively looking at and making sure that it is 
functioning properly.
    So, if confirmed, I look forward to working with the staff 
on that and to getting your ideas on the specific things that 
we might want to consider to make sure this is. It is a complex 
market, it is a new market; but it is very important to a lot 
of producers, a lot of the agricultural sector of this country. 
So, we need to make sure it works effectively for people.
    Senator Klobuchar. Thank you. Because I think it played an 
unfair role in what happened and what we see in this proposed 
rule.
    I would also mention that Chairwoman Stabenow has shown 
great leadership in this area and I again will put questions on 
the record of the other two nominees as well has some on the 
margin issue and some position limits issues which you and I 
also discussed earlier.
    Thank you very much.
    Chairwoman Stabenow. Thank you. Important issues.
    Senator Chambliss.
    Senator Chambliss. Thank you very much, Madam Chair.
    Let me follow up on that. I do not think there are any of 
us who would disagree that manipulation of the markets is a 
violation of the current law and it is a very critical 
oversight responsibility that CFTC has and we are all familiar 
with cases where manipulation, individuals who have sought to 
manipulate the market have been dealt with in a severe matter 
by CFTC and we want that to continue.
    But by the same token, speculators are an asset to the 
market. I want to make sure as we go through this, and you are 
going to add any number of rules and regulations that you deal 
with regarding that issue; but if each of you will just give me 
a simple yes or no. I want to make sure that you have no bias 
against speculators.
    Mr. Massad, let us start with you.
    Mr. Massad. Certainly. Senator, I can assure you that 
speculators are important in these markets. That is often the 
other side of the hedge for a business that is seeking to hedge 
commercial risk.
    Senator Chambliss. Great. Mr. Giancarlo.
    Mr. Giancarlo. The answer, I cannot remember how you 
rephrase it, yes or no; but I believe speculators play an 
important role in the market.
    I think actually the law does not bar speculation in the 
market. The law gives the CFTC power to use position limits to 
prevent excessive speculation. It does not bar speculation.
    Speculation allows hedgers to meet a cross time. They play 
a very important role in markets. As an operator of markets for 
many years, I understand that.
    Senator Chambliss. Ms. Bowen.
    Ms. Bowen. Yes, I do acknowledge that speculators are one 
player in the market. I absolutely do recognize that. At the 
same time, I do recognize that excessive speculation is a 
problem and it is critically important for us to protect our 
markets. I do not think we are going to have market integrity 
at all if we allow there to be excessive speculation.
    Senator Chambliss. Obviously, you are here because this 
Committee has jurisdiction over the operation of the Commodity 
Futures Trading Commission. Within the Commission, there are 
various advisory committees. One of those is the Agricultural 
Advisory Committee.
    It is interesting to note that there has not been a meeting 
of the Ag Advisory Committee of the CFTC since 2011. With the 
confirmation of the three of you, there is not going to be 
anybody on the Commission that has what I think we could refer 
to as a background in agriculture which is a little bit unusual 
because that was the original nature of the CFTC.
    Do any of the three of you have any interest in chairing 
the Ag Advisory Committee within the CFTC?
    Mr. Massad. Well, Senator, perhaps I should speak first as 
the nominee for the Chair. It is, I think, vitally important to 
the Commission that we have the input of agricultural 
stakeholders. It is an incredibly important part of these 
markets, and I think the advisory committee is a great way of 
doing that.
    I will tell you I will make sure it is chaired. I am, I 
think we have to see exactly, if we are all confirmed, who does 
what. But I will pledge to you that we will make sure it is an 
important committee that meets regularly.
    Mr. Giancarlo. Senator, I also agree that it is vitally 
important that committee be chaired. I think it is an 
unfortunate oversight that it has gone on so long.
    If I might add, I believe there is also another committee, 
and that is the Energy Committee, Advisory Committee, that also 
has not met for some time.
    So, to answer your question, I would be honored to chair 
either of those committees.
    Ms. Bowen. I would like to say my door is going to be open 
for any stakeholder, whether we have committee meetings or not; 
and so I welcome to have the Agriculture Committee committed to 
come and visit. I do know our Chair will probably have 
something to say as to who gets which committees. But 
irrespective that, please look to me to be someone who would be 
very welcoming to them.
    Senator Chambliss. Great. Thank you.
    Mr. Massad, when Dodd-Frank passed, I was concerned that 
CFTC would go too far in regulating the activities of commodity 
end-users; and based on the comments of my constituents, I 
think my concerns are justified.
    Are you satisfied that the Commission has given due 
consideration to end-users in the exemptions and exceptions 
provided to them by Dodd-Frank and the CEA in its rulemaking?
    Mr. Massad. Well, Senator, if confirmed, I want to make, 
absolutely sure, that we have. I think that is part of 
Congress's direction to us in providing the statutory basis to 
recognize that end-users, particularly non-financial commercial 
end-users, who are hedging commercial risk are treated 
differently than the financial entities that may be dealers or 
other participants in these markets.
    So, I look forward. I know there are a wide range of issues 
that touch on this, and I intend to make sure that we have 
taken all appropriate action to make sure they are treated 
properly and again look forward to working with you and your 
staff in hearing your concerns on that.
    Senator Chambliss. My time is up, but, Mr. Giancarlo, you 
mentioned an issue that is very critical to all of us that are 
concerned with the markets and that is the issue of position 
limits.
    As you go through the discussion of this, should that take 
place, what really concerns me is that there is going to be an 
opportunity to create winners and losers and that should not be 
the object of at CFTC.
    So, as all three of you educate yourself on this issue and 
go through it, we look forward to dialoguing particularly on 
that issue of position limits.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much, I would just add 
my voice to Senator Chambliss about the Agriculture Advisory 
Committee and I hope you will seriously look to that as an 
important part of receiving critical input from agriculture.
    Senator Donnelly.
    Senator Donnelly. Thank you, Madam Chair.
    Mr. Massad, I thought that this would be the moment when we 
were together in my office, I said if you do a great job as 
Chair you could be the Derek Jeter of the CFTC; and you said 
wait until my son hears that.
    [Laughter.]
    Senator Donnelly. Your son was here and he just left to get 
a drink of water. So, the timing was terrible on this.
    Mr. Massad. I will make him watch the tape.
    Senator Donnelly. All right. Very good.
    In regard to position limits, I have argued that they 
should be a tool in the CFTC's toolbox that helps fulfill its 
mission to promote transparent open markets and to protect the 
public from fraud and manipulation.
    I just want to make sure that with all three of you that 
you will work to finalize a good position limits rule in a 
timely manner.
    Mr. Massad. Senator, I believe it is very important that we 
work to finalize that rule. We have had position limits in 
place for agricultural commodities, as you know, for many 
years. I think they are a very important tool in the toolkit, 
and Congress obviously has directed us to take action in this 
regard.
    So, I will make that a priority.
    Senator Donnelly. Mr. Giancarlo.
    Mr. Giancarlo. Yes. Along with margin on uncleared swaps, I 
think that position limits is one of the outstanding 
rulemakings that are vitally important to the end-user 
community.
    As I said earlier, thousands of pages of comments have now 
been received. The comment period ended at the beginning of 
February. It will now fall to the Commission to go through 
those comments very carefully and make sure that end-users 
receive the exemption that they deserve and yet at the same 
time that loopholes are not created through it.
    So, we have got to get it right.
    Senator Donnelly. Ms. Bowen.
    Ms. Bowen. Yes. I would just briefly also echo that it is 
an important tool in the toolbox. At the same time, I do look 
forward to reading the comments. I know there are hundreds of 
comments on this issue, and I look forward to reading those and 
having discussions with constituents.
    Senator Donnelly. Thank you.
    Mr. Massad, I think a good argument can be made that 
excessive speculation leads to increased or exaggerated price 
fluctuations that can negatively affect the pocketbook of 
Hoosiers.
    As part of the position limits imposed, I understand it 
creates a position limit five times higher for traders in cash-
settled markets if they are not also trading a physically 
settled contract.
    Can you explain why these limits are needed and why I 
should not be worried that they might increase the potential 
for manipulation?
    Mr. Massad. Thank you, Senator, for the question. You have 
touched on a very important issue. What is called the 
conditional spot limit rule that is part of the reproposed 
rule.
    It is a very complex issue. I know there are strong views 
on both sides. I look forward to reading the comments on this 
issue and talking about it with the staff and would be happy to 
visit further with you on it.
    I think we have got to make sure that we end up with any 
final action we take that it is well reasoned, it is objective, 
it is justified, it is based on evidence, and it has a sound 
basis.
    So, I pledge to you that is what I will try to make sure we 
do and again I am happy to work with you on it.
    Senator Donnelly. Thank you.
    As you have heard from my good friends and colleagues here, 
agricultural commodity markets are part of the heart and soul 
of what we do here.
    I just want to make sure that you all are committed to 
continuing the commitment to that, the emphasis to that and the 
desire to never forget what a critical part that is in this 
Committee or of the CFTC. Thank you.
    Mr. Massad. Yes, Senator.
    Senator Donnelly. On position limits again. We talked about 
excessive speculation and there have been times in the past, it 
is extraordinary when all of a sudden you look up and the 
families in Logansport, Indiana, and in Evansville, Indiana, 
are looking at $4.25 gasoline when it was a dollar cheaper 
maybe a few months before or whatever.
    I was wondering. We have seen the spot markets, 421 million 
barrels on spec or more. Do you think that numbers of that size 
affect pricing of the product? Mr. Massad, if you would. I only 
have about a minute left.
    Mr. Massad. Well, Senator, thank you for the question. I 
guess I would say that speculation obviously can affect prices. 
There are many, many factors that affect prices. Sometimes it 
is difficult to measure exactly what the impact is of any 
particular factor.
    But I think again Congress directed us to look at the issue 
of excessive speculation and take action. If I am confirmed, I 
will make it a priority that we do that.
    Senator Donnelly. Thank you.
    Mr. Giancarlo.
    Mr. Giancarlo. One of the accomplishments of Title VII of 
Dodd-Frank was to create a whole regime for the collection of 
market data in the swaps market, and the CFTC has gone far into 
beginning the process of collecting that data, but yet to be 
done is the process of really mining and interpreting that 
data, and that is a very important mission, I think, for this 
Commission going forward so we can look at just questions like 
that to determine what is the role in the cash-settled market, 
how does it affect the physically settled market.
    So, that is something that I think is going to be an 
important objective for this Commission to get the data, 
gathering the data and now being able to interpret it and come 
to some real conclusions about what is going on in the 
marketplace and what do we need to do about it.
    Senator Donnelly. Ms. Bowen.
    Ms. Bowen. I do think it is critically important for us to 
really spend a great deal of time frankly on this issue. A 
number of you have raised it today and we know how important 
that is to consumers.
    You have my commitment that I will definitely be addressing 
that issue as well with my colleagues.
    Senator Donnelly. I want to thank all of you for putting 
yourself forward for public service. Your work, you know, in 
many ways for all of our families and I will wrap this up. 
Families have to make decisions on limited paycheck and limited 
pocketbook of whether sometimes when prices go so high, whether 
they can fill up the market basket or whether they have to fill 
up the gas tank. We are very, very grateful for your 
willingness to step up for all of our fellow citizens.
    Thank you.
    Chairwoman Stabenow. Thank you.
    Senator Hoeven, you are back just in time. You are up.
    Senator Hoeven. Thank you, Madam Chairman, and again my 
thanks both to you and the Ranking Member for your leadership 
on the Farm Bill. I truly appreciate it.
    Thanks to the witnesses, Mr. Massad, thank you for coming 
to visit with me. I appreciate it as well as your background, 
the work that you did with TARP.
    Mr. Giancarlo, good to have you here. Ms. Bowen, thank you 
so much.
    My first question is related to position limits. The CFTC, 
and I apologize if somebody else has already asked this 
question, but I think it is very important.
    The CFTC has recently proposed a position limits rule; and 
essentially for contracts where you take physical delivery to 
settle, you could have one position limit. But if you have 
cash-settled contracts, you could take five times that position 
limit. I think that is a concern. Furthermore, you have some of 
the markets that settle their cash contracts pricing off of the 
physical delivery markets. I think that raises issues of 
liquidity. I think that raises issues of price volatility.
    This rule was proposed before, rejected. I believe the 
former Chairman was very much opposed to it and now it is being 
re-proposed.
    I would like you to address that starting with Mr. Massad 
but I would like each of you to address this issue.
    Mr. Massad. Thank you, Senator Hoeven, for the question. 
You are referring to the conditional spot limit rule.
    Senator Hoeven. Exactly.
    Mr. Massad. It is a very important issue and it is included 
in the reproposed rule, and I want to say that, if I am 
confirmed, I look forward to reading the comments about this 
issue. It is a complex one. I know there are strong views on 
both sides.
    It is very important that we take action which has a 
justifiable basis, a reasoned basis, is grounded in the data, 
and is sustainable.
    So, I am happy to work with you and talk with you further 
on this issue. Again, I know it is an issue that there are some 
strong feelings about, but we need to make sure we take a well 
reasoned action, and I can just pledge that I will use the best 
of my abilities to do that.
    Senator Hoeven. Mr. Giancarlo.
    Mr. Giancarlo. This is an important issue. It is an issue 
that I know there has been a lot of comments received in the 
comment period. I have not had a chance to see all of them and 
I would not want to prejudge it until I have had a chance to 
look at that.
    I would say that, it is conceived in the market that 
physically settled contracts have different dynamics than cash-
settled contracts, and there may be different opportunities for 
manipulation, and one is different than the other.
    But one of the things I would really like to look at as I 
go through the comments is what data was the basis for the 
CFTC's proposal on the five times exception to the rule. I 
would like to understand what data it was underlying it and is 
it current data, is it appropriate data.
    I am going to be very data-driven, if confirmed, in the 
role and I think that is going to have to drive a lot of the 
decision-making.
    Senator Hoeven. Ms. Bowen.
    Ms. Bowen. It has definitely been a topic very much so not 
just today but I understand it is an incredibly important 
topic. The fact that it was reproposed means that it really is 
critically important.
    I can tell you that I am going to bring a set of fresh eyes 
to this, look at it with a clean slate. I am not going to 
presume any position on this. I can assure you I will bring my 
objective best sense to look at the issues, and it is important 
for us to get it right.
    Senator Hoeven. So, while I think you have tremendous 
qualifications, all three of you, I would say that I have some 
concern about, none of you have experience at the farming level 
at a grassroots level.
    You know, we do not have somebody with an Ag background, 
and I think that is important. I think other members have 
brought that up.
    But I am encouraged, I think Mr. Giancarlo, and maybe all 
three of you, express an interest in getting out and actually 
understanding how farmers and how agriculture uses futures 
contracts.
    I think we have lost track kind of where this came from. 
This was designed for farmers to hedge their risk when they 
grow a crop. They take a long position. They grow a crop, and 
it has turned into all of these financial futures and very 
complex instruments.
    Fortunately, I think you have a pretty good understanding 
of the complexity of those instruments, the risk they create at 
both an institutional and at a system level.
    But I do hope that you will take time. I think it is very 
important you get out and interact at maybe the farm level a 
little bit to get an understanding where is this all starts.
    You know, I would hope somebody on the CFTC would have that 
kind of Ag background. Now with the two we have and the three 
of you, we will not have that.
    So, that is one concern. The other is to look at this 
position limits rule because of the potential for price 
manipulation, speculation, price volatility.
    I am going to take you at your word. You are coming in with 
an open mind. That means that maybe a no when you get a chance 
to vote on this or maybe a yes. I have already asked the 
Chairman of this Committee to hold a hearing on this issue, and 
so I do want to emphasize to you that this is something we will 
be looking at very closely.
    I thank you for your service.
    Chairwoman Stabenow. Thank you very much.
    Senator Casey.
    Senator Casey. Madam Chair, thank you very much and I 
appreciate you having us here for this hearing.
    I wanted to start off by saying to each of the nominees how 
much we appreciate your service, your willingness to serve at a 
tough time. We all here are elected officials. It is a tough 
time to be an elected official. It is also a tough time to be 
an appointed official. We are grateful you are willing to do 
that.
    As your families were introduced, I was reminded of my own 
background. My father was in and out of politics and government 
over the course of several decades, not years.
    Being at events where he was being sworn into office or 
being questioned about his work, I want to say to your spouses, 
your children and your family.
    We are grateful you are here and you should take great 
pride in this day and also take great pride in what your family 
members are doing because you are part of the reason they are 
here obviously, but you are also part of the service they will 
render to their country. We are especially grateful for that.
    I will do kind of an itemization of a couple of issues, 
some of which have already been addressed, but raise them for 
emphasis, I guess, and also to indicate how important they are 
to a lot of us.
    The end-user issue is a critically important issue for 
individuals and institutions. In Pennsylvania, we have, 
contrary to popular belief, we have a huge part of our economy 
that is an agricultural economy.
    There is always a debate about what is the biggest industry 
in the State, tourism or agriculture. It is probably not well 
known around the country how significant agriculture is in a 
state like ours which does have some major urban areas.
    So, the end-user issue is critical and I have not had a 
chance to talk to all of the nominees.
    Mr. Massad, we have spoken about this and I know my staff 
has. So, to the extent you can speak to that and take action in 
furtherance of the goals that we set forth on end-users I 
appreciate that.
    I want to ask a question about it. Senator Klobuchar raised 
these so-called RIN volatility issue, and I will not reiterate 
that. We will talk about that later. But that is critically 
important.
    I would be interested to see if there are ways that you 
could reduce the volatility in that market. That is something 
that we hear a lot about.
    I guess one very practical question I would ask, though, 
and I will start with Mr. Massad and others that want to chime 
in on this. The kind of fundamental question which are 
resources. I think sometimes we believe that if folks are 
focused on the right policy and they get through the 
confirmation process and they have an office to go to that 
everything is wonderful.
    We know that resources are critically important, maybe now 
more than ever, and I just want to give you an opportunity to 
speak to that in terms of what you see are the resource issues, 
if any. I hope there are none but I am afraid I am wrong about 
that.
    Mr. Massad. Thank you, Senator Casey. I appreciate the 
question.
    I think the resource issue is a very, very important one. I 
am very concerned about the adequacy of the resources 
obviously. This is an agency whose responsibilities have grown 
enormously and the budget has not grown.
    We must make sure that we provide adequate resources to the 
agency to carry out its mission. It is critically important, 
and I think it is also a very good investment for our country.
    We have the best financial markets in the world; and in 
part they are the best because they are well regulated, 
thoughtfully regulated, and it has been that way for decades. 
We should not lose that mantle and making sure the agency is 
adequately funded to meet all the challenges of this vastly 
expanded jurisdiction, of the technology that drives these 
markets, of the data collection responsibilities that we have, 
and of making sure we can take strong enforcement to address 
some of the other concern you highlighted is critical.
    I would be delighted to work with you and your staff on 
making sure that happens.
    Senator Casey. Anyone else want to comment on that issue?
    Mr. Giancarlo. I would if I may. I am just conscious of the 
fact as we are here today Acting Commissioner Widgin is 
elsewhere in the capitol testifying on the CFTC's budget, and I 
do not envy his task this morning.
    I entirely agree that the CFTC's mission has been 
enormously expanded and its resources have not. Its mandate is 
the law so it has to meet that mandate and it has to have the 
right resources to do it.
    At the same time, I am informed by my own experience in 
business over the last 12 years but especially the last five 
years since the financial crisis. Revenues are down and yet 
demands on our resources are greater.
    We have had to do more with less in business just as 
probably most Americans in their own households had to do more 
with less. It is more time in the office, more time working to 
get more done.
    My own staff in my firm is down 10 percent and have not 
seen raises in six years, and I am not suggesting that you 
should be a policy but I am making the point that when we live 
in a time where resources need to be stretched because the 
American taxpayer's pay the price at the end of the day.
    So, we have got to regulate these expanded markets yet we 
have got to be very, very careful that we are not spending the 
American taxpayer's money improperly.
    So, I think resource allocation within the agency is 
important. Use of resources, cooperation with other SROs such 
as the NFA and others are vitally important.
    How do we use technology? In business, technology has 
become more important to do jobs and we need to find a way to 
do that within the agency as well.
    Cooperation with overseas regulators and litigating 
effectively, not taking on too many things by taking on the 
right things. So, I think those are things we need to do with 
in the agency.
    If confirmed, I would try to find the right balance.
    Senator Casey. Thank you very much.
    Ms. Bowen.
    Ms. Bowen. Just briefly. I would especially focus on our 
human capital and our knowledge base. With thirty-two years on 
Wall Street I can tell you there is no end to the imagination 
of the kinds of products that can be created.
    So, we frankly need resources to be able to police the 
market, to enforce the market, and frankly, to think ahead of 
the market. I would welcome the use of more resources to really 
develop our human capital as well.
    Senator Casey. Well, that idea of you as part of an effort 
to be a cop on the beat is a very important point and we need 
to make sure what the research is.
    I am over time but I want to ask you to answer this 
question. You said you are the youngest of five?
    Ms. Bowen. Yes.
    Senator Casey. I grew up in a family of eight. My youngest 
brother is a great lawyer. He is number eight. He would say he 
is the smartest in the family. I am not going to ask you where 
you are but I am assuming you are.
    Ms. Bowen. Other than always being right.
    [Laughter.]
    Senator Casey. For the purposes of confirmation, I will 
assert that you are the smartest in the family.
    Thank you for your service.
    Ms. Bowen. Thank you so much.
    Chairwoman Stabenow. Thank you. Speaking on behalf of 
firstborns I would like to reiterate that--all right.
    Senator Thune.
    Senator Thune. Thank you, Madam Chairman, and thank you to 
our nominees for being here today and welcome.
    Let me just, if I might, as we meet with these nominees 
this morning make very clear how important your job is. There 
are farmers and ranchers and grain elevators and cooperatives 
in the agricultural community that are increasingly dependent 
upon the tools that are available and that they utilize in 
terms of better managing their risk and especially in an era 
where you are starting to see lower commodity prices and higher 
production costs and these are all things that are under your 
jurisdiction.
    So, I just want you to know that the job that you have in 
front of you is an important one and there are an awful lot of 
people who depend upon the tools that are available.
    We all understand the importance as well of the need for 
transparency, for smart regulations that allow for effective 
cost analysis of proposed rules. I think it is really important 
that be an important component of everything that you do at the 
Commission.
    Just a couple of quick questions. I know the Chair is 
anxious, we have got to take some votes going here momentarily 
but I wanted to ask and I direct this to you, Mr. Massad.
    Since the passage of Dodd-Frank in 2010, the Commission has 
issued approximately 60 rules followed by more than 140 no-
action letters. This reliance on no-action letters has created 
some confusion for the industries that the CFTC is regulating, 
and I am wondering what your thoughts are on the use of no-
action letters and what, as Chairman, would you propose 
changing to decrease the CFTC's reliance on no-action letters?
    Mr. Massad. Thank you for the question, Senator Thune.
    As someone who was in private law practice for many years, 
I think I appreciate very much the importance of good process 
and the importance of clarity in rulemaking. I also understand 
that there are appropriate circumstances where, instead of a 
rule, you may do guidance, you may do no action.
    Congress gave the Commission enormous responsibilities with 
deadlines to bring an entire market into regulation that really 
was not regulated.
    The Commission has promulgated almost all the rules 
required. It has also issued a number of no-action letters.
    What I would pledge to you is that I will use all of my 
best abilities to make sure that we act in a way that provides 
certainty, clarity, and sustainability. That we use rules where 
that is appropriate. That we have good adherence to the 
requirements of the Administrative Procedures Act so that 
people can comment on those rules.
    There may be situations where guidance and no-action 
letters are appropriate such as when there are new facts in the 
market or things are still developing.
    But I think it is very important that we act in a manner 
that market participants can rely on what we are doing and have 
predictability. Having been a lawyer who advised a lot of 
businesses, I know predictability about the rules is very 
critical.
    Senator Thune. Ms. Bowen, a lot of agricultural end-users 
are raising concerns about CFTC Rule Number 1.35 and the record 
keeping requirements associated with that. They find the rules 
so broad and vague that they believe they have to save every 
email or article that might lead to the execution of a 
transaction.
    I am wondering, as Commissioner, how you would provide more 
practical guidance to end-users with regard to that rule.
    Ms. Bowen. Yes. I have read comments to that effect, and I 
do not think rules could be sort of one-size-fits-all. I think 
that is clear from the feedback that the Commission received.
    Particularly with end-users, we do not want to have rules 
that would create undue costs and burdens on them. So, I would 
pledge to make sure that we focus on that really, really 
clearly. I look forward to working with you and your staff.
    Senator Thune. All right. Thank you.
    Mr. Giancarlo, tell me about why you would want to leave 
the private sector and pursue a position as a CFTC 
Commissioner.
    [Laughter.]
    Mr. Giancarlo. Maybe I can tell a little story. In 1942, my 
grandfather was a physician in private practice in Hudson 
County, New Jersey, with a family of two and a busy urban 
practice.
    A few months after the bombing of Pearl Harbor, he marched 
down to the local recruiting office and enlisted in the U.S. 
Army. He, as a doctor, felt that he had something to bring. 
Even though he was 40 years old, he felt that he could serve as 
country following a crisis. He could bring his medical 
training.
    He then went on to serve at Fort Daniel, Georgia, and Fort 
Thomas, Kentucky. His family lived with my great-grandmother in 
Cincinnati during that service.
    He was the Army Commandant, Medical Commandant. He brought 
his medical skills to bear to solve a problem that had been a 
great problem in World War I with all the illness and death on 
American camps before the GIs even got to the front.
    In a similar way, I feel that I have learned a lot through 
the financial crisis. I was there in the center of it as an 
operator of marketplaces. I saw the devastation in markets and 
I realize that markets have to have, to operate efficiently and 
to serve our country, have to have credibility, have to have 
the reforms put in place but have to be put in place in the 
right manner.
    So, I think I am at a unique time. I think I have a unique 
set of skills, and I think I can bring them to bear and somehow 
follow in my grandfather's footsteps.
    Senator Thune. Thank you. My time has expired. Thank you, 
Madam Chair.
    Thank you all.
    Chairwoman Stabenow. Thank you.
    Senator Brown.
    Senator Brown. Thank you, Madam Chair.
    Mr. Giancarlo, my father was 35 at the time of Pearl 
Harbor, was a physician, and did not do exactly what your 
father did but mostly did that and was shipped off. He joined 
the Army because he did not want to be on a ship and he ended 
up the whole war on a ship.
    [Laughter.]
    Senator Brown. He always rooted for Army or Navy in the 
Army-Navy game because, I do not understand any of that. But 
anyway, thank you for joining.
    I want to talk about end-users in a different way. During 
the last decade, Wall Street has expanded into a number of 
commercial activities. Power generation, what happened to 
electricity markets in California?
    You know about metals warehousing. The New York Times had a 
front page piece about what happened with aluminum in Detroit. 
Also in oil refining, oil tankers, even stockpiling yellowcake 
uranium. You know all of that.
    I have particular concerns about aluminum prices for the 
end-user as there are large breweries, large bottling 
companies, all soft drink makers, all of that.
    As you know, the CFTC can address this issue both through 
its anti-manipulation authority and its review of foreign 
boards of trade like the London metal exchange.
    As Commissioners, I have two questions. Then I think we 
need to go vote. One, do you think these institutions have 
moved too far into some of these commercial activities, Wall 
Street's movement, especially two or three Wall Street firms 
moving into these commercial activities? This question is for 
all three of you as the second one is.
    As Commissioners, how would you use your anti-manipulation, 
your FBOT authority for the foreign boards of trade to address 
issues in aluminum and other metals.
    If you would just answer both of those questions, Mr. 
Massad.
    Mr. Massad. Thank you, Senator.
    As to the first question, let me just say that I think the 
issue of what businesses should large bank holding companies be 
allowed to be in particularly given the fact that they do 
receive various forms of assistance from the government in the 
form of deposit insurance, access to the discount window, and 
so forth is an extremely important one.
    It is largely outside the jurisdiction of the CFTC as you 
and I discussed when we met. Therefore, it is not something 
that as the CFTC Chair, if confirmed, that I would rule on.
    But as an American taxpayer, I think it is a very important 
question to be considered, and certainly to the extent that 
other regulatory agencies that are looking at these issues or 
the Senate or the House needs any assistance from the CFTC, I 
would be happy to provide it.
    As to the second part of the question, I think it is very 
important that the Commission use its authority, and if 
confirmed, I would certainly do so, to act if we see evidence 
of manipulation of any type but particularly in the markets as 
you have highlighted.
    It is important that we act to prevent that. That is our 
job, and again I would be happy to work with you and your staff 
on making sure that we are looking at these issues.
    Senator Brown. Mr. Giancarlo.
    Mr. Giancarlo. You know, under Glass-Steagall, these 
institutions would not be able to engage in this. But I was not 
involved in the process by which those rules were winnowed down 
and eventually Glass-Steagall was repealed.
    Going forward, what I can say is market manipulation is 
market manipulation, whether it is done by large financial 
institutions or small financial institutions, whether it is 
done through the manipulations of delivery times in metal 
warehouses or whether it is done through any other means in 
markets.
    Any markets that are overseen by this agency, should I be 
confirmed, I would be supportive of aggressive action against 
market manipulation and using all the other tools including the 
other tools you mentioned which is the oversight, foreign 
boards of trade like the London metals exchange.
    Senator Brown. Ms. Bowen.
    Ms. Bowen. Yes, I too am aware of some of the situations 
you cited with respect to aluminum. I agree. That is something 
we should definitely be looking at particularly if that causes 
manipulation in the market. Any time you can control both the 
demand and supply of a commodity that could be a recipe or it 
needs to be looked at because it could be a recipe for 
manipulations.
    Senator Brown. Mr. Giancarlo and Ms. Bowen, does it concern 
you that, I mean, Mr. Massad, answered the first part of that 
question. But does it concern you that Wall Street is in more 
of these real economy kinds of activities?
    Ms. Bowen.
    Ms. Bowen. Wearing my personal hat, I am concerned and I am 
aware that the CFTC has sent letters to the LME and other 
exchanges to ask them to preserve their data, their price and 
warehousing rules.
    I believe the Fed has recently announced that they are 
taking a look at the issue of whether banks should be allowed 
to continue to operate in physical commodities.
    So, yes, I am concerned.
    Senator Brown. Mr. Giancarlo.
    Mr. Giancarlo. I do not think that good regulation would be 
in the business of picking winners and losers. So, I would not 
like to point at a particular industry. What I would say, as an 
operator markets, it has been my experience that whenever any 
parties in the market gain a dominant position, dominance can 
lead to abuses, and absolute dominance can lead to absolute 
abuses, as the saying about power goes.
    So, I think we need to be on the lookout for a dominant 
positions in any markets whether they be operated by Wall 
Street banks or whether they be operated by non-banking 
institutions or any others that were able to gain a dominant 
position in a market place.
    Senator Brown. Thank you, Madam Chair.
    I would only say that this is not in their jurisdiction and 
not their purview but the issue of risk to a financial system 
by these large Wall Street firms getting and owning an oil 
tanker what disaster could mean in terms of risk and stability 
for financial systems is a very serious issue. Again, not one 
probably in their purview or that they needed to speak of but 
importance.
    Thank you.
    Chairwoman Stabenow. Thank you very much.
    I know as a senior member of the Banking Committee that is 
something that you are deeply involved in as well.
    Votes have started and I have a long list of other 
questions but you will be saved from those at the moment. We 
will put them in writing.
    I do want to indicate again, you have heard over and over 
again about concerns about end-users. There have been multiple 
questions on position limits, issues that have been raised 
about market manipulation, excessive speculation and whether or 
not the CFTC's proposal that includes higher limits on cash-
held contracts plays into excessive speculation.
    So, there are a number of different concerns of the 
Committee. One thing we did not talk about I would just say 
that is very, very important is the issue of cross-border 
coordination, what the EU is doing. How we move forward on 
that.
    So, we have not had time to talk about it. I did intend to 
ask you about it. We have to work very closely together on 
this. As you know, this is incredibly important in making the 
system work in a global economy.
    Having a full Commission at the CFTC means more than just 
functional future swaps and options markets. It really is about 
a strong economy, having confidence in that economy in tools 
available for our job providers and to the millions of jobs 
that depend on the markets working.
    I would strongly urge that you reinvigorate the 
Agricultural Advisory Committee. I think that is going to be 
very, very important.
    I would also say to members that we need to have questions 
for the record submitted to the Committee as soon as possible 
so that the nominees can begin working on responses.
    The deadline for submitting questions for the record is no 
later than 2:00 p.m. on Monday, March 10.
    With that, thank you very much for your willingness to 
serve.
    The meeting is adjourned.
    [Whereupon, at 11:37 a.m., the Committee was adjourned.]
      
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