[Congressional Record Volume 146, Number 135 (Wednesday, October 25, 2000)]
[Extensions of Remarks]
[Pages E1939-E1941]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              COMMODITY FUTURES MODERNIZATION ACT OF 2000

                                 ______
                                 

                               speech of

                          HON. THOMAS W. EWING

                              of illinois

                    in the house of representatives

                       Thursday, October 19, 2000

  Mr. EWING. Mr. Speaker, I am pleased to submit for the Record the 
following documents in support of H.R. 4541.

                      Letters of Support Received

       Ad Hoc Coalitation of Commercial and Investment Banks, The 
     Bond Market Association, Emerging Markets Traders 
     Association, The Foreign Exchange Committee, Futures Industry 
     Association, The Financial Services Roundtable, International 
     Swaps and Derivatives Association, Securities Industry 
     Association.
       Morgan Stanley Dean Witter, Goldman, Sachs & Co., Merrill 
     Lynch & Co., Inc., Citigroup Inc., The Chase Manhattan Bank, 
     Credit Suisse First Boston, Inc.
       Investment Company Institute, Enron Corp., Chicago 
     Mercantile Exchange, Chicago Board of Trade, Securities 
     Industry Association.
       Energy Group: BP Amoco, Enron North America, Inc., Goldman, 
     Sachs & Co., Koch Industries, Inc., Morgan Stanley Dean 
     Witter, Phibro Inc., Sempra Energy Trading Corp.

                                  ____
                                  

  Executive Office of the President, Office of Management and Budget; 
          Statement of Administration Policy, October 19, 2000

       (This statement has been coordinated by OMB with the 
     concerned agencies.)


H.R. 4541--Commodity Futures Modernization Act of 2000 (Rep. Ewing (R) 
                       Illinois and 3 cosponsors)

       The Administration strongly supports the version of H.R. 
     4541, the Commodity Futures Modernization act of 2000, that 
     the Administration understands will be considered on the 
     House floor. This legislation would reauthorize the Commodity 
     futures Trading Commission (CFIC) and modernize the Nation's 
     legal and regulatory framework regarding over-the-counter 
     (OTC) derivatives transactions and markets. In so doing, H.R. 
     4541 also would implement many of the unanimous 
     recommendations regarding the treatment of OTC derivatives 
     made by the President's Working Group on Financial Markets, 
     which includes the Secretary of the treasury and the Chairmen 
     of the Federal Reserve Board of Governors, the Securities and 
     Exchange Commission, and the Commodity Futures Trading 
     Commission.
       It is important that this legislation be enacted this year 
     because of the meaningful steps it would take in helping to: 
     promote innovation; enhance the transparency and efficiency 
     of derivative markets; maintain the competitiveness of U.S. 
     businesses and markets; and, potentially, reduce systemic 
     risk. H.R. 4541 would accomplish these goals while assuring 
     adequate customer protection for small investors and 
     protecting the integrity of the underlying securities and 
     futures markets. A failure to modernize the Nation's 
     framework for OTC derivatives during this legislative session 
     would deprive American markets and businesses of these 
     important benefits and could result in the movement of these 
     markets to overseas locations with more updated regulatory 
     regimes. The Administration looks forward to working with 
     Members of Congress to improve certain aspects of the bill as 
     it continues through the legislative process.

                                  ____
                                  

                                                 October 18, 2000.
     Hon. Dennis Hastert,
     The Speaker, House of Representatives, Washington, DC
     Hon. Richard Gephardt, Minority Leader,
     House of Representatives, Washington, DC
       Dear Speaker Hastert and Leader Gephardt: The undersigned 
     organizations, representing the full range of the interested 
     U.S. financial sector, strongly urge you and each of your 
     colleagues to support ``The Commodity Futures Modernization 
     Act of 2000'' (H.R. 4541) when it is considered by the House 
     of Representatives this week.
       This legislation would provide ``legal certainty'' that 
     over-the-counter derivatives transactions will continue to be 
     enforceable in accordance with their terms. Enhanced legal 
     certainty for OTC derivatives will reduce systemic risk and 
     the core legal certainty provisions of H.R. 4541 are based 
     upon the unanimous recommendations of the Secretary of the 
     Treasury, the Chairman of the

[[Page E1940]]

     Board of Governors of the Federal Reserve System and the 
     Chairmen of both the Securities and Exchange Commission and 
     the Commodity Futures Trading Commission.
       These core legal certainty provisions were approved by 
     overwhelming and bipartisan majorities of the House 
     Agriculture, Banking and Commerce Committees and they have 
     the virtually unanimous support of the private sector.
       Final Congressional approval of H.R. 4541 this year is 
     urgently needed. In addition to providing legal certainty for 
     OTC derivatives, H.R. 4541 will modernize the extremely 
     outmoded Commodity Exchange Act. This will reduce systemic 
     risk, promote financial innovation and enable the United 
     States to retain its leadership role in the global financial 
     markets.
           Sincerely,
         Ad Hoc Coalition of Commercial and Investment Banks, The 
           Bond Market Association, Emerging Markets Traders 
           Association, The Foreign Exchange Committee, Futures 
           Industry Association, International Swaps and 
           Derivatives Association, Securities Industry 
           Association.

                                  ____
                                  

                                                 October 18, 2000.
     Hon. Larry Combest,
     Chairman, House Agriculture Committee, Longworth House Office 
         Building, Washington, DC
     Hon. Tom Ewing,
     Chairman, Agriculture Subcommittee on Risk Mgt., Rayburn 
         House Office Building, Washington, DC.
       Dear Chairmen Combest and Ewing: As members of the Ad Hoc 
     Coalition of Commercial and Investment Banks, the undersigned 
     firms strongly urge the House to pass ``The Commodity Futures 
     Modernization Act of 2000'' (HR 4541) when it is considered 
     on the floor. This legislation is critical to securing legal 
     certainty for our financial markets and to fostering 
     continued American innovation in the increasingly important 
     realm of derivative financial products. The President's 
     Working Group on Financial Markets has testified that 
     securing legal certainty for financial derivatives is 
     imperative to reduce system risk and we strongly agree.
       Clearly, the legislation represents compromises in terms of 
     the objectives of all interested parties. However, HR 4541 
     successfully achieves the most important core objectives 
     needed for the markets to prevent the flight of our domestic 
     financial derivatives business abroad. In addition, the 
     legislation makes historic changes in the operation of our 
     domestic futures exchanges that will enable them to offer new 
     products and to effectively compete with foreign exchanges.
       We view enactment of HR 4541 to be extremely important and 
     believe that the failure of Congress to enact the bill will 
     have very significant, adverse consequences for the markets 
     and market participants in this country. We applaud your 
     leadership throughout the development of HR 4541 and urge 
     your colleagues to take favorable action before the end of 
     this session.
           Sincerely,
     Morgan Stanley Dean Witter
     Goldman, Sachs & Co.
     Merrill Lynch & Co., Inc.
     Citigroup Inc.
     The Chase Manhattan Bank
     Credit Suisse First Boston Inc.

                                  ____
                                  

                                      Chicago Mercantile Exchange,


                                       Chicago Board of Trade,

                                    Chicago, IL, October 19, 2000.
       Dear Representative: We urge you to pass H.R. 4541, the 
     Commodity Futures Modernization Act of 2000, scheduled to 
     come to the House floor today. Simply put, vote for this bill 
     is a vote for U.S. markets. A vote against the bill is a vote 
     for London and other foreign markets.
       Foreign exchanges are offering products that U.S. futures 
     exchanges can't. That is a recipe for competitive disaster 
     for the U.S. futures industry in today's global economy. 
     London's futures exchange will take the unprecedented step of 
     trading single stock futures on U.S. companies in January 
     2001. London joins nine other jurisdictions that know the 
     marketplace wants this product that was ``temporarily'' 
     banned in the U.S. 18 years ago.
       H.R. 4541 is a comprehensive package that addresses this 
     prohibition on single stock futures and provides a 
     streamlined regulatory structure endorsed by financial 
     regulators, one that meets the demands of today's dynamic and 
     changing markets. It also provides the legal certainly that 
     will allow U.S. financial service firms to keep their swaps 
     business in the U.S. rather than moving it off-shore.
       Like any comprehensive legislation, this bill is not 
     perfect from our perspective. However, it is critically 
     important that H.R. 4541 be enacted into law this year to 
     prevent our international competitors from having exclusive 
     access to these new products.
       Vote for U.S. investors and markets by supporting this 
     historic legislation.
           Sincerely,
     Chicago Board of Trade.
     Chicago Mercantile Exchange.

                                  ____
                                  

                                          Sullivan & Cromwell,

                                    New York, NY, October 19, 2000
     Hon. Larry Combest,
     Chairman, House Agriculture Committee, Longworth House Office 
         Building, Washington, DC
     Hon. Tom Ewing,
     Chairman, Agriculture Subcommittee, on Risk Mgt, Rayburn 
         House Office Building, Washington, DC.
       Dear Chairmen Combest and Ewing: On behalf of the entities 
     listed below (collectively, the ``Energy Group''), I write 
     this letter to strongly urge enactment of H.R. 4541, the 
     Commodity Futures Modernization Act of 2000. This legislation 
     provides critical legal certainty for energy companies and 
     allows them to provide risk management services to their 
     clients and for themselves without risk that their 
     transactions could later be found to violate the Commodity 
     Exchange Act.
       We applaud your leadership and the excellent work of your 
     Committees and the other Committees of Congress in developing 
     this legislation. Passage of the legislation will promote 
     business and innovation in this important sector of the 
     economy.
       We appreciate your support of this initiative. We would be 
     pleased to respond to any questions that any member might 
     have.
           Sincerely,
                                               Kenneth M. Raisler.
     BP Amoco
     Enron North America, Inc.
     Goldman, Sachs & Co.
     Koch Industries, Inc.
     Morgan Stanley Dean Witter
     Phibro Inc.
     Sempra Energy Trading Corp.

                                  ____
                                  

                                                  Enron Corp.,

                                    Houston, TX, October 19, 2000.
     Hon. Larry Combest,
     Chairman, House Agriculture Committee, Longworth House Office 
         Building, Washington, DC.
       Dear Mr. Chairman: I am writing to urge enactment of H.R. 
     4541, the Commodity Futures Modernization Act of 2000, by 
     this Congress. This important legislation provides critical 
     legal certainty for a range of transactions that are a 
     central part of Enron's risk management and commodity trading 
     businesses. Enron is the largest trader of natural gas and 
     electricity in the U.S. and we actively trade other 
     commodities. To facilitate our commodity trading business we 
     have developed EnronOnline which is the world's largest 
     business-to-business marketplace with over $130 billion in 
     trades since November 1999.
       We appreciate the fine work of the House Agriculture, 
     Commerce, and Banking Committees and applaud the leadership 
     of their Chairmen and Ranking Members. The Bill is the 
     product of hard work and compromise and it would be 
     unfortunate if this effort would have to wait until the next 
     Congress to be rewarded.
       Prompt adoption of H.R. 4541 will assure that Enron and 
     others active in the commodity trading and risk management 
     industry can continue to grow our businesses and provide 
     innovative service to our customers without the risk and cost 
     of legal uncertainty that now exists.
       I appreciate your attention to this important matter and 
     would be pleased to respond to any questions that you might 
     have.
           Sincerely,
                                                   Kenneth L. Lay,
                                                         Chairman.

                                  ____
                                  

                              Securities Industry Association,

                                 Washington, DC, October 18, 2000.
       Dear Representative: I am writing on behalf of the 
     Securities Industry Association (``SIA'') to urge you to vote 
     for H.R. 4541, the Commodity Futures Modernization Act of 
     2000. SIA believes that this legislation can ensure that 
     American financial markets remain in the vanguard of 
     innovation and investor protection. H.R. 4541 may be 
     considered on the suspension calendar as early as today.
       The legislation provides legal certainty for OTC 
     derivatives. These provisions of the bill, which largely 
     track the unanimous recommendations of the Report of the 
     President's Working Group on Financial Markets, would finally 
     remove the shadow of legal uncertainty that has threatened 
     this vital sector of the U.S. capital markets for more than a 
     decade. We can not stress too strongly the importance that we 
     place on Congress enacting these provisions this year. We 
     have consistently urged Congress, among other steps, to: 
     Clarify the enforceability of derivatives transactions 
     between eligible participants; exclude certain hybrid 
     instruments from the CEA; remove restrictions on the 
     clearance and settlement of OTC derivatives; clarify the 
     instruments and transactions to which the Treasury Amendment 
     applies; and exclude financial and certain non-agricultural 
     commodities from the CEA.
       While this legislation does not address every aspect of 
     these issues, H.R. 4541 takes great strides in providing a 
     legislative solution to those issues.
       We also note that we have some lingering concerns with the 
     bill's provisions that would eliminate legal prohibitions on 
     single stock futures. SIA does not object to the bill on this 
     basis and hopes that these issues can be resolved. With these 
     concerns in mind, SIA strongly supports the overall goals of

[[Page E1941]]

     the legislation and urges Congress to move the process 
     forward.
       In our view the most important issue for Congress to 
     resolve is the legal uncertainty affecting OTC derivatives 
     and hybrid instruments involving non-exempt securities. 
     Resolution of that issue should not be postponed. The 
     problems engendered by the CEA are real and are exacerbated 
     by the increasing globalization of financial markets. Markets 
     can migrate quickly, and once established in a new, more 
     hospitable legal environment, may not return. Congress has 
     the power to maintain this country's preeminent leadership 
     position in the global financial markets by moving promptly 
     to correct this long-standing problem.
       Rarely is Congress presented with the opportunity to make a 
     material contribution to the mitigation of systemic risk, but 
     H.R. 4541 presents just such an opportunity. SIA is greatly 
     encouraged by the House Committees' action on H.R. 4541, and 
     their efforts to ensure passage of this key legislation this 
     year. We ask that you build on this solid record of progress 
     to ensure that United States capital markets remain 
     competitive and on the cusp of innovation and urge you to 
     vote for H.R. 4541. SIA stands ready to assist you in any way 
     we can to facilitate enactment of legislation this year. We 
     appreciate your consideration of our views.
           Sincerely,
     Marc E. Lackritz,
       President.
     Steve Judge,
       Senior Vice President, Government Affairs.

                                  ____
                                  

                                 Investment Company Institute,

                               Washington, DC, September 19, 2000.
     Hon. Thomas W. Ewing,
     House of Representatives, Rayburn House Office Building, 
         Washington, DC.
       Dear Congressman Ewing: The Investment Company Institute is 
     writing to express our support for the version of H.R. 4541, 
     the ``Commodity Futures Modernization Act of 2000'' scheduled 
     for floor consideration today. This consensus bill reconciles 
     the legislation reported by the Commerce, Banking and 
     Agriculture Committees.
       The Institute supports H.R. 4541 because of the Section 208 
     provisions in the legislation that apply important consumer 
     and investor protections found in the Investment Company Act 
     of 1940 to pools of single stock futures. Such language 
     ensures that investors in pools of single stock futures will 
     enjoy the same safeguards that have made mutual funds the 
     investment choice for over 83 million Americans.
       For this reason, we ask you to support this consensus 
     legislation.
           Sincerely,
                                                  Matthew P. Fink,
                                                        President.

     

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