[Congressional Record Volume 159, Number 83 (Wednesday, June 12, 2013)]
[House]
[Pages H3317-H3332]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SWAP JURISDICTION CERTAINTY ACT
Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 256, I call
up the bill (H.R. 1256) to direct the Securities and Exchange
Commission and the Commodity Futures Trading Commission to jointly
adopt rules setting forth the application to cross-border swaps
transactions of certain provisions relating to swaps that were enacted
as
[[Page H3318]]
part of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
and ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 256, the
amendments recommended by the Committee on Financial Services, printed
in the bill, are adopted. The bill, as amended, is considered read.
The text of the bill, as amended, is as follows:
H.R. 1256
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Swap Jurisdiction Certainty
Act''.
SEC. 2. JOINT RULEMAKING ON CROSS-BORDER SWAPS.
(a) Joint Rulemaking Required.--
(1) In general.--Not later than 270 days after the date of
enactment of this Act, the Securities and Exchange Commission
and the Commodity Futures Trading Commission shall jointly
issue rules setting forth the application of United States
swaps requirements of the Securities Exchange Act of 1934 and
the Commodity Exchange Act relating to cross-border swaps and
security-based swaps transactions involving U.S. persons or
non-U.S. persons.
(2) Construction.--The rules required under paragraph (1)
shall be identical, notwithstanding any difference in the
authorities granted the Commissions in section 30(c) of the
Securities Exchange Act of 1934 (15 U.S.C. 78dd(c)) and
section 2(i) of the Commodity Exchange Act (7 U.S.C. 2(i)),
respectively, except to the extent necessary to accommodate
differences in other underlying statutory requirements under
such Acts, and the rules thereunder.
(b) Considerations.--The Commissions shall jointly issue
rules that address--
(1) the nature of the connections to the United States that
require a non-U.S. person to register as a swap dealer, major
swap participant, security-based swap dealer, or major
security-based swap participant under each Commission's
respective Acts and the regulations issued under such Acts;
(2) which of the United States swaps requirements shall
apply to the swap and security-based swap activities of non-
U.S. persons, U.S. persons, and their branches, agencies,
subsidiaries, and affiliates outside of the United States and
the extent to which such requirements shall apply; and
(3) the circumstances under which a non-U.S. person in
compliance with the regulatory requirements of a foreign
jurisdiction shall be exempt from United States swaps
requirements.
(c) Rule in Accordance With APA Required.--No guidance,
memorandum of understanding, or any such other agreement may
satisfy the requirement to issue a joint rule from the
Commissions in accordance with section 553 of title 5, United
States Code.
(d) General Application to Countries or Administrative
Regions Having Nine Largest Markets.--
(1) General application.--In issuing rules under this
section, the Commissions shall provide that a non-U.S. person
in compliance with the swaps regulatory requirements of a
country or administrative region that has one of the nine
largest combined swap and security-based swap markets by
notional amount in the calendar year preceding issuance of
such rules, or other foreign jurisdiction as jointly
determined by the Commissions, shall be exempt from United
States swaps requirements in accordance with the schedule set
forth in paragraph (2), unless the Commissions jointly
determine that the regulatory requirements of such country or
administrative region or other foreign jurisdiction are not
broadly equivalent to United States swaps requirements.
(2) Effective date schedule.--The exemption described in
paragraph (1) and set forth under the rules required by this
section shall apply to persons or transactions relating to or
involving--
(A) countries or administrative regions described in such
paragraph, or any other foreign jurisdiction as jointly
determined by the Commissions, accounting for the five
largest combined swap and security-based swap markets by
notional amount in the calendar year preceding issuance of
such rules, on the date on which final rules are issued under
this section; and
(B) the remaining countries or administrative regions
described in such paragraph, and any other foreign
jurisdiction as jointly determined by the Commissions, 1 year
after the date on which such rules are issued.
(3) Criteria.--In such rules, the Commissions shall jointly
establish criteria for determining that one or more
categories of regulatory requirements of a country or
administrative region described in paragraph (1) or other
foreign jurisdiction is not broadly equivalent to United
States swaps requirements and shall jointly determine the
appropriate application of certain United States swap
requirements to persons or transactions relating to or
involving such country or administrative region or other
foreign jurisdiction. Such criteria shall include the scope
and objectives of the regulatory requirements of a country or
administrative region described in paragraph (1) or other
foreign jurisdiction as well as the effectiveness of the
supervisory compliance program administered, and the
enforcement authority exercised, by such country or
administrative region or other foreign jurisdiction, and such
other factors as the Commissions, by rule, jointly determine
to be necessary or appropriate in the public interest.
(4) Required assessment.--Beginning on the date on which
final rules are issued under this section, the Commissions
shall begin to jointly assess the regulatory requirements of
countries or administrative regions described in paragraph
(1), as the Commissions jointly determine appropriate, in
accordance with the criteria established pursuant to this
subsection, to determine if one or more categories of
regulatory requirements of such a country or administrative
region or other foreign jurisdiction is not broadly
equivalent to United States swaps requirements.
(e) Report to Congress.--If the Commissions make the joint
determination described in subsection (d)(1) that the
regulatory requirements of a country or administrative region
described in such subsection or other foreign jurisdiction
are not broadly equivalent to United States swaps
requirements, the Commissions shall articulate the basis for
such a determination in a written report transmitted to the
Committee on Financial Services and the Committee on
Agriculture of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs and the Committee on
Agriculture, Nutrition, and Forestry of the Senate within 30
days of the determination. The determination shall not be
effective until the transmission of such report.
(f) Definitions.--As used in this Act and for purposes of
the rules issued pursuant to this Act, the following
definitions apply:
(1) The term ``U.S. person''--
(A) means--
(i) any natural person resident in the United States;
(ii) any partnership, corporation, trust, or other legal
person organized or incorporated under the laws of the United
States or having its principal place of business in the
United States;
(iii) any account (whether discretionary or non-
discretionary) of a U.S. person; and
(iv) any other person as the Commissions may further
jointly define to more effectively carry out the purposes of
this Act; and
(B) does not include the International Monetary Fund, the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, their
agencies and pension plans, and any other similar
international organizations and their agencies and pension
plans.
(2) The term ``United States swaps requirements'' means the
provisions relating to swaps and security-based swaps
contained in the Commodity Exchange Act (7 U.S.C. 1a et seq.)
and the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) that were added by title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (15 U.S.C. 8301 et
seq.) and any rules or regulations prescribed by the
Securities and Exchange Commission and the Commodity Futures
Trading Commission pursuant to such provisions.
(g) Conforming Amendments.--
(1) Securities exchange act of 1934.--Section 36(c) of the
Securities Exchange Act of 1934 (15 U.S.C. 78mm(c)) is
amended by inserting ``or except as necessary to effectuate
the purposes of the Swap Jurisdiction Certainty Act,'' after
``to grant exemptions,''.
(2) Commodity exchange act.--Section 4(c)(1)(A) of the
Commodity Exchange Act (7 U.S.C. 6(c)(1)(A)) is amended by
inserting ``or except as necessary to effectuate the purposes
of the Swap Jurisdiction Certainty Act,'' after ``to grant
exemptions,''.
The SPEAKER pro tempore. Debate shall not exceed 1 hour, with 40
minutes equally divided and controlled by the chair and ranking
minority member of the Committee on Financial Services and 20 minutes
equally divided and controlled by the chair and ranking minority member
of the Committee on Agriculture.
The gentleman from Texas (Mr. Hensarling) and the gentlewoman from
California (Ms. Waters) each will control 20 minutes. The gentleman
from Texas (Mr. Conaway) and the gentleman from Georgia (Mr. David
Scott) each will control 10 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days within which to revise and extend their remarks
and submit extraneous material for the Record on H.R. 1256, currently
under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may
consume.
{time} 1530
Mr. Speaker, the legislation before the House this afternoon, H.R.
1256, the
[[Page H3319]]
Swap Jurisdiction Certainty Act, is a bipartisanship response to what
many view to be, frankly, regulatory red tape overreach and the adverse
consequences that it can have on the millions of our fellow countrymen
who are either unemployed or underemployed--the impact that it could
have on the competitiveness of our U.S. employers and job creators.
Mr. Speaker, I need not tell anyone in this body that we regrettably
continue to be in the middle of a nonrecovery recovery. If it weren't
for the fact that so many people have actually left the job force--the
working participation rate--our unemployment rate would be even higher.
Many have just given up.
We know that for many, even though America has, in the past, produced
3\1/2\ percent economic growth and is probably capable of 4 or 5
percent economic growth with the right economic policies, regrettably,
we find ourselves mired in 1\1/2\ to 2 percent GDP growth, which means,
Mr. Speaker, a lot of American dreams go unfulfilled and a lot of our
constituents lay awake at night wondering how are they going to pay the
bills.
So, Mr. Speaker, jobs continue to be job number one, I believe, of
the United States House of Representatives. But, regrettably, those who
create jobs, those who employ our constituents, are drowning in a sea
of red tape. There's been an over 50 percent increase in regulations
under the Obama administration. We know that it is directly correlated
to the lackluster economic growth that we see in the Nation today.
I still vividly remember that one small business person in east Texas
came up to me--he had a small cabinetry shop. Even though it was still
profitable, he shut it down. He shut it down because of the red tape
burden that crushed him and the jobs of 17 people who worked in east
Texas. And he said, Congressman, it got to the point I just thought my
Federal Government didn't want me to succeed.
Mr. Speaker, we always have to be vigilant in ensuring that the red
tape burden doesn't strangle the jobs and hopes and aspirations of the
American people. So that brings us to H.R. 1256, the Swap Jurisdiction
Certainty Act.
Now, many of you who may be tuning in to this debate may not be quite
familiar with the world of derivatives, but it's a way that many
farmers, ranchers, manufacturers hedge risk in order to become
successful companies and employ people and sell their goods and
services at competitive prices. An outfit like John Deere will use a
derivative. They may do an interest rate swap as they finance a tractor
for some farmer in rural east Texas that I may represent. That
derivative is directly linked to the cost and the availability of that
tractor.
What we are trying to do with H.R. 1256 is make sure that those who
are trying to access derivatives, to hedge risk, to create and sustain
jobs, don't automatically overnight have huge swaps of the global
market pulled out from under them because, if they do, all of a sudden
it could be that somebody can't finance that tractor anymore.
Companies like Southwest Airlines that operate in my hometown of
Dallas, Texas, they hedge their fuel cost; and if they can't access
global markets, who knows about the success of their hedges. Then, all
of a sudden, the price of a trip for grandparents to fly in from Kansas
City to see their grandkids in Dallas, Texas, just became more
prohibitive, it just became more expensive.
An outfit like Coors, they'll hedge their aluminum cost through
swaps, maybe their wheat costs through swaps. And I don't know about
other Members, but I represent a lot of hardworking people in the Fifth
District of Texas; and let me tell you, sometimes on a hot August
afternoon after working, putting in 40 hours at the Pepsi bottling
plant or maybe putting it in at some of the other factories that we may
have in Mesquite, somebody might just want to go to the 7-Eleven and
buy a six-pack. In America that ought to be their right. And the
inability--the inability--to access global markets for swaps ultimately
can actually inflate that cost. That's not something I care to deny to
hardworking Americans who want that.
This is a very simple and bipartisan bill. Mr. Speaker, this passed.
We had a hearing in the Financial Services Committee and we had a
markup in the Financial Services Committee. It passed with 100 percent
of the Republican vote. It passed with almost two-thirds of the
Democratic vote. You would think that we might be under the suspension
calendar for this one, but in order to respect the wishes of the
ranking member, we are having a more prolonged debate in addition to
the one that we've already had in the committee.
But, Mr. Speaker, ultimately, this bill will do two things. It will
tell the Securities and Exchange Commission and the Commodity Futures
Trading Commission, You need to issue one joint rule when it comes
really to American end users being able to access global markets, not
one suggestion and one rule, two different rules--one rule. One rule.
Let's take down a little complexity here.
Mr. Speaker, after Dodd-Frank, we're about to celebrate its 3rd
anniversary next month. After 3 years of deliberating, maybe it's time
to actually come out with a rule and create a little certainty for the
people at Coors and at Southwest Airlines and at all the other
employers and John Deere. Maybe it's time to create a little certainty.
So the bill says, Okay, let's get this done in 9 months. You've had
almost 3 years. It's time to get it done.
And last but not least, in order not to pull the rug out from under
these people on day one, it says, Do you know what? The nine largest
markets, we are going to have a presumption that their regimes are
broadly equivalent to the U.S. and not immediately deny access.
Now, at any given time, if the CFTC and SEC come to the conclusion
that these regimes are not broadly equivalent, that somehow they
present risk to our economy, with the stroke of a pen they can change
that presumption. But not on day one, not on day one, Mr. Speaker.
So, for the sake of economic growth, for the sake of jobs, to provide
some certainty in a struggling economy, I would urge all--all--of my
colleagues to support this bipartisan legislation that was voice voted
in the Ag Committee, voice voted, and had unanimous--unanimous--consent
of all Republicans and almost two-thirds of the Democrats on the
Financial Services Committee, urge all my colleagues to support H.R.
1256.
I reserve the balance of my time.
Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
I would like to try to clear up some of the misunderstandings of what
this bill is about. The more we debate it, the better Members
understand the impact of this bill on our economy.
The gentleman from Texas, the chairman, just talked about how
generous they are in allowing this debate to take place. Members, let
me tell you what really happened. The fact of the matter is there has
been an attempt to hide H.R. 1256 in this DOD bill. What business does
it have in this bill? Why is it the Rules Committee determined that it
would be a closed rule?
The first reason is that they tried to get away without having
amendments to the bill. I had an amendment that I offered in committee
that was not accepted, an amendment that if there were an open rule, I
would have been able to offer this amendment on the floor. But, no,
they close-ruled this bill to keep any amendments from being heard, to
be debated, to be voted on, because they know that if Members really
discover what these derivatives are all about and how they could create
such risk that we'll be put in the position of bailing out failed
institutions all over again, that Members would not support this kind
of bill.
{time} 1540
This country has been through a terrible financial crisis. Part of
the reason is that we allowed our banks and financial institutions to
place unregulated bets on the mortgage markets. Remember AIG? What did
AIG do? It made a really big bet that the mortgage market would go up,
and it lost, and the taxpayer was put in the position of having to bail
it out. The Dodd-Frank Act enabled us to put a stop to that kind of
betting going on, hidden from the rest of us, finally dragging that
activity out into the sunlight.
The CFTC and the SEC are finally putting in place rules of the road
to
[[Page H3320]]
prevent any one institution from threatening our livelihood again, but
this bill wants to drag some of that activity back into the shadows,
allowing banks and others, once again, to enter into transactions
without even our regulators being able to see them.
You may say that this bill just concerns the limits on how far U.S.
law goes. So why is it so important that the CFTC and SEC have
discretion over the rules on cross-border initiatives? Because the
exposure that a foreign branch or subsidiary of a U.S. institution
takes in foreign markets comes back home to the U.S. Moreover, U.S.
banks and corporations may find that those they do business with have
much more hidden exposure because of foreign transactions. This bill
says that we will have to rely on the foreign regulators to protect us.
We shouldn't have to rely on foreign regulators who don't even have
regulatory regimes to protect us. We should protect ourselves by making
sure that anybody our branches and our subsidiaries are doing business
with have comparable rules. Those countries must have comparable rules
to the U.S. rules in order to protect us.
To put it simply, this bill would delay the implementation of the
Wall Street Reform Act's derivatives provisions by months, if not
years, and would preserve the kind of opacity in our markets that led
to taxpayers' bailing out AIG just 5 short years ago.
For example, while Europe has made considerable progress on its
swaps' clearing and reporting rules, Europe's framework for
implementing trading and internal business conduct standards have been
caught up in delays. It is unclear at this point how strong those
requirements ultimately will be. This bill increases the incentives for
other jurisdictions to avoid making the tough decisions to put in a
strong financial framework.
I reserve the balance of my time.
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore. The Chair will remind all persons in the
gallery that they are here as guests of the House and that any
manifestation of approval or disapproval of proceedings or other
audible conversation is in violation of the rules of the House.
Mr. HENSARLING. I yield myself 30 seconds just to say to the
gentlelady that she had the opportunity to offer her amendment in
committee, and her amendment was defeated. Second of all, as she raises
the specter of bailout, she has also said before that Dodd-Frank ended
bailouts, so I don't know which it is. I would also say nothing in the
bill changes the rulemaking authority of the CFTC or the SEC, and it
delays nothing, but it was just 6 months ago that the ranking member
sent a letter to the chairman of the CFTC:
I request that you provide for phased-in compliance and
appropriate short-term relief from relevant title VII
provisions.
So she, herself, was asking for a delay.
I now yield 5 minutes to the chairman of the Subcommittee on Capital
Markets and Government Sponsored Enterprises, the author of this
legislation, the gentleman from New Jersey (Mr. Garrett).
Mr. GARRETT. I thank the gentleman from Texas for yielding. I also
want to thank the gentleman from Delaware (Mr. Carney), the gentleman
also from Texas (Mr. Conaway) and the gentleman from Georgia (Mr.
Scott), who all, along with us, were able to work together in a
bipartisan manner on this legislation.
I want to begin my comments today by clearing up what might be called
a knee-jerk reaction that some commentators have made about our efforts
on this legislation.
Today's legislation is not about deregulating the swap markets or
creating loopholes for market participants. In fact, this bill is just
the opposite of that. You see, there is broad bipartisan support for
appropriately regulating the swap markets and for shining the
proverbial light of day, if you will, on what was once an opaque
marketplace. I agree that bringing greater additional transparency and
clarity to this market is a positive thing for all--for American
consumers and taxpayers as well.
Yet I have significant concerns about how the ongoing Dodd-Frank
implementation of this appropriate regulation is being conducted. Only
in Washington, D.C., would you have two, not one, regulatory bodies
tasked to work together to implement rules required by Congress and
then have them working down two separate, entirely different tracks on
rules that will impact literally hundreds of American businesses and
thousands of investors.
What you have is one agency over here. It's moving forward with a
100-page informal guidance, and the other, on the other hand, has just
released a 1,000-page formal rule proposal. One proposal applies U.S.
regulations to transactions taking place entirely outside the U.S.
between the U.S. nonpersons, and the other creates a new, detailed
substitute compliance framework. So it's hard to imagine a scenario in
which these two proposals are more different. In effect, we have two
very powerful U.S. regulators. Both of them have literally hundreds
upon hundreds of millions of dollars in budget and thousands of staff,
but at the end of the day, they cannot sit down together and work out a
common proposal.
That's not what Dodd-Frank wanted them to do. They wanted them to
come together, and that's what this legislation would effectuate. H.R.
1256, the Swap Jurisdiction Certainty Act, will restore that much-
needed sanity to the rule-writing of this extraterritorial application
of U.S. swaps regulation.
Again, given that there has been some confusion and a great deal of
mischaracterization by some commentators on the impact of this
legislation, let me take a moment to make certain everyone understands
exactly what it does and the effects it will have. You see, the
legislation before us allows the CFTC and the SEC to continue to enjoy
significant discretion and also flexibility as to how they implement
the rules. We are not removing any of their current authority. In fact,
we are adding to it, and we are enhancing it.
First and foremost, the legislation specifically requires the SEC and
the CFTC to have the same or identical cross-border rules. I think it's
difficult--maybe it's impossible--for anyone to suggest that it is
appropriate for two domestic U.S. regulatory bodies to have two
different standards governing very similar parts of the market. So, by
simply requiring the agencies to get together and have identical rules,
the bill will limit the ability for potential arbitrage opportunities
for the market participants, and it will ensure that we have standard
identical regulatory regimes for both types of swaps. There is a great
deal of ongoing discussion right now about how to limit this, about how
to limit regulatory arbitrage opportunities for market participants.
Under this new regime, the most glaring area of potential in this area
is if the SEC and the CFTC have different rules;
Secondly, the legislation would require a formal rule, not a
guidance, to be issued. Currently, the CFTC is moving down the path of
instituting a more amorphous guidance, if you will, which really has
questionable legal authority. So, without a formal rule in place that
carries the force of law, there is a valid concern that some entities
won't feel the need to even abide by this guidance from the CFTC or, if
it's challenged by a court, will feel that it might carry considerably
less weight. So, by requiring a formal rule, the bill will then ensure
that the force of law will apply without question;
Finally, the legislation specifically authorizes the SEC and CFTC to
regulate swap transactions between the U.S. and foreign entities. Now,
this is important if the regulators are concerned about the importation
of systemic risk. Why is this important? Because under current law, it
is really questionable what authority these agencies actually have to
regulate potential transactions between the U.S. and foreign
participants. We add this to it and give them that explicit authority.
{time} 1550
So if the regulators are concerned about any foreign country not
living up to the Obama administration's G-20 commitments that was
established back in 2009, then these regulators will be able to work
together to specifically authorize under the act.
This expansion and enhancement, if you will, of the regulators'
current authority--I would think it should be well received by the
administration.
[[Page H3321]]
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. HENSARLING. I yield the gentleman an additional 45 seconds.
Mr. GARRETT. Finally, in a formal Statement of Administration Policy,
the administration argues that the bill will somehow slow down
implementation of title VII. This can't be further from the truth. By
requiring the agencies to work together and put the same rule, this
will remove legal obstacles here in Washington and ensure that we have
the appropriate regulatory framework sooner rather than later. It will
remind the people saying that we will somehow slow down implementation
of these rules that, no, that cannot be further from the truth. Dodd-
Frank was passed almost 3 years ago, and we're no closer today than we
were 3 years ago to getting this done.
Mr. Speaker, let us restore, then, some common sense and some clarity
to the rulemaking process and actually bring it some additional
transparency. Let us not play into the narrative that the rest of the
country has of a dysfunctional Washington. Let us make sure that our
financial regulators are actually working together and not trying to
allow some to front-end each other.
Let us pass this legislation.
Ms. WATERS. Mr. Speaker, at this time I enter into the Record three
letters of opposition to this bill. One is from the Executive Office of
the President of the United States Office of Management and Budget;
Americans for Financial Reform; and American Federation of Labor and
Congress of Industrial Organizations.
American Federation of Labor and Congress of Industrial
Organizations,
Washington, DC, June 11, 2013.
Dear Representative: The AFL-CIO opposes the ``Swaps
Jurisdiction Certainty Act'' (H.R. 1256) scheduled for floor
consideration this week. If passed, this bill would undermine
the framework Congress put in place in the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 to prevent
risky derivatives trading from contributing to another global
financial crisis. It would impose major new procedural
hurdles that would impede the Commodity Futures Trading
Commission's (CFTC) ability to move forward with effective
rules designed to prevent risks that arise from overseas
derivatives trading from impacting the U.S. economy.
The 2008 financial crisis provided vivid illustrations of
how derivatives transactions conducted by U.S. institutions
in overseas markets can wreak havoc on the U.S. economy--both
the AIG bailout and the Lehman Brothers failure were caused
to a large extent by offshore derivatives trades.
As we saw with AIG and Lehman Brothers, U.S. institutions
can easily conduct derivatives transactions outside U.S.
borders that put U.S. financial institutions at risk. With
this in mind, Congress granted the CFTC, which regulates
around 90 percent of U.S. derivatives markets, authority in
Section 722(d) of Dodd-Frank to oversee derivatives
transactions that ``have a direct and significant connection
with activities in, or effect on, commerce of the United
States.''
The CFTC has issued proposed guidance that strikes an
appropriate balance. It protects U.S. taxpayers and the U.S.
economy while allowing overseas subsidiaries of U.S. banks to
be regulated under `substituted compliance' by their local
regulator when the CFTC makes a specific determination that
the relevant foreign rules are as strong as the U.S. rules.
H.R. 1256 would seriously undermine the CFTC's ability to
protect U.S. taxpayers from risks that arise from overseas
derivatives trading by creating a presumption that these
transactions are exempt from U.S. regulation. To overcome
this presumption, the CFTC and the Securities and Exchange
Commission (SEC) would be required to determine that the
foreign country rules are not `broadly comparable' to U.S.
rules, issue joint rules, and make formal reports to
Congress.
The CFTC's ability to effectively oversee offshore
derivatives transactions that create risks to the U.S.
economy is central to whether Title VII is ultimately
successful in mitigating the risks in the derivatives markets
that nearly brought down the economy less than five years
ago.
Don't let another AIG or Lehman Brothers happen under your
watch. Vote against the ``Swaps Jurisdiction Certainty Act''
(H.R. 1256) and prevent a major loophole from undermining the
basic derivatives market protections that Congress so
sensibly put in place when it passed Dodd-Frank in 2010.
Sincerely,
William Samuel,
Director, Government Affairs Department.
____
Americans for Financial Reform,
Washington, DC, June 11, 2013.
Dear Representative, on behalf of Americans for Financial
Reform, we are writing to express our opposition to HR 1256,
the ``Swaps Jurisdiction Certainty Act''. This legislation is
supported by Wall Street because it opens a back door in
financial regulation that could allow the largest
international banks to evade U.S. derivatives regulation by
transacting through their foreign subsidiaries.
Proper oversight of foreign subsidiaries is critical for
any derivatives regulation to be effective. In the financial
crisis, AIG required a $160 billion public bailout for
activities conducted through its London office, and more
recently JP Morgan's `London Whale' lost the company $6
billion. Bloomberg News has documented that large Wall Street
banks routinely transact well over half of their swaps
business through foreign subsidiaries. For this reason, the
Dodd-Frank Act granted the Commodity Futures Trading
Commission (CFTC), which regulates some 90 percent of U.S.
derivatives transactions, oversight over all derivatives
transactions that have ``a direct and significant connection
with'' U.S. commerce. Yet HR 1256 would block and hinder this
oversight in numerous ways, including by establishing a
presumption that derivatives regulations in major foreign
markets are adequate to satisfy U.S. derivatives protections.
By doing so, it could encourage U.S. financial firms to
outsource operations to foreign jurisdictions with weaker
rules.
The proper oversight of international derivatives
transactions is crucial to effective regulation of U.S.
derivatives markets. Financial transactions that are
nominally booked in overseas subsidiaries of U.S. banks
create risk for the U.S. parent. We have learned this lesson
in many crises, most recently in the massive derivatives
losses experienced at JP Morgan's London office, and most
painfully in the world financial collapse of 2008. As the
chair of the Commodity Futures Trading Commission (CFTC) has
stated:
Swaps executed offshore by U.S. financial institutions can
send risk straight back to our shores. It was true with the
London and Cayman Islands affiliates of AIG, Lehman Brothers,
Citigroup and Bear Stearns. A decade earlier it was true, as
well, with Long-Term Capital Management. The nature of modern
finance is that large financial institutions set up hundreds,
if not thousands of ``legal entities'' around the globe. .
.
Many of these far-flung legal entities, however, are still
highly connected back to their U.S. affiliates.
The CFTC, the agency assigned to regulate some 90 percent
of U.S. derivatives markets, is already addressing this vital
issue. The agency has proposed guidance that would protect
U.S. taxpayers and the U.S. economy by preserving
jurisdiction over derivatives transactions executed through
foreign entities which impact the U.S. economy. The CFTC's
balanced approach would apply Dodd-Frank oversight to such
transactions, but also allow foreign entities to be regulated
under `substituted compliance' by their local regulator when
the agency finds that the relevant foreign rules are as
strong as the U.S. rules.
Crucially, the CFTC has taken the position that
`substituted compliance' under foreign rules would only be
permitted in cases where the U.S. regulators found foreign
regulation to be genuinely equivalent to the relevant U.S.
regulation. Maintaining this principle is critical to
protecting U.S. taxpayers from the risks of offshore swaps by
U.S. institutions. If it is not maintained, we could see a
`race to the bottom' as derivatives transactions move to the
least regulated jurisdictions to take advantage of lax rules.
This is particularly dangerous since foreign countries are
not exposed to the risks to the U.S. taxpayer created due to
derivatives losses in foreign subsidiaries of U.S. banks.
HR 1256 would seriously undermine the capacity of
regulators to assure that U.S. derivatives transactions
conducted through foreign entities are subject to regulations
that meet U.S. standards. It does this in several ways.
First, HR 1256 would effectively create a presumption that
overseas derivatives transactions will be ruled by foreign
country rulemaking rather than U.S. rulemaking. The current
CFTC guidance only permits `substituted compliance' when U.S.
regulators determine that relevant foreign rules are as
strong as the U.S. rules. But HR 1256 instead establishes a
strong statutory presumption that transactions in the world's
major derivatives markets will be governed by foreign
regulatory rules in the host country rather than U.S. rules.
The statutory presumption that foreign rules govern could
only be overturned if both the CFTC and SEC make a joint
determination, supported by a formal report to Congress, that
the foreign country rules are not `broadly comparable' to
U.S. rules. This determination could be challenged in court
on the basis of the `broadly comparable' language in HR 1256,
creating significant litigation risk.
Thus, U.S. regulators would face major new hurdles in
applying derivatives rules to overseas transactions, even
where these transactions clearly posed a risk to the U.S.
economy. This would not only weaken protections for U.S.
financial markets, it would weaken the U.S. negotiating
position in pressing foreign governments for adequate
derivatives rules. The statutory roadblocks to properly
enforcing U.S. derivatives rules that are created by HR 1256
would undercut the U.S. government before negotiations are
even begun. They create numerous additional opportunities for
Wall Street to undermine effective regulation.
Second, HR 1256 strips the CFTC of authority to
independently determine derivatives rules for overseas
transactions. It requires
[[Page H3322]]
any such rules to be passed by a joint rulemaking between the
SEC and CFTC, which must specify identical rules. The SEC
regulates less than 10 percent of the gross notional swaps
market, and has jurisdiction over different types of swaps
than the CFTC does. Furthermore, the agencies are already
required to harmonize their regulation where appropriate. A
joint rulemaking is not needed for coordination, as the
agencies regulate different derivatives markets. But it would
hinder and delay the CFTC's work to regulate extraterritorial
derivatives transactions. The purpose of this joint
rulemaking requirement is simply to add more hurdles and more
delay before any action can be taken, making effective
regulation less likely.
In addition to the impact of additional bureaucratic
hurdles, in this case a joint rulemaking requirement would
also represent a dramatic roll back of the statutory mandate
granted to the CFTC in overseeing 90% of the swaps market.
Section 722(d) of the Dodd-Frank Act grants the CFTC
jurisdiction over all activities that have a ``direct and
significant connection with activities in, or effect on,
commerce of the United States''. This is clearly the
appropriate jurisdiction to protect U.S. taxpayers and the
U.S. economy--it is obviously critical that U.S. regulators
have jurisdiction over potentially risky transactions that
are directly connected to the U.S. economy. Yet the SEC has
no such clear statement of jurisdiction in the Dodd-Frank
Act. The effect of requiring joint rulemaking would be to
eliminate the CFTC's clear grant of jurisdiction over those
transactions that are directly connected to U.S. commerce.
This long and complex legislation raises other issues as
well. However, the core issue is that oversight of swaps
transactions in foreign subsidiaries of U.S. banks is not a
side issue in derivatives regulation. It is at the heart of
effective oversight of these vast and complex markets. The
thousands of subsidiaries of major global banks allow them to
transmit cash flows and risk from derivatives contracts
around the world with unprecedented ease. If derivatives
transactions impacting the U.S. market that are conducted
through foreign subsidiaries are not properly regulated, then
no regulation of U.S. derivatives markets can be effective.
The numerous additional statutory restrictions created by HR
1256 to block U.S. oversight of derivatives transactions
conducted overseas would undermine derivatives regulation as
a whole and weaken protections against financial instability.
Thank you for your consideration. For more information
please contact AFR's Policy Director, Marcus Stanley at
[email protected] or 202-466-3672.
Sincerely,
Americans for Financial Reform:
AARP; A New Way Forward; AFL-CIO; AFSCME; Alliance For
Justice; American Income Life Insurance; American
Sustainable Business Council; Americans for Democratic
Action, Inc; Americans United for Change; Campaign for
America's Future; Campaign Money; Center for Digital
Democracy; Center for Economic and Policy Research;
Center for Economic Progress; Center for Media and
Democracy; Center for Responsible Lending; Center for
Justice and Democracy; Center of Concern; Center for
Effective Government; Change to Win; Clean Yield Asset
Management; Coastal Enterprises Inc.; Color of Change.
Common Cause; Communications Workers of America;
Community Development Transportation Lending Services;
Consumer Action; Consumer Association Council;
Consumers for Auto Safety and Reliability; Consumer
Federation of America; Consumer Watchdog; Consumers
Union; Corporation for Enterprise Development; CREDO
Mobile; CTW Investment Group; Demos; Economic Policy
Institute; Essential Action; Green America; Greenlining
Institute; Good Business International; HNMA Funding
Company; Home Actions; Housing Counseling Services;
Home Defender's League; Information Press; Institute
for Global Communications.
Institute for Policy Studies: Global Economy Project;
International Brotherhood of Teamsters; Institute of
Women's Policy Research; Krull & Company; Laborers'
International Union of North America; Lawyers'
Committee for Civil Rights Under Law; Main Street
Alliance; Move On; NAACP; NASCAT; National Association
of Consumer Advocates; National Association of
Neighborhoods; National Community Reinvestment
Coalition; National Consumer Law Center (on behalf of
its low-income clients); National Consumers League;
National Council of La Raza; National Council of
Women's Organizations; National Fair Housing Alliance;
National Federation of Community Development Credit
Unions; National Housing Resource Center; National
Housing Trust; National Housing Trust Community
Development Fund; National NeighborWorks Association;
National Nurses United; National People's Action;
National Urban League.
Next Step; OpenTheGovernment.org; Opportunity Finance
Network; Partners for the Common Good; PICO National
Network; Progress Now Action; Progressive States
Network; Poverty and Race Research Action Council;
Public Citizen; Sargent Shriver Center on Poverty Law;
SEIU; State Voices; Taxpayer's for Common Sense; The
Association for Housing and Neighborhood Development;
The Fuel Savers Club; The Leadership Conference on
Civil and Human Rights; The Seminal; TICAS; U.S. Public
Interest Research Group.
UNITE HERE; United Food and Commercial Workers; United
States Student Association; USAction; Veris Wealth
Partners; Western States Center; We the People Now;
Woodstock Institute; World Privacy Forum; UNET; Union
Plus; Unitarian Universalist for a Just Economic
Community.
List of State and Local Partners:
Alaska PIRG; Arizona PIRG; Arizona Advocacy Network;
Arizonans For Responsible Lending; Association for
Neighborhood and Housing Development NY; Audubon
Partnership for Economic Development LDC, New York NY;
BAC Funding Consortium Inc., Miami FL; Beech Capital
Venture Corporation, Philadelphia PA; California PIRG;
California Reinvestment Coalition; Century Housing
Corporation, Culver City CA; CHANGER NY; Chautauqua
Home Rehabilitation and Improvement Corporation (NY);
Chicago Community Loan Fund, Chicago IL; Chicago
Community Ventures, Chicago IL.
Chicago Consumer Coalition; Citizen Potawatomi CDC,
Shawnee OK; Colorado PIRG; Coalition on Homeless
Housing in Ohio; Community Capital Fund, Bridgeport CT;
Community Capital of Maryland, Baltimore MD; Community
Development Financial Institution of the Tohono O'odham
Nation, Sells AZ; Community Redevelopment Loan and
Investment Fund, Atlanta GA; Community Reinvestment
Association of North Carolina; Community Resource
Group, Fayetteville A; Connecticut PIRG; Consumer
Assistance Council; Cooper Square Committee (NYC);
Cooperative Fund of New England, Wilmington NC;
Corporacion de Desarrollo Economico de Ceiba, Ceiba PR;
Delta Foundation, Inc., Greenville MS; Economic
Opportunity Fund (EOF), Philadelphia PA; Empire Justice
Center NY; Empowering and Strengthening Ohio's People
(ESOP), Cleveland OH; Enterprises, Inc., Berea KY; Fair
Housing Contact Service OH; Federation of Appalachian
Housing; Fitness and Praise Youth Development, Inc.,
Baton Rouge LA; Florida Consumer Action Network;
Florida PIRG; Funding Partners for Housing Solutions,
Ft. Collins CO.;
Georgia PIRG; Grow Iowa Foundation, Greenfield IA;
Homewise, Inc., Santa Fe NM; Idaho Nevada CDFI,
Pocatello ID; Idaho Chapter, National Association of
Social Workers; Illinois PIRG; Impact Capital, Seattle
WA; Indiana PIRG; Iowa PIRG; Iowa Citizens for
Community Improvement; JobStart Chautauqua, Inc.,
Mayville NY; La Casa Federal Credit Union, Newark NJ;
Low Income Investment Fund, San Francisco CA; Long
Island Housing Services NY; MaineStream Finance, Bangor
ME; Maryland PIRG; Massachusetts Consumers' Coalition;
MASSPIRG; Massachusetts Fair Housing Center; Michigan
PIRG; Midland Community Development Corporation,
Midland TX; Midwest Minnesota Community Development
Corporation, Detroit Lakes MN; Mile High Community Loan
Fund, Denver CO; Missouri PIRG; Mortgage Recovery
Service Center of L.A.; Montana Community Development
Corporation, Missoula MT.;
Montana PIRG; Neighborhood Economic Development Advocacy
Project; New Hampshire PIRG; New Jersey Community
Capital, Trenton NJ; New Jersey Citizen Action; New
Jersey PIRG; New Mexico PIRG; New York PIRG; New York
City Aids Housing Network; New Yorkers for Responsible
Lending; NOAH Community Development Fund, Inc., Boston
MA; Nonprofit Finance Fund, New York NY; Nonprofits
Assistance Fund, Minneapolis M; North Carolina PIRG;
Northside Community Development Fund, Pittsburgh PA;
Ohio Capital Corporation for Housing, Columbus OH; Ohio
PIRG; OligarchyUSA; Oregon State PIRG; Our Oregon;
PennPIRG; Piedmont Housing Alliance, Charlottesville
VA; Michigan PIRG; Rocky Mountain Peace and Justice
Center, CO; Rhode Island PIRG; Rural Community
Assistance Corporation, West Sacramento CA; Rural
Organizing Project OR; San Francisco Municipal
Transportation Authority; Seattle Economic Development
Fund; Community Capital Development; TexPIRG; The Fair
Housing Council of Central New York; The Loan Fund,
Albuquerque NM; Third Reconstruction Institute NC;
Vermont PIRG; Village Capital Corporation, Cleveland
OH; Virginia Citizens Consumer Council; Virginia
Poverty Law Center; War on Poverty--Florida; WashPIRG;
Westchester Residential Opportunities Inc.; Wigamig
Owners Loan Fund, Inc., Lac du Flambeau WI; WISPIRG.;
Small Businesses
[[Page H3323]]
Blu; Bowden-Gill Environmental; Community MedPAC;
Diversified Environmental Planning; Hayden & Craig,
PLLC; Mid City Animal Hospital, Phoenix AZ; The
Holographic Repatterning Institute at Austin; UNET.
____
Statement of Administration Policy
H.R. 1256--Swap Jurisdiction Certainty Act
(Rep. Garrett, R-NJ, and 3 cosponsors, June 11, 2013)
The Administration is firmly committed to strengthening the
Nation's financial system through the implementation of key
reforms to derivatives markets. However, the Administration
opposes passage of H.R. 1256, which would modify Title VII of
the Dodd-Frank Wall Street Reform and Consumer Protection
Act. The Dodd-Frank Act puts in place a number of
requirements that bring transparency to and enhance the
stability of derivatives markets. These reforms will
collectively strengthen the weak and outdated regulatory
regime that played a significant role in the crisis that
caused devastating damage to the U.S. economy and the
financial well-being of American families.
Regulators are making significant progress with a number of
derivatives-related reforms. As part of these efforts,
regulators are already coordinating to address the issues
raised in H.R. 1256, while taking into account the
characteristics of the particular markets they regulate.
Given these ongoing coordination efforts, passage of this
bill would be premature and disruptive to the current and
ongoing implementation of the reforms. The Administration
believes regulators should be given the time necessary to
complete their work. The Administration consequently opposes
passage of H.R. 1256, which would preempt ongoing work and
slow the implementation of these vital reforms.
I yield 2 minutes to the gentlewoman from New York (Mrs. Carolyn B.
Maloney).
Mrs. CAROLYN B. MALONEY of New York. I thank the gentlelady for
yielding and for her leadership.
Mr. Speaker, I rise today in opposition to H.R. 1256, the Swap
Jurisdiction Certainty Act.
I oppose this bill, as does the Obama administration, because it
would fundamentally undermine Dodd-Frank's derivatives reforms and
would create a loophole big enough to drive an AIG-sized truck through.
Many of the derivatives that brought down AIG in 2008 were executed
through one of its foreign branches, and many of the counterparties on
those derivatives were European banks. These derivatives were a big
factor in the AIG bailout that cost our taxpayers $182 billion and in
the financial crisis that cost our economy well over $12 trillion.
H.R. 1256 would require the CFTC and the SEC to issue a joint rule
detailing how U.S. derivatives rules would apply to transactions
between U.S. and foreign companies or individuals. However, the bill
then requires the agencies to exempt foreign companies from U.S. rules
unless both agencies determine that the derivatives rules in the
foreign country are broadly equivalent to U.S. rules, a vague standard
that would weaken both the CFTC and the SEC's proposed rules governing
crossborder transactions.
In the modern financial system, risk knows no borders. Problems in a
U.S. bank's foreign office flow right back to the parent company here
in the U.S., and it is the U.S. parent company that ultimately bears
the loss. This is especially true in derivatives, which are traded in a
global and highly interconnected market. For these regulations to be
truly effective, however, they must cover derivatives executed in the
foreign branches and guaranteed affiliates of U.S. banks.
I urge my colleagues to vote against this bill.
Mr. Speaker, I rise today in opposition to H.R. 1256, the Swap
Jurisdiction Certainty Act.
I oppose this bill and the Obama Administration opposes because it
would fundamentally undermine Dodd-Frank's derivatives reforms, and
would create a loophole big enough to drive an AIG-sized truck through.
Many of the derivatives that brought down AIG in 2008 were executed
through one of its foreign branches, and many of the counterparties on
those derivatives were European banks. These derivatives were a big
factor in the AIG bailout that cost taxpayers $182 billion, and in the
financial crisis that cost our economy over $12 trillion. Why would we
want to repeat the same mistake?
H.R. 1256 would require the CFTC and the SEC to issue a joint rule
detailing how U.S. derivatives rules would apply to transactions
between U.S. and foreign companies or individuals. However, the bill
then requires the agencies to exempt foreign companies from U.S. rules
unless both agencies determine that the derivatives rules in the
foreign country are ``broadly equivalent'' to U.S. rules--a vague
standard that would weaken both the CFTC and the SEC's proposed rules
governing cross-border transactions.
In the modern financial system, risk knows no borders. Problems in a
U.S. bank's foreign office flow right back to the parent company here
in the U.S., and it is the U.S. parent company that ultimately bears
the loss. This is especially true for derivatives, which are traded in
a global and highly interconnected market.
For these regulations to be truly effective, however, they must cover
derivatives executed in the overseas branches and guaranteed affiliates
of U.S. banks. This is what the CFTC has proposed, and what the
supporters of this bill are seeking to prevent.
We cannot afford to outsource derivatives regulation to foreign
jurisdictions when it is U.S. taxpayers, and not the taxpayers of the
foreign jurisdiction, who are ultimately bearing the risks. We learned
the hard way with AIG that risk in the derivatives market flows across
borders. Why would we want to repeat the same mistake?
In response to the financial crisis, Congress enacted Dodd-Frank,
which imposes common-sense rules on the derivatives market, such as
capital and margin requirements for U.S. derivatives dealers. These
rules will make the financial system safer by ensuring that U.S. banks
that deal derivatives are sufficiently capitalized, and have the
ability to pay off all of their derivatives without government help.
H.R. 1256 would undermine these basic reforms. This is why I oppose
the bill, why the Obama administration opposes the bill, and I would
urge my colleagues to vote against the bill.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Neugebauer), chairman of the Housing and Insurance
Subcommittee.
Mr. NEUGEBAUER. Mr. Speaker, I rise in support of H.R. 1256.
One of the things that I think people demand out of their government
is transparency and regular order, and one of the things about this
bill is there has been a lot of transparency and a lot of debate and
discussion about it.
In fact, this bill was marked up in the previous Congress, both in
the House Agriculture Committee and the House Financial Services
Committee. You would have thought we would have just brought that bill
back here and put it on suspension. That's not what's happening. It was
sent back to the House Financial Services Committee and the House
Agriculture Committee.
In fact, during that process in the Financial Services Committee,
some issues that Mr. Frank, the ranking member of last year, brought up
were incorporated into this markup. When it was over in the House
Agriculture Committee--and I have the opportunity to sit on both of
those committees--some changes that were recommended by the ranking
member, Collin Peterson, were incorporated into that bill. In fact,
that bill passed on voice vote in the House Agriculture Committee.
Mr. Kildee offered some language that would limit the bill to the
nine largest swap jurisdictions as was alluded to earlier. Those were
incorporated into this bill.
The ranking member of the full committee did bring up an amendment,
and interestingly enough some of her own Members did not support that
amendment.
So what I would say about H.R. 1256 is that it's going to bring some
certainty to a very uncertain process. The fact that it has been 3
years and these two agencies have not been able to come together and
come out with a common rule doesn't make sense. I think it's one of the
things that frustrates people about government, that two different
agencies would have different rules about the same thing.
Then I think the third thing, too, as was alluded to by the chairman,
is that these are important markets to our businesses, whether they be
large or small. They rely on foreign participants to come into the
markets and provide opportunities to hedge, whether it's crops or
ingredients in the manufacturing process.
Basically, what we're doing is we're saying that the SEC and the CFTC
still have the authority that was given to them in the original Dodd-
Frank bill, but we need some harmonization not only within those
agencies, but with the other countries that are involved in regulating
the foreign entities, as well.
Ms. WATERS. Mr. Speaker, I will enter into the Record the amendment
[[Page H3324]]
that I would have offered had they not come up with a closed rule.
Page 5, strike line 1 and all that follows through page 7,
line 6, and insert the following:
(d) General Application to Foreign Jurisdictions.--
(1) General application.--In issuing rules under subsection
(b), the Commissions shall provide that persons in compliance
with the regulatory requirements of a country or
administrative region that has one of the nine largest
combined swap and security-based swap markets by notional
amount in the calendar year preceding issuance of such rules
or any other foreign jurisdiction as jointly determined by
the Commissions may satisfy the corresponding categories of
United States swaps requirements through such compliance upon
the making of a joint determination by the Commissions
pursuant to subsection (d)(2).
(2) Determinations.--The Commissions shall jointly
determine whether one or more categories of regulatory
requirements of a foreign jurisdiction as jointly determined
by the Commissions, are broadly equivalent to corresponding
United States swaps requirements, with such determinations
initially to be made as follows:
(A) Initial determinations regarding a country or
administrative region described under paragraph (1), or any
other foreign jurisdiction as jointly determined by the
Commissions, accounting for the five largest combined swap
and security-based swap markets by notional amount in the
calendar year preceding issuance of rules under subsection
(b) shall be made within 180 days after issuance of such
rules.
(B) Initial determinations regarding a country or
administrative region described under paragraph (1), or any
other foreign jurisdiction as jointly determined by the
Commissions, accounting for the next five largest combined
swap and security-based swap markets by notional amount in
the calendar year preceding issuance of rules under
subsection (b) shall be made within 360 days after issuance
of such rules.
(C) Initial determinations regarding a country or
administrative region described under paragraph (1), or any
other foreign jurisdiction as jointly determined by the
Commissions, shall be made within 540 days after issuance of
rules under subsection (b).
(3) Criteria.--In such rules, the Commissions shall jointly
establish criteria for determining that one or more
categories of regulatory requirements of a country or
administrative region described under paragraph (1) or other
foreign jurisdiction are broadly equivalent to corresponding
United States swaps requirements, and shall jointly determine
the appropriate application of certain United States swap
requirements to persons or transactions relating to or
involving such country or administrative region or other
foreign jurisdiction as jointly determined by the Commission
to the extent that the Commissions have determined that
certain regulatory requirements of such country or
administrative region or other foreign jurisdiction are
broadly equivalent to corresponding United States swaps
requirements.
(4) Right to petition.--A market participant or group of
market participants may request a determination with respect
to a particular category or categories of foreign regulatory
requirements with regard to a foreign jurisdiction or
jurisdictions. Any determination made regarding such a
request shall be available to all market participants.
Page 7, line 7, strike ``(4)'' and insert ``(5)''.
I yield 1\1/2\ minutes to the gentleman from Massachusetts (Mr.
Capuano).
Mr. CAPUANO. Mr. Speaker, I thank the gentlewoman for yielding.
Look, this bill is not going to create jobs in America. This bill is
all about foreign swaps. If we're going to create jobs, we're going to
create them in foreign countries.
By the way, Dodd-Frank exempts foreign swaps activities from
derivatives regs, except when they have--and this is a quote from the
bill--``direct and significant connection with activities in, or effect
on, commerce of the United States.''
Other than that, if they don't affect us; they're not subject to
regulation. Simple. But if they're done in a foreign country and they
affect us, if it's just a way to get around our regs, they're subject
to United States regulation. It's really kind of simple.
By the way, according to The Wall Street Journal, the sixth largest
banks of the United States combined have 22,621 subsidiaries. That's an
average of 3,770 subsidiaries each. Why? In order to get around this
kind of regulation.
I don't blame them. I'm not against swaps. I'm not against swaps
conducted on foreign soil. I simply want them subjected to United
States regulation. I don't think it's that difficult. I don't
understand why we have to do this, except to say, Here's a big open
door. This is a huge hole to the regulatory process of the United
States of America.
I understand that some Members of this body don't like any
regulation, and I respect that. But get up and say it.
Mr. HENSARLING. Mr. Speaker, may I inquire as to how much time
remains on both sides.
The SPEAKER pro tempore. The gentleman from Texas has 3\1/4\ minutes
remaining, and the gentlewoman from California has 12 minutes
remaining.
Mr. HENSARLING. At this time, Mr. Speaker, I yield 2 minutes to the
gentleman from Florida (Mr. Crenshaw).
{time} 1600
Mr. CRENSHAW. Mr. Speaker, I thank the gentleman for yielding.
This seems to be one of the most straightforward, commonsense pieces
of legislation that I have seen in a long time.
As chairman of the subcommittee on Appropriations that overseas the
budget of the SEC, we have hearings from time to time to make sure that
the SEC is doing their job--that is to protect investors, to make sure
that capital markets are fair and stable. Here we have a situation
where a certain amount of instability has been created because you have
two different agencies that are writing different rules about what's
called the over-the-counter commodities market. That's a global market,
and it is very important to an awful lot of people. It seems to me that
if we're going to have that kind of regulation, you would think that
the SEC would coordinate with the other agency, the Commodity Futures
Trading Commission, and they would publish one rule that people can
understand and live by. But that's not the case.
You don't have the similarities that you need; you don't have them
mirroring each other. All this bill does is simply say: Look, if we're
going to ask for this kind of regulation, let's make sure that these
two agencies publish the same rule. Otherwise you've got all kinds of
uncertainty, all kinds of turmoil. If you're a regulated individual or
entity or company, how do you know what to comply with unless this
happens?
Now, I don't want to have to put language in the appropriations bill
that kind of encourages folks to do that. It's simple, just pass this
bill. It sounds to me like we're going to. It's a bipartisan bill, and
I encourage everyone to vote ``yes'' and move on.
Ms. WATERS. I yield 1\1/2\ minutes to the gentleman from
Massachusetts (Mr. Lynch).
Mr. LYNCH. Mr. Speaker, I thank the gentlelady for yielding.
I rise today in strong opposition to the bill before this House
today, H.R. 1256, the Swaps Jurisdiction Certainty Act. It should be
called the Wall Street Bailout Certainty Act because that's the actual
effect this is going to have. It will do serious and irrevocable harm
to our efforts to rein in the reckless behavior of Wall Street.
In the words of our own Commodity Futures Trading Commission Chairman
Gary Gensler, this bill will ``blow a hole'' in the hard-fought
derivatives reforms we passed 3 years ago. Section 722 of the Dodd-
Frank Act gives the CFTC authority to regulate overseas derivatives
that have a direct and significant effect on the commerce of the United
States.
If my colleagues need an example, I harken to the ranking member's
example of why this cross-border authority is so critically important,
and that's the case of AIG, the insurance giant. AIG engaged in
increasingly complex and risky derivatives bets on the subprime
mortgage market out of its AIG Financial Products subsidiary in London.
And because there was virtually no oversight of derivatives markets,
AIG Financial Products was able to deal in the shadows. And when the
housing bubble burst, no one, not its directors, not its
counterparties, not even its regulators, knew just how deeply in
trouble AIG was.
So while we have adopted a number of regulations within Dodd-Frank,
this bill will allow all of the companies that would be regulated to
escape that regulation by doing these derivative deals through their
foreign subsidiaries. And the four biggest derivative dealers in this
country have over 3,000 foreign subsidiaries each. So this is an escape
hatch for them. Vote ``no'' on this bill.
Mr. HENSARLING. I reserve the balance of my time.
Ms. WATERS. I yield 1\1/2\ minutes to the gentleman from Texas (Mr.
Al Green).
[[Page H3325]]
Mr. AL GREEN of Texas. Mr. Speaker, the question before us is whether
we will outsource American economic stability in this quadrillion-
dollar derivatives market to foreign subsidiaries of American
companies. Will we outsource this quadrillion-dollar market?
Now, a quadrillion is a big number. If you stack dollar bills one on
the other, a quadrillion will take you all of the way from the Earth to
the Sun. It's important for us to remember that AIG outsourced to a
foreign subsidiary. It was in London. And, of course, we know what
happened with AIG.
Finally, I will say this. We're trying to jump-start the economy, it
seems. We have to be careful what we do when we try these jump starts
because this derivatives market has within it interest rate
derivatives. These derivatives, if there's a spike in interest rates,
can have an enormous impact on the world's economy.
So let us be careful when we jump-start. Sometimes when we do common
things, like jump-starting our cars, it works fine. But on other
occasions, we can have an explosion. Let's be careful as we jump-start
the derivatives market.
Mr. HENSARLING. I continue to reserve the balance of my time.
Ms. WATERS. I yield 1\1/2\ minutes to the gentleman from Minnesota
(Mr. Ellison).
Mr. ELLISON. Mr. Speaker, I will get right to the point: AIG,
Citibank, and Lehman are recent examples of institutions where the U.S.
parent was hurt by those firms' problems abroad. Lehman had 3,300
subsidiaries at the time they declared bankruptcy, and its London
subsidiary had more than 130,000 outstanding swaps contracts, many of
them guaranteed by Lehman Brothers Holdings, headquartered in the U.S.
Bank of America, for example, has more than 2,000 subsidiaries, with
38 percent of them in foreign jurisdictions. Bank of America's books
its derivatives not only in the U.S. but also in the U.K. and in
Ireland.
Now, a very simple fact, Mr. Speaker, is that Dodd-Frank, the bill
that has been deconstructed before our very eyes, while the ink is
still wet on the page, requires that all foreign or U.S. firms
transacting with U.S. persons comply with derivatives market
reform. We're taking that apart right now. That's a shame, and it's
going to put that guy who wants to buy beer in Texas at risk for his
job and his house and everything else.
Mr. HENSARLING. I reserve the balance of my time.
Ms. WATERS. I yield 1\1/2\ minutes to the gentlewoman from
Connecticut (Ms. DeLauro).
Ms. DeLAURO. I stand in strong opposition to this bill, which weakens
Dodd-Frank regulations over derivatives markets and allows foreign
banks and swaps traders to engage in the same risky behavior that
caused an economic meltdown a few short years ago.
We are here to represent the American people, not the big banks. And
after the 2008 financial crisis that triggered the worse recession
since the Great Depression, the American people want to see more
accountability from Wall Street, not less. That's why we passed Dodd-
Frank in the first place, to end dangerous speculation by financial
institutions and prevent more bailouts.
The bill before us tries to exempt from oversight any swap
transaction in which one of the parties is not based in the United
States. In other words, it effectively guts the derivatives regulation
in the Dodd-Frank Act.
When AIG nearly destroyed the economy, their affiliate was based out
of London as a branch of a French-registered bank. Lehman Brothers had
3,300 legal entities here and abroad when it failed. Citigroup set up
numerous structured investment vehicles overseas to move positions off
its balance sheet. But when those investments were about to fail,
Citigroup in the U.S. assumed the huge debt, and was ultimately bailed
out by U.S. taxpayers.
The notion that we should let big banks evade Dodd-Frank oversight if
they set up a subsidiary in another major economy first is absurd. A
vote for this bill is a vote for more risky derivatives transactions,
more bad behavior, and more bailouts. I urge my colleagues to stand up
for the American people, the American taxpayers, and vote this down.
Mr. HENSARLING. I reserve the balance of my time.
Ms. WATERS. I yield an additional 1 minute to the gentleman from
Massachusetts (Mr. Capuano).
Mr. CAPUANO. What this bill says is if you do this activity in the
United States of America, you'll be subject to certain regulations. If
you do the exact same activity through a subsidiary in a foreign
country, you will not be subject to our regulation. That's an open
invitation to move American jobs offshore. It's an encouragement to
move American jobs offshore. It is blatantly obvious. How that is good
for the American economy, I don't know. Why would we want to say to any
American company some foreign regulator is better than us?
Now I know we are going to have this debate in other matters later on
this week, saying just the opposite. So in this case, foreign
regulators are better, but in other cases, they're not. It's kind of
stunning. We actually did it this morning on another matter.
I want to join with the AFL-CIO in making a pretty clear warning to
my colleagues: if this bill becomes law, I regretfully agree that there
will come a day that you'll regret this vote, as many of us, not me,
but many of us regret the vote for the PATRIOT Act.
{time} 1610
Ms. WATERS. I yield 1 minute to the gentleman from Massachusetts (Mr.
Lynch.)
Mr. LYNCH. Mr. Speaker, I thank the gentlelady for yielding.
Let me just make one final point on this. What this bill will do now
is to give the Cayman Islands or London or some other jurisdiction the
ability to write derivatives rules that cover U.S. affiliates.
Now, the problem with that very idea is that the Cayman Islands or
any other jurisdiction has no interest in protecting the U.S. taxpayer.
That's the truth.
When the bailout for AIG came, it was $160 billion in U.S. currency,
supported by the U.S. taxpayer, that bailed AIG out. So any of these
foreign affiliates that go under in foreign jurisdictions, those
foreign jurisdictions, whether it be the Cayman Islands or any other
jurisdiction, have no interest, they have no dog in the fight to
protect the American taxpayer.
That's the problem with this bill. That's the bottom line. We should
vote against it. This is a disgrace. But it does show the power of Wall
Street, I'll say that.
Mr. HENSARLING. I yield myself 15 seconds, Mr. Speaker, to say, one,
if this is a disgrace, you need to inform almost two-thirds of your
Members who voted for it in committee. Second of all, nothing in this
amends Dodd-Frank. Third of all, you all tell us Dodd-Frank ended ``too
big to fail,'' so the specter of bailout I simply do not understand.
You need to make up your mind.
I reserve the balance of my time.
Ms. WATERS. I yield myself as much time as I may consume to refute.
The gentleman from Texas keeps talking about we make the claim that
we ended ``too big to fail.'' That's what we're trying to do. That's
what we're standing up against, what you're attempting to do in this
piece of legislation.
Derivatives are an important part of the reform of Dodd-Frank. It is
important because we're trying to create transparency. The over-the-
counter derivatives market that has been working for so long in the
shadows we cannot continue to have.
Mr. HENSARLING. Will the gentlewoman yield?
Ms. WATERS. I yield to the gentleman from Texas.
Mr. HENSARLING. If I misquoted the gentlelady, I apologize, but I
thought I had seen earlier quotes where the gentlelady posited that
Dodd-Frank ended ``too big to fail.'' If I was incorrect, I apologize
to the gentlelady, but I thought you had said that on more than one
occasion.
Ms. WATERS. Reclaiming my time, the gentleman from Texas knows how it
works. We have Dodd-Frank reform, and it has to be implemented. You
know the living wills have to be done. You know that we have to put in
place all that it takes to have the orderly liquidation procedure. And
it is important that you understand, and that all of our Members
understand, that derivatives are an important part of reform.
[[Page H3326]]
If we allow this bill that presumes that other countries are
comparable to us in their regulatory regimes without even checking,
without vetting, without asking any questions, without requiring
anything, then we absolutely put our own country at risk, and we put at
risk the American taxpayers who will have to bail out the major
financial institutions if we allow you to pass a bill like this,
presuming that they are okay, that these countries are okay.
The other thing is--I know and understand now. I understand very well
that if we allow this presumption to take place, then you'll just go to
court and you'll argue that you have the presumption, and you'll try
and tie up the CFTC all over again.
I reserve the balance of my time.
Mr. HENSARLING. I reserve the balance of my time.
Ms. WATERS. I yield 1 minute to the gentleman from Texas (Mr. Al
Green).
Mr. AL GREEN of Texas. Thank you, Madam Ranking Member.
It's important to note the amount in derivatives that we're talking
about. We're talking about a quadrillion dollars--a quadrillion
dollars--more than the entire economy of the world, a quadrillion
dollars, and the impact a quadrillion dollars can have on the world's
economy.
Some of this money is in interest rate derivatives. If there's a
spike in interest rates, we're not sure what the ultimate impact on the
world's economy will be. If I am wrong, everything will be all right;
but if I'm right, everything will be all wrong, and it will be too late
for us to take corrective action.
Mr. HENSARLING. I reserve the balance of my time.
Ms. WATERS. I yield myself the balance of my time.
Mr. Speaker and Members, I'm very disappointed and worried that this
bill has been brought to the floor under a closed rule, as have more
than one-third of the bills so far this Congress.
I believe there are important issues concerning the structure of this
bill, particularly the bill's presumption that the rules of the nine
largest foreign markets will be broadly equivalent to our own. The bill
would require the SEC and the CFTC to act in order to allow U.S. rules
to apply to transactions, even though the risk of the transactions will
ultimately be imported back to the United States.
My amendment would have the reverse of this presumption, directing
the SEC and CFTC to jointly consider the regulatory framework of these
countries to provide appropriate exemptions when jurisdictions have
derivatives rules that are truly broadly equivalent to our own.
A closed rule prevents us from considering these issues. Why do they
have a closed rule? Why did they try to hide this bill inside the DOD?
They don't want this debate. They didn't want an opportunity for any
amendments. They don't care that foreign countries would be determining
our fate when they set up their regulatory regimes, which won't be
comparable to ours.
We owe it to the American people to do better than we have done. We
have had the subprime meltdown. We've had the economic crisis. Why
throw us back into that simply because you're trying to protect Wall
Street?
Our citizens don't deserve that. They deserve for us to stand up and
protect them from having to bail out these big institutions that will
fail.
We have gone through AIG. We have gone through JP Morgan, the London
Whale, the $6 billion failure. Why should we do that again?
I yield back the balance of my time.
Mr. HENSARLING. Mr. Speaker, how much time do we have?
The SPEAKER pro tempore (Mr. Womack). The gentleman from Texas is
advised that he has 1\1/2\ minutes remaining.
Mr. HENSARLING. Mr. Speaker, in order to close for the bipartisan
majority, I will yield the remainder of our time to the author of the
bill, the gentleman from New Jersey (Mr. Garrett).
Mr. GARRETT. I thank the gentleman from Texas, and the bipartisan
manner from Mr. Carney and Mr. Scott as well, working together to get
this bill passed.
And I am welcome to the debate that we are having here, but I do find
it amazingly ironic that I have to come to the floor and stand here in
the position of former Member Barney Frank and defend Dodd-Frank to the
allegations from the other side of the aisle to the idea that there's
some sort of escape hatch here, or a pole blown out, or that we're
outsourcing regulation, when, in fact, if you read the legislation,
you'll realize it does none of those things.
Now, I understand that Dodd-Frank was a piece of legislation that was
well over 2,000 pages, and maybe some who voted in favor of it did not
understand the complexity of it and what was involved; but the bill
before us today is only 11 pages long, so everyone should be able to
have read it and understand it.
So when the gentleman from Massachusetts refers to section 722(d)
being affected by it and other portions of Dodd-Frank being changed by
it, he should understand, by reading the 11 pages, none of Dodd-Frank
or 722 or those other sections were altered in one way, shape, or form
or other.
What was done was to install and enforce and carry out the will of
Dodd-Frank in the area to make sure that the two regulatory agencies
dealing with the respective areas here, the SEC and the CFTC, actually
do what former Chairman Frank wanted Dodd-Frank to do, and that is to
issue a rule and issue a rule that would be effective, in their
judgement, for the betterment of the economy and for the regulated
entities involved.
And with that, I see my time is up. I encourage a ``yes'' vote on
this legislation.
{time} 1620
Mr. CONAWAY. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, I rise today to urge my colleagues to pass H.R. 1256,
the Swap Jurisdiction Certainty Act. Swaps are important tools that our
farmers, ranchers, and businesses rely on to hedge the risks of
competing in a global marketplace. Yet later this month, guidance the
CFTC issued could fundamentally disrupt these markets here at home and
around the world unless Congress acts today.
Last summer, the CFTC issued its proposed crossborder guidance to the
marketplace for review and comment, explaining how it would regulate
swaps entered into by foreign companies. What was produced was
startling in its reach--the guidance declares that almost any swap
entered into by anyone with any interest related to the United States
falls under the jurisdiction of the CFTC and the Dodd-Frank Act.
As chairman of the General Farm Commodities and Risk Management
Subcommittee, I held a hearing on this issue last December with
Commissioners Sommers and Chilton from the CFTC and regulators from the
European Union and Japan. Each witness agreed that it was imperative
that we get the crossborder application of Dodd-Frank correct and that
the U.S. not try to police swap markets around the world.
Respect for equivalent, but not necessarily identical, regulatory
standards has been a cornerstone of international banking regulations
for decades. The CFTC as rewritten the principles of international
cooperation with this guidance, insisting that it alone can and should
manage the global swaps markets. Predictably, this was met with
universal outcry from foreign governments and international regulators.
But today's bill is about far more than just the pride of
international regulators. If the CFTC's guidance stands and equivalence
is no longer recognized, the global derivatives market can become
regionalized as institutions and customers transact a majority of their
business within their home jurisdictions. Such an outcome would
concentrate specific risks in various economies and sectors of the
world.
Here at home, American end users who use swaps to manage everyday
business risks may have fewer counterparties to work with. Fewer
counterparties means that there will be less competition and liquidity
in the market, leading to higher costs for end users and a
concentration of higher risk in the United States.
Not only has the CFTC failed to cooperate with international
regulators, it's failed to do so at home, as well, leading the SEC to
propose a separate rule governing the small slice of swaps
[[Page H3327]]
markets that it regulates. Today, there are two different sets of rules
for when market participants are subject to U.S. law, depending on what
instrument is being traded.
The Swap Jurisdiction Certainty Act will end this mess. It first
requires that the CFTC and the SEC cooperate on a single, joint rule
for the extraterritorial application of Dodd-Frank regulations. Second,
it requires the CFTC and the SEC to recognize the competence of certain
sophisticated foreign regulators, unless they can both agree that the
regulators have failed to produce equivalent requirements.
For all the back and forth today, this is a simple, straightforward
bill. In a nutshell, it requires the CFTC and the SEC to cooperate,
both with each other and with the rest of the world--exactly what they
should have been doing all along.
I'd like to thank my counterpart on the Financial Services Committee,
Mr. Garrett, for his work on bringing this legislation to the floor
today. I would, as well, like to thank Ranking Member David Scott, who
continues to be a thoughtful and productive partner on issues in the
Agriculture Committee. And, finally, I'd like to thank Chairman Frank
Lucas who never lets us forget that our constituents depend on these
markets to manage their businesses and protect themselves in an
uncertain world.
With that, I urge swift passage of the legislation and reserve the
balance of my time.
Mr. DAVID SCOTT of Georgia. Thank you, Mr. Chairman. I yield myself
such time as I may consume.
Let me say at the outset that what has been clearly brought to our
attention today is a great need for leadership. That's what this is
about. Derivatives are here. The other side pointed out very
magnificently we're dealing with a $600 trillion piece of the world
economy. It must have rules. It must have regulations. This is the duty
and the responsibility of the United States Congress to do so. To do
otherwise would indeed weaken Dodd-Frank. What this bill does is
strengthen Dodd-Frank.
Now, I serve on both the Agriculture Committee and the Financial
Services Committee. I'm also the ranking member of the General Farm
Commodity and Risk Management Subcommittee. I mention those things
because I have been intimately involved in this issue for a long time,
and I know the consequences if we do not respond.
Now, why do we need this bill? Dodd-Frank has been approved almost 3
years; but right today, we still do not know what swaps activities will
be subject to U.S. regulation and which ones will be subject to foreign
regulations. If something is shameful, that is shameful.
In section 722, the Dodd-Frank Act limits the CFTC's jurisdiction
over swaps transactions outside the United States for those that have
``direct and significant connection with activities in or effect on
commerce in the United States.'' However, section 722, the same
section, limits the SEC's jurisdiction over security-backed swaps
outside the United States, as well. That brings confusion.
What is the proper thing to do? Ask these two agencies to harmonize.
Give us one rule so that that will apply. That's what this bill does.
We are dealing with a global market. We cannot put our American banking
system at a disadvantage competitively. That is what will weaken Dodd-
Frank. That is what will bring about another crisis beyond what we
already have.
So, Mr. Speaker, what we need to do is understand that on the foreign
market, what are we dealing with? We're not dealing with every nation
in the world. We are dealing with only the nine largest economies, and
we must make sure that their regulatory regimes are as strong as ours.
That is the responsibility of the SEC and the CFTC. That's what this
bill is.
As far as AIG and as far as all of the other debacles that have
happened, we're all upset about that. That's why we must move with this
legislation.
Now, very briefly, much has been said about what has happened as if
we've done nothing about it. Mr. Speaker, we've put clearing in so that
all swaps transactions must be cleared. Clearing of swap contracts will
eliminate bilateral credit risk, and it transfers that risk to
clearinghouses which requires market participants to post margins, put
up their own money. That's how you prevent another calamity.
The margin requirements are there also for uncleared swaps. And the
clearing rules and the margin rules taken together mean that all swap
contracts will be fully secured by high-quality liquid assets, and this
is what will prevent another scenario.
And so I started what I said with what is desperately needed here:
leadership. To allow this crossborder to go unanswered any longer is
weakening us. Mr. Gensler, who is the chairman of the CFTC, next week
will be meeting in Montreal with the European regulators. Leadership is
needed. There is a July 23 deadline that all of the international
markets must meet to deal with rules and regulations.
{time} 1630
The wrong thing for us to do is not to pass this bill. And I assure
my colleagues, my Democratic and Republican friends, I've gone through
the safeguards we've put in here. This will not happen again. It will
not happen again because we have strengthened Dodd-Frank. And the head
of our Fed, Chairman Bernanke, said in his own words, We need this
cross-border protection; we need this legislation.
So with that, I reserve the balance of my time because I have some
other speakers that we'd like to hear from.
Mr. CONAWAY. Mr. Speaker, I yield 2 minutes to a former member of the
Agriculture Committee and the subcommittee, the gentleman from North
Carolina (Mr. Hudson).
Mr. HUDSON. Mr. Speaker, I rise today in strong support of H.R. 1256,
the Swap Jurisdiction Certainty Act, which requires the CFTC and the
SEC to cooperate on a single rule for how U.S. derivatives regulations
are applied overseas.
This bill and several others we will consider today are critically
important to the work we have begun in the House Agriculture Committee
to reform Dodd-Frank and make this bill less onerous for our farmers
and bankers.
As Commissioner Jill Sommers noted, it appears as though the CFTC was
``guided by what could only be called the 'Intergalactic Commerce
Clause''' as they prepared their cross-border guidance when it was
released last summer.
How foreign institutions comply with Dodd-Frank is of enormous
consequence. The CFTC has taken the position that virtually everyone
everywhere is a U.S. person and subject to its jurisdiction. Without
question, this expansive claim of jurisdiction is going to raise the
cost for farmers and end users in my home State of North Carolina to
hedge their risk and diminish global competitiveness of our domestic
financial firms, which employ many people back home in North Carolina.
The CFTC is risking all this to an end that no one seems to fully
understand. Their actions are making financial regulatory reform more
burdensome and more complicated, while serving only to alienate the
CFTC and U.S. markets from the rest of the world.
The Swap Jurisdiction Certainty Act would force the CFTC to cooperate
with the SEC on a single standard for cross-border application of swaps
regulations. In addition, the bill is narrowly tailored to guarantee
that the top nine foreign swaps markets will be recognized by the CFTC
and SEC as having comparable rules so foreign firms would be governed
by the laws of their home countries.
This bill does not allow unchecked swaps markets to spring up in
Caribbean island nations or the four corners of Southeast Asia, as some
on the other side of the aisle have alluded. Instead, it directs the
CFTC to do what it should have done in the first place: to cooperate
with its fellow regulators both down the street and around the world.
I urge its adoption.
Mr. DAVID SCOTT of Georgia. I yield 1\1/2\ minutes to the gentleman
from Delaware (Mr. Carney).
Mr. CARNEY. I would like to thank Mr. Scott for yielding time and for
his leadership on this issue.
I rise today in support of H.R. 1256. It will lead to a stronger,
more robust set of regulations for the derivatives market.
[[Page H3328]]
Let me be clear, this is not an effort to roll back Title VII of
Dodd-Frank or to weaken its reach overseas. In fact, its intent is to
harmonize regulations for cross-border swaps transactions, to eliminate
confusion, and to prevent the establishment of two sets of rules in
certain jurisdictions, which we know will leave us vulnerable to
companies who would want to exploit those loopholes. In fact, this is a
goal that our former chair and ranking member articulated well in a
letter that he cosigned with Senator Tim Johnson to the regulators
dated October 4, 2011, in which he says:
U.S. regulators should work with other international
regulators to seek broad harmonization of appropriately tough
and effective standards. Should current harmonization efforts
ultimately fail or prove a race to the bottom that would
undermine effective regulation, the U.S. would of course
reserve the right to proceed to extend the application of its
standards to overseas operations.
That's exactly what this bill does: it calls on the CFTC and the SEC
to issue joint regulations in overseas markets, and in the G8 plus Hong
Kong, in those markets where there are already rigorous regulations,
the CFTC to determine whether our regulations are strong enough. If
they are not, they can apply our regulations there.
So this bill is a good bill to create one set of regulations around
the world that will be strong and clear and consistent.
Mr. Speaker, I rise today to support H.R. 1256. It will lead to a
stronger, more robust set of regulations for the derivatives market.
Let me be clear, this is not an effort to roll back Title 7 of Dodd-
Frank or to weaken its reach overseas.
In fact its intent is to harmonize regulations for cross-border swaps
transactions.
To eliminate confusion.
And to prevent the establishment of two sets of rules in certain
jurisdictions--which we know leaves us vulnerable to companies who want
to exploit loopholes when there's a patchwork of regulations.
Unfortunately, since the passage of Dodd-Frank, the CFTC and SEC have
moved forward with conflicting proposals to enforce Dodd-Frank
derivatives law in markets overseas.
This bill has one goal: to create clear, strong and consistent rules
governing derivatives transactions for U.S. companies operating around
the world.
It does this in two ways.
First: it tells the SEC and CFTC to coordinate and issue their swaps
regulations jointly. That way, we have one set of regulations that
companies have to follow.
Under current law, the two agencies can issue overlapping, or even
conflicting regulations. In fact, that's exactly what they've done.
This is confusing and burdensome for U.S. firms. But more
importantly, it creates opportunities for firms to exploit
inconsistencies and loopholes in the regulations.
This bill requires one consistent set of regulations to close
loopholes and eliminate confusion.
Second: this bill acknowledges the strong regulatory commitment some
nations have already made to regulate swaps.
The bill says that since these countries are moving forward with
derivatives regulations that are comparable to ours in scope and rigor,
companies engaged in derivatives transactions in these countries can
follow those regulations.
During consideration of this bill in the Financial Services
Committee, I supported an amendment offered by the Ranking Member that
would have flipped the presumption in the bill.
Instead of presuming that certain countries have broadly equivalent
regulations to ours, it would've directed the regulators to proactively
make that determination. That amendment didn't pass. But there is a
failsafe in this bill.
But, this is critical. Under this bill, if the SEC and CFTC look at
these countries' regulations and determine that they are not in fact as
strong or robust as our regulations, the agencies can require that
companies operating in those countries follow U.S. law.
Our regulators remain in control.
Without this bill, firms operating overseas, even in the nine
countries where most of this business takes place, will have to comply
both with U.S. regulation, and the regulations of those countries.
Again, this leaves us vulnerable to firms that want to exploit this
patchwork regulatory framework. Or worse, it could drive derivative
trading away from US firms and further away from the view of our
regulators.
The SEC, just a few weeks ago, proposed a draft rule that
acknowledges the need for harmonization between our rules and the rules
of other countries.
Here's the bottom line.
The goal is really simple, and that is to reach an accommodation
where we have strong regulatory requirements that are consistent across
borders, that are strong, but that do not create loopholes or confusion
in those markets.
Mr. CONAWAY. Mr. Speaker, may I inquire as to how much time remains
on each side?
The SPEAKER pro tempore. The gentleman from Texas has 4\1/2\ minutes
remaining. The gentleman from Georgia has 2 minutes remaining.
Mr. CONAWAY. Mr. Speaker, I yield 2 minutes of my time to the
gentleman from Georgia (Mr. Scott) for his use.
The SPEAKER pro tempore. Without objection, the gentleman from
Georgia will control the time.
There was no objection.
Mr. DAVID SCOTT of Georgia. With that, I'd like to yield 1\1/2\
minutes to the gentleman from Florida (Mr. Murphy).
Mr. MURPHY of Florida. I thank the gentleman from Georgia for
yielding.
I rise in support of H.R. 1256.
Title VII of Dodd-Frank contains important structural reforms to the
derivatives market so that complicated, unregulated financial
instruments can never bring our economy to its knees again. However, no
law is perfect, and we should look for ways to improve Wall Street
Reform to keep unintended consequences from trickling down to Main
Street.
The bill before us would put SEC and CFTC on the same page, giving
American businesses the ability to compete with foreign companies on a
level playing field. This will not destabilize the global financial
system because the bill demands a broadly equivalent swaps regime as
Title VII.
The global derivatives market deserves smart regulations, not
duplicative or conflicting requirements. I urge my colleagues to
support this commonsense, technical adjustment.
Mr. CONAWAY. I reserve the balance of my time.
The SPEAKER pro tempore. The gentleman from Georgia is advised that
he has 3 minutes remaining.
Mr. DAVID SCOTT of Georgia. With that, I yield 1\1/2\ minutes to the
gentlewoman from Wisconsin (Ms. Moore).
Ms. MOORE. I thank the gentleman from Georgia.
I rise today to support H.R. 1256, the Swap Jurisdiction Certainty
Act.
I proudly supported the Dodd-Frank Wall Street Reform Act because I
believed that regulations of derivatives were desperately needed, and
today I stand here to support what is a very modest change because I
believe that the inability of the CFTC and the SEC to come together on
a definition of ``U.S. persons'' is centrally important to effective
cross-border rules and regulations and rules of the road.
Now, I did support the gentlelady from California's amendment for
switching the presumption. Because of the closed rules, we were unable
to take that up at this time, and I believe it would have improved the
bill. However, although this amendment was not adopted, I believe that
the regulators will continue to have the authority to regulate any
overseas swaps transactions under U.S. rules if they conclude that it
is appropriate.
I believe that without this bill we could find U.S. companies going
outside not only the jurisdiction of the United States and our losing
our competitiveness, but those swaps activities could migrate away from
U.S. companies overseas to companies outside of the reach of U.S.
regulators. So I would urge my colleagues to support this important
legislation.
Mr. CONAWAY. I reserve the balance of my time.
Mr. DAVID SCOTT of Georgia. With no other speakers, Mr. Speaker, let
me just close by saying, with the international, interconnected,
complex nature of financial markets and the sizeable role the
derivatives play within the global economy--as I mentioned, $600
trillion--international harmonization of rulemaking between the CFTC
and the SEC is critical, and a coordinated regulatory cooperation
between the nine largest global partners keeping our financial
institutions at a competitive position is critical. That's what this
bill does.
I urge all of my colleagues to support this important and timely
piece of legislation.
I yield back the balance of my time.
{time} 1640
Mr. CONAWAY. Mr. Speaker, I yield myself the balance of my time.
[[Page H3329]]
We have heard from a number of foreign governments around the world
on their entities' regulatory schemes and--let me just say--strong
disagreement with the cross-border guidance that Chairman Gensler and
the CFTC proposed.
We have heard from Ministers of Finance from the United Kingdom, the
European Commission, France, Brazil, Germany, South Africa, Russia, and
Switzerland. We've heard from the European Securities and Markets
Authority. In Australia, we've heard from the Reserve Bank of Australia
and the Australian Securities and Investments Commission. The Hong Kong
Secretary for Financial Services and the Treasury. Japan has weighed in
with the Japan Financial Services Agency and the Bank of Japan. The
Monetary Authority of Singapore, the Swiss Financial Market Supervisory
Authority, and from the UK we've heard from the Chancellor of the
Exchequer and the Financial Services Authority.
I would like to submit for the Record two of those letters; one to
Secretary Lew from a number of folks, and the other is to Chairman
Gensler from England, the European Union, Japan, as well as France. Mr.
Speaker, all of these letters are posted on the Agriculture Committee's
Web site for constituents and others to read and get a flavor of what
our fellow regulators around the world are saying about this. None of
them have any interest in an unregulated market. They all see the risks
that we see.
This bill simply asks the SEC and the CFTC to get along, come to a
conclusion, whatever that might be, and then deal equitably with their
fellow regulators around the world. These are bright, smart people,
just like we are. For us to argue that we have the only perfect scheme
to regulate derivatives is a bit wrongheaded. This bill goes a long way
to fixing that.
I would urge my colleagues to support the bill, vote in favor of it,
and I yield back the balance of my time.
18 April 2013.
Cross-Border OTC Derivatives Regulation
Dear Secretary Lew: We, the undersigned, are writing to
express our concern at the lack of progress in developing
workable cross-border rules as part of reforms of the OTC
derivatives market.
We are already starting to see evidence of fragmentation in
this vitally important financial market, as a result of lack
of regulatory coordination. We are concerned that, without
clear direction from global policymakers and regulators,
derivatives markets will recede into localised and less
efficient structures, impairing the ability of business
across the globe to manage risk. This will in turn dampen
liquidity, investment and growth.
We share a common commitment with respect to OTC
derivatives reform, and are implementing rules across very
different markets with different characteristics and
different risk profiles, to support this global initiative.
We believe the basic principles on which cross-border rules
should be based are clear and widely shared, and we summarise
them in the annex to this letter. An approach in which
jurisdictions require that their own domestic regulatory
rules be applied to their firms' derivatives transactions
taking place in broadly equivalent regulatory regimes abroad
is not sustainable. Market places where firms from all our
respective jurisdictions can come together and do business
will not be able to function under such burdensome regulatory
conditions.
A coherent collective solution is therefore needed for
cross-border derivatives, and regulators must work together
to avoid outright conflicts in regulation and minimise
overlaps as far as possible. In this regard, mutual
recognition, substituted compliance, exemptions, or a
combination of these would all be a valid approach, and
careful consideration should be given with respect to
registration requirements for firms operating across borders.
Recent experience shows that these discussions can only
proceed if they are based on a shared understanding of the
overall outcome being sought. For this reason, we are writing
to urge that jurisdictions consider carefully the attached
principles to avoid cross-border conflicts and support the
Pittsburgh G20 reforms. We hope that these principles might
provide a useful foundation for regulatory discussions to
make progress.
We urge all authorities to work with us to achieve an
outcome that meets the principles outlined in this letter and
we, in turn, commit to continue to work to address the areas
of concern which are most fundamental to others. To this end,
this letter is copied to the Chairman of the FSB; the
Chairman of the CFTC; the Chairman of the SEC; the Chairman
of the U.S. Senate Committee on Agriculture, Nutrition and
Forestry; and the Chairman of the US House of Representatives
Committee on Agriculture.
Yours sincerely
Guido Mantega,
Minister of Finance, Government of Brazil.
Pierre Moscovici,
Minister of Finance, Government of France.
Taro Aso,
Deputy Prime Minister, Minister of Finance, Minister of
State for Financial Services, Government of Japan.
Pravin Gordhan,
Minister of Finance, Government of South Africa.
George Osborne,
Chancellor of the Exchequer, UK Government.
Michel Barnier,
Commissioner for Internal Market and Services, European
Commission.
Wolfgang Schauble,
Minister of Finance, Government of Germany.
Anton Siluanov,
Minister of Finance, Government of Russia.
Eveline Widmer-Schlumpf,
Finance Minister, Government of Switzerland.
____
October 17, 2012.
U.S. Cross Border Swaps Rules
Hon. Gary Gensler,
Chairman, Commodity Futures Trading Commission, Washington,
DC.
Dear Chairman Gensler: We, the undersigned, would like to
share our concerns with you about the implementation of the
current phase of post-crisis regulatory reform, as you
reflect on the final shape of the CFTC cross border rules for
swaps.
Faithfully implementing the reforms adopted by the G20 in
2009 in Pittsburgh on the clearing and electronic trading of
standardised OTC derivatives in a non-discriminatory way
remains of the utmost importance. As you know, Europe has
adopted legislation on clearing and is in the final stages of
negotiation on the trading aspect of the G20 Pittsburgh
reforms. In Japan, clearing requirements will be effective in
November and legislation on trading platforms was recently
approved by the Diet. While there may be differences in some
areas of detail, we believe the US, the Member States of the
EU and Japan are now set to implement these historic reforms
in a broadly consistent way in our respective jurisdictions.
This is a significant achievement, capturing the large
majority of the global swaps market. But as has been
continuously stressed by G20 leaders since 2009, domestic
legislation alone does not fulfil the political aim that was
agreed in Pittsburgh and reaffirmed in Toronto in 2010.
Regulation across the G20 needs to be carefully implemented
in a harmonised way that does not risk fragmenting vital
global financial markets.
For all its past faults, the derivatives market has allowed
financial counterparties across the globe to come together to
conduct more effective risk management and, as a result,
support economic development. Done properly this should be of
benefit to all. At a time of highly fragile economic growth,
we believe that it is critical to avoid taking steps that
risk a withdrawal from global financial markets into
inevitably less efficient regional or national markets.
We of course recognise and understand the need for US and
other regulators to satisfy themselves on the adequacy of
regulation in other jurisdictions. But we would urge you
before finalising any rules, or enforcing any deadlines, to
take the time to ensure that US rulemaking works not just
domestically but also globally. We should collectively adopt
cross border rules consistent with the principle that
equivalence or substituted compliance with respect to partner
jurisdictions, and consequential reliance on the regulation
and supervision within those jurisdictions, should be used as
far as possible to avoid fragmentation of global markets.
Specifically, this principle needs to be enshrined in CFTC
cross border rules, so that all US persons wherever they are
located can transact with non-US entities using a
proportionate substituted compliance regime.
We assure you our regulatory authorities stand ready to
work closely with you to ensure an effective cross border
regime is implemented at the earliest possible opportunity
and provide you with the necessary information and
reassurance regarding our respective regulatory frameworks.
Yours sincerely,
George Osborne,
Chancellor of the Exchequer, UK Government.
Michel Barnier,
Commissioner for Internal Market and Services, European
Commission.
[[Page H3330]]
Ikko Nakatsuka
Minister of State for Financial Services, Government of
Japan.
Pierre Moscovici,
Minister of Finance, Government of France.
Mr. BLUMENAUER. Mr. Speaker, I supported the passage of the Dodd-
Frank Wall Street Reform Act in 2010 to rein in Wall Street, end
taxpayer bailouts of big banks, and protect consumers. Under this Act,
the CFTC and the SEC were charged with regulating a number of
previously unregulated or under-regulated Wall Street and financial
service sector activities that led in large part to the 2008 crisis,
including the $700 trillion derivatives market.
While Congress has a responsibility to ensure that the reforms
enacted under Dodd-Frank are clear and effective--and many may still
require clarification from Congress--the bill under consideration
today, H.R. 1526, is premature and potentially damaging. I therefore do
not support this legislation.
Regulators at the CFTC and the SEC continue to make progress on
implementing important regulations of the derivatives market. Given
this progress and the fact that this is an ongoing process, intervening
and micromanaging the rulemaking process at this stage would only delay
the positive benefits these changes will have for Americans.
I also have concerns that this legislation sets a policy that would
make it more difficult for regulators to ensure that U.S. derivatives
transactions conducted overseas through foreign entities are subject to
the new rules, potentially opening up a hole in the regulatory process.
In requiring that the CFTC and the SEC issue a joint determination
along with a formal report to Congress to establish that another
country's rules are not ``broadly comparable'' to U.S. rules, this
legislation creates an extra layer of bureaucracy on these already
overburdened agencies that will hinder their effectiveness.
Regulating the derivatives market is a huge and important job. This
legislation slows this progress without benefit to the American people
or our economy.
Mr. MARKEY. Mr. Speaker, I rise in opposition to the bill being
considered today, H.R. 1256, the Swap Jurisdiction Certainty Act.
Although couched as an innocuous bill to ensure that US banks have
clarity about how swaps and derivatives trades are to be managed
between U.S. and non-U.S. entities, in reality this bill will
significantly impede efforts to apply strong regulations on Wall Street
banks trading in these financial products.
The size of the global swaps market is staggering. According to the
Bank for International Settlements, at the end of last year, the total
notional value of outstanding over-the-counter swaps was over 632
trillion dollars. Again, 632 trillion dollars. In comparison, the gross
domestic product of the entire United States was just 15.1 trillion
dollars at the end of last year. The swaps market is over 40 times
larger than the entire U.S. economy; in fact, the swaps market is 10
times larger than the entire global economy.
This market is also truly global in scope. Many of our major Wall
Street banks, such as J.P. Morgan, Bank of America, and Goldman Sachs,
have significant foreign subsidiaries. Bank of America alone has
subsidiaries in approximately 40 countries. Given the massive size of
this market, we need the strongest possible rules over swaps
transactions in foreign subsidiaries that could adversely affect U.S.
banks and bank holding companies.
Unfortunately, this bill will prevent our primary regulator of the
swaps market, the Commodity Futures Trading Commission, from finalizing
strong regulations. The CFTC has spent years crafting strong rules
governing cross-border swaps and derivatives and has received a large
amount of industry input on these rules. The most recent draft was
circulated on May 16, 2013. If this bill passes, that entire process
will be stopped in its tracks, even as the rules are supposed to be
finalized within the next 30 days. Enacting this bill now is tantamount
to tripping the CFTC at the finish line.
Even beyond the poor timing of this bill, the bill will substantially
weaken the CFTC's ability to regulate the global swaps market. Under
the text of H.R. 1256, the CFTC and the SEC are to jointly release
rules governing cross-border swaps. Yet, as part of that rulemaking,
the CFTC and SEC are required to assume that a foreign person in
compliance with the regulations of any of the nine largest combined
swap jurisdictions is also in compliance with all U.S. swaps rules.
Given that the United States sets the global standard in financial
matters, this provision effectively makes all global swaps rules only
as strong as the rules of the weakest country among the nine largest
jurisdictions. In other words, it will prompt a regulatory race to the
bottom, which is a recipe for disaster.
Have we learned nothing from the excesses of the Bush Administration,
when financial deregulation allowed excessively risk derivatives
driving a financial market collapse? Just five years after that
experience, this is a bill that allows for increased deregulation of
some of Wall Street's most dangerous financial products at a time when
we need more regulation of swaps. It was only one year ago that J.P.
Morgan experienced its ``London Whale'' fiasco, where bad decisions by
J.P. Morgan personnel in London resulted in New York based J.P. Morgan
taking a loss of $6.2 billion. No one in senior management, risk,
legal, or compliance was aware of the risks or liabilities being
assumed by people in the London office. Yet, if CFTC's cross-border
swaps rules were in place, maybe that disaster would not have happened.
U.S. based swaps dealers are increasingly fragmented, and we need
strong central rules to minimize the risk of swaps trading causing
another financial crisis. At a time when we are just four years removed
from the worst recession since the Great Depression, a recession
sparked by insufficient regulation of the swaps market, this bill is
the wrong solution for the wrong problem at the wrong time. I urge my
colleagues to vote no on H.R. 1256.
Mr. VAN HOLLEN. Mr. Speaker, I have substantial sympathy with those
seeking regulatory clarity and with U.S. companies wishing to avoid
being competitively disadvantaged when operating abroad. At the same
time, one of the hard-learned lessons from the recent financial crisis
is that outsized risk readily crosses national boundaries, which is why
prudential regulation of cross-border derivatives transactions that can
impact our economy was embedded in the Dodd-Frank Wall Street Reform
law.
The problem with today's legislation is that it seeks to achieve
regulatory certainty for these kinds of transactions by effectively
substituting foreign derivatives rules for our own safeguards unless
the Commodity Futures Trading Commission (CFTC) and the Securities and
Exchange Commission (SEC) both agree that the foreign rules in question
are not ``broadly equivalent'' to our own.
Like the Administration, I would prefer for Americans to rely on U.S.
law for protection in this area, and for our regulators to finish their
work on these important safeguards in coordination with their foreign
counterparts--rather than presume that foreign regulation, and in some
cases foreign regulation that hasn't even been written yet, will be
sufficient to do the job.
The SPEAKER pro tempore. All time for debate has expired.
Pursuant to House Resolution 256, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit
Mr. SEAN PATRICK MALONEY of New York. Mr. Speaker, I have a motion to
recommit at the desk.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. SEAN PATRICK MALONEY of New York. I am in its current form.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Page 7, after line 24, insert the following:
(4) Additional criteria on china, iran, and other
countries who engage in cyber attacks or violate the iran
sanctions act.--The Commissions shall determine that the
regulatory requirements of a country, administrative region,
or other foreign jurisdiction are not broadly equivalent to
United States swaps requirements if the Commissions determine
that such country, administrative region, or other foreign
jurisdiction--
(A) engages in cyber attacks and does not have, or has
but does not enforce, laws to deter cyber attacks against
U.S. person, including U.S. companies, and the Government of
the United States; and
(B) is in violation of, or does not enforce comparable
restrictions to, the Iran Sanctions Act of 1996, the
Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010, the Iran Threat Reduction and Syria Human Rights
Act of 2012, and the International Emergency Economic Powers
Act.
Page 8, line 1, strike ``(4)'' and insert ``(5)''.
Page 11, after line 2, insert the following:
(g) Exclusions of Corporations That Violate Iran
Sanctions Act or Engage in Cyber Attacks.--A non-U.S. person
shall not receive the exemption provided in subsection (d) if
the Commissions determine such person has--
(1) been the subject of a civil or criminal proceeding
for violating the Iran Sanctions Act of 1996, the
Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010, the Iran Threat Reduction and Syria Human Rights
Act of 2012, or the International Emergency Economic Powers
Act; or
(2) been the subject of a civil or criminal proceeding
related to cyber attacks on the
[[Page H3331]]
Government of the United States or U.S. companies.
Page 11, line 3, strike ``(g)'' and insert ``(h)''.
Mr. SEAN PATRICK MALONEY of New York (during the reading). I ask
unanimous consent to dispense with the reading.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New York?
Mrs. WAGNER. I object, Mr. Speaker.
The SPEAKER pro tempore. Objection is heard.
The Clerk will read.
The Clerk continued to read.
The SPEAKER pro tempore. The gentleman from New York is recognized
for 5 minutes in support of his motion.
Mr. SEAN PATRICK MALONEY of New York. Thank you, Mr. Speaker.
I rise today to offer the final amendment to the bill. It will not
kill the bill or send it back to the committee. If adopted, the bill
will immediately proceed to final passage as amended.
I rise to offer this motion to recommit because this bill in its
current form misses an opportunity to do more, and we should not let
that opportunity pass.
The underlying legislation has the goal of extending reasonable
accommodations to like-minded friends and allies around the globe. A
stronger, better coordinated global regulatory framework is, of course,
a goal that we all share.
My amendment is simple. It says that the accommodations we extend to
our friends must not be extended to those who actively seek to harm the
United States--our citizens, our allies, our corporations--by violating
the Iran Sanctions Act or by engaging in cyber attacks against the
United States.
The dangers of a nuclear Iran are real. They are made even more real
by actors who continue to bypass American and U.N. sanctions.
Iran is an existential threat to our friend and our ally Israel. Iran
is a growing menace in the Middle East, arming both the Syrian regime
and Hezbollah, and undermining peace in Iraq. Iran is actively pursuing
the development of a nuclear capability, which we cannot allow.
We cannot let countries or corporations who do not share our values
reap the benefits of this bill. That's why my amendment would target
countries and corporations and deny them the benefits of this bill if
they violate the Iran Sanctions Act.
We have very strong laws on the books blocking any violation of the
Iran Sanctions Act, here or abroad, either by countries or corporations
who don't share our values. That's a good thing.
In fact, the President just recently issued a new Executive order
further tightening these sanctions, particularly in the financial
sector. That's why this final amendment is key to keeping this
legislation aligned with these efforts to keep Iran isolated from the
international community and to eliminate any new sources of funding to
the Iranian regime.
My amendment also targets countries that engage in cyber attacks
against our country or our corporations. Countries like Iran and other
countries such as China try to undermine the United States, our
companies, our infrastructure, our systems every day, thousands of
times a day.
Cyber attacks result in a huge economic loss to our intellectual
property to the tune of hundreds of billions of dollars annually, not
to mention the extreme danger to our national security, our banks, our
infrastructure.
My amendment doesn't allow transactions under this bill that would
harm either the United States or Israel. We cannot and should not walk
away from making this bill better, and I urge my colleagues to support
my amendment.
I yield back the balance of my time.
Mrs. WAGNER. Mr. Speaker, I rise in opposition to the motion.
The SPEAKER pro tempore. The gentlewoman from Missouri is recognized
for 5 minutes.
Mrs. WAGNER. Mr. Speaker, my friends on the other side of the aisle
just refuse to face the fact that 3 years ago with the passage of Dodd-
Frank they created some of the most complex and confusing rules our
economy has ever seen.
It is by no means a coincidence that the difficulties faced by
farmers and small businesses and families in obtaining credit today is
a direct result of Dodd-Frank's chilling effect on our capital markets.
The bill that we are considering today has nothing to do with cyber
attacks. Although this is an important matter, this issue has nothing
to do with cyber attacks. If it was so important, I'm wondering why it
was not offered in either committee where we were fully debating this
particular bill.
{time} 1650
Our system is broken, absolutely broken, at the Federal regulatory
level. The SEC and the CFTC have promulgated two completely different
regulations to govern cross-border swap transactions. The delay and
disorder on this issue end today.
Mr. Speaker, disparate regulations governing the same behavior hinder
the capital markets and hurt the economy. I am hopeful that a
bipartisan vote on this legislation will send a strong signal to our
regulators in Washington that finally, after 3 years, they need to come
together for the good of economic growth and prosperity. I urge a
``no'' vote on the motion to recommit and a ``yes'' vote on H.R. 1256.
I yield back the balance of my time.
The SPEAKER pro tempore. Without objection, the previous question is
ordered.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. SEAN PATRICK MALONEY of New York. Mr. Speaker, on that I demand
the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 and clause 9 of rule
XX, this 15-minute vote on the motion to recommit will be followed by
5-minute votes on the question on passage of H.R. 1256, if ordered; and
the motion to suspend the rules and pass H.R. 1038.
The vote was taken by electronic device, and there were--yeas 194,
nays 230, not voting 10, as follows:
[Roll No. 217]
YEAS--194
Andrews
Barber
Barrow (GA)
Bass
Beatty
Becerra
Bera (CA)
Bishop (GA)
Bishop (NY)
Blumenauer
Bonamici
Brady (PA)
Braley (IA)
Brown (FL)
Brownley (CA)
Bustos
Butterfield
Capps
Capuano
Cardenas
Carney
Carson (IN)
Cartwright
Castor (FL)
Castro (TX)
Cicilline
Clarke
Clay
Cleaver
Clyburn
Cohen
Connolly
Conyers
Cooper
Costa
Courtney
Crowley
Cuellar
Cummings
Davis (CA)
Davis, Danny
DeFazio
DeGette
Delaney
DeLauro
DelBene
Dingell
Doggett
Doyle
Duckworth
Duncan (TN)
Edwards
Ellison
Engel
Enyart
Eshoo
Esty
Farr
Fattah
Foster
Frankel (FL)
Fudge
Gabbard
Gallego
Garamendi
Garcia
Grayson
Green, Al
Green, Gene
Gutierrez
Hahn
Hanabusa
Hastings (FL)
Heck (WA)
Higgins
Himes
Hinojosa
Holt
Honda
Horsford
Hoyer
Huffman
Israel
Jackson Lee
Jeffries
Johnson (GA)
Johnson, E. B.
Jones
Kaptur
Keating
Kelly (IL)
Kennedy
Kildee
Kilmer
Kind
Kirkpatrick
Kuster
Langevin
Larsen (WA)
Larson (CT)
Lee (CA)
Levin
Lewis
Lipinski
Loebsack
Lofgren
Lowenthal
Lowey
Lujan Grisham (NM)
Lujan, Ben Ray (NM)
Lynch
Maffei
Maloney, Carolyn
Maloney, Sean
Matheson
Matsui
McCollum
McDermott
McGovern
McIntyre
McNerney
Meng
Michaud
Miller, George
Moran
Murphy (FL)
Nadler
Napolitano
Neal
Negrete McLeod
Nolan
O'Rourke
Owens
Pallone
Pascrell
Pastor (AZ)
Payne
Pelosi
Perlmutter
Peters (CA)
Peters (MI)
Peterson
Pingree (ME)
Pocan
Price (NC)
Quigley
Rahall
Rangel
Richmond
Roybal-Allard
Ruiz
Ruppersberger
Rush
Ryan (OH)
Sanchez, Linda T.
Sanchez, Loretta
Sarbanes
Schakowsky
Schiff
Schneider
Schrader
Schwartz
Scott (VA)
Scott, David
Serrano
Sewell (AL)
Shea-Porter
Sherman
Sinema
Sires
Slaughter
Smith (WA)
Speier
Swalwell (CA)
Takano
Thompson (CA)
Thompson (MS)
Tierney
Titus
Tonko
Tsongas
Van Hollen
Vargas
Veasey
Vela
Velazquez
Visclosky
Walz
Waters
Watt
Waxman
Welch
Wilson (FL)
Yarmuth
NAYS--230
Aderholt
Alexander
Amash
Amodei
Bachmann
Bachus
Barletta
Barr
Barton
Benishek
Bentivolio
Bilirakis
Bishop (UT)
Black
Blackburn
Bonner
Boustany
Brady (TX)
[[Page H3332]]
Bridenstine
Brooks (AL)
Brooks (IN)
Broun (GA)
Buchanan
Bucshon
Burgess
Calvert
Camp
Cantor
Capito
Carter
Cassidy
Chabot
Chaffetz
Coble
Coffman
Cole
Collins (GA)
Collins (NY)
Conaway
Cook
Cotton
Cramer
Crawford
Crenshaw
Culberson
Daines
Davis, Rodney
Denham
Dent
DeSantis
DesJarlais
Diaz-Balart
Duffy
Duncan (SC)
Ellmers
Farenthold
Fincher
Fitzpatrick
Fleischmann
Fleming
Flores
Forbes
Fortenberry
Foxx
Franks (AZ)
Frelinghuysen
Gardner
Garrett
Gerlach
Gibbs
Gibson
Gingrey (GA)
Gohmert
Goodlatte
Gosar
Gowdy
Granger
Graves (GA)
Graves (MO)
Griffin (AR)
Griffith (VA)
Grijalva
Grimm
Guthrie
Hall
Hanna
Harper
Hartzler
Hastings (WA)
Heck (NV)
Hensarling
Herrera Beutler
Holding
Hudson
Huelskamp
Huizenga (MI)
Hultgren
Hunter
Hurt
Issa
Jenkins
Johnson (OH)
Johnson, Sam
Jordan
Joyce
Kelly (PA)
King (IA)
King (NY)
Kingston
Kinzinger (IL)
Kline
Labrador
LaMalfa
Lamborn
Lance
Lankford
Latham
Latta
LoBiondo
Long
Lucas
Luetkemeyer
Lummis
Marchant
Marino
Massie
McCarthy (CA)
McCaul
McClintock
McHenry
McKeon
McKinley
McMorris Rodgers
Meadows
Meehan
Messer
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Mullin
Mulvaney
Murphy (PA)
Neugebauer
Noem
Nugent
Nunes
Nunnelee
Olson
Palazzo
Paulsen
Pearce
Perry
Petri
Pittenger
Pitts
Poe (TX)
Polis
Pompeo
Posey
Price (GA)
Radel
Reed
Reichert
Renacci
Ribble
Rice (SC)
Rigell
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Rokita
Rooney
Ros-Lehtinen
Roskam
Ross
Rothfus
Royce
Runyan
Ryan (WI)
Salmon
Sanford
Scalise
Schock
Schweikert
Scott, Austin
Sensenbrenner
Sessions
Shimkus
Shuster
Simpson
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Southerland
Stewart
Stivers
Stockman
Stutzman
Terry
Thompson (PA)
Thornberry
Tiberi
Tipton
Turner
Upton
Valadao
Wagner
Walberg
Walden
Walorski
Weber (TX)
Webster (FL)
Wenstrup
Whitfield
Williams
Wilson (SC)
Wittman
Wolf
Womack
Woodall
Yoder
Yoho
Young (AK)
Young (FL)
Young (IN)
NOT VOTING--10
Campbell
Chu
Deutch
Harris
Markey
McCarthy (NY)
Meeks
Moore
Wasserman Schultz
Westmoreland
{time} 1716
Messrs. CALVERT, ROGERS of Alabama, YOUNG of Indiana, and CAMP
changed their vote from ``yea'' to ``nay.''
Mr. HUFFMAN and Ms. WILSON of Florida changed their vote from ``nay''
to ``yea.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Ms. WATERS. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This is a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 301,
noes 124, not voting 9, as follows:
[Roll No. 218]
AYES--301
Aderholt
Alexander
Amash
Amodei
Bachmann
Bachus
Barber
Barletta
Barr
Barrow (GA)
Barton
Benishek
Bentivolio
Bera (CA)
Bilirakis
Bishop (GA)
Bishop (UT)
Black
Blackburn
Bonner
Boustany
Brady (TX)
Brooks (AL)
Brooks (IN)
Broun (GA)
Brownley (CA)
Buchanan
Bucshon
Burgess
Butterfield
Calvert
Camp
Cantor
Capito
Cardenas
Carney
Carson (IN)
Carter
Cassidy
Chabot
Chaffetz
Clay
Clyburn
Coble
Coffman
Cole
Collins (GA)
Collins (NY)
Conaway
Connolly
Cook
Cooper
Costa
Cotton
Cramer
Crawford
Crenshaw
Crowley
Cuellar
Culberson
Cummings
Daines
Davis, Rodney
Delaney
DelBene
Denham
Dent
DeSantis
DesJarlais
Diaz-Balart
Duckworth
Duffy
Duncan (SC)
Duncan (TN)
Ellmers
Esty
Farenthold
Fincher
Fitzpatrick
Fleischmann
Fleming
Flores
Forbes
Fortenberry
Foster
Foxx
Franks (AZ)
Frelinghuysen
Gabbard
Gallego
Garcia
Gardner
Garrett
Gerlach
Gibbs
Gibson
Gingrey (GA)
Gohmert
Goodlatte
Gosar
Gowdy
Granger
Graves (GA)
Graves (MO)
Griffin (AR)
Griffith (VA)
Grijalva
Grimm
Guthrie
Gutierrez
Hahn
Hall
Hanabusa
Hanna
Harper
Harris
Hartzler
Hastings (WA)
Heck (NV)
Heck (WA)
Hensarling
Herrera Beutler
Himes
Holding
Horsford
Hudson
Huelskamp
Huizenga (MI)
Hultgren
Hunter
Hurt
Israel
Issa
Jenkins
Johnson (GA)
Johnson (OH)
Johnson, Sam
Jordan
Joyce
Kelly (IL)
Kelly (PA)
Kilmer
Kind
King (IA)
King (NY)
Kingston
Kinzinger (IL)
Kirkpatrick
Kline
Kuster
Labrador
LaMalfa
Lamborn
Lance
Lankford
Larsen (WA)
Latham
Latta
Lipinski
LoBiondo
Long
Lowey
Lucas
Luetkemeyer
Lummis
Maffei
Maloney, Sean
Marchant
Marino
Massie
Matheson
McCarthy (CA)
McCaul
McClintock
McHenry
McIntyre
McKeon
McKinley
McMorris Rodgers
McNerney
Meadows
Meehan
Meng
Messer
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moore
Mullin
Mulvaney
Murphy (FL)
Murphy (PA)
Neugebauer
Noem
Nugent
Nunes
Nunnelee
Olson
Owens
Palazzo
Paulsen
Pearce
Perlmutter
Perry
Peters (CA)
Peters (MI)
Peterson
Petri
Pittenger
Pitts
Poe (TX)
Polis
Pompeo
Posey
Price (GA)
Quigley
Radel
Rahall
Reed
Reichert
Renacci
Ribble
Rice (SC)
Richmond
Rigell
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Rokita
Rooney
Roskam
Ross
Rothfus
Royce
Ruiz
Runyan
Ruppersberger
Ryan (WI)
Salmon
Sanchez, Loretta
Sanford
Scalise
Schneider
Schock
Schrader
Schwartz
Schweikert
Scott, Austin
Scott, David
Sensenbrenner
Sessions
Sewell (AL)
Sherman
Shimkus
Shuster
Simpson
Sinema
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Southerland
Stewart
Stivers
Stockman
Stutzman
Terry
Thompson (MS)
Thompson (PA)
Thornberry
Tiberi
Tipton
Turner
Upton
Valadao
Vargas
Veasey
Vela
Wagner
Walberg
Walden
Walorski
Weber (TX)
Webster (FL)
Wenstrup
Whitfield
Williams
Wilson (SC)
Wittman
Wolf
Womack
Woodall
Yoder
Yoho
Young (AK)
Young (FL)
Young (IN)
NOES--124
Andrews
Bass
Beatty
Becerra
Bishop (NY)
Blumenauer
Bonamici
Brady (PA)
Braley (IA)
Bridenstine
Brown (FL)
Bustos
Capps
Capuano
Cartwright
Castor (FL)
Castro (TX)
Cicilline
Clarke
Cleaver
Cohen
Conyers
Courtney
Davis (CA)
Davis, Danny
DeFazio
DeGette
DeLauro
Dingell
Doggett
Doyle
Edwards
Ellison
Engel
Enyart
Eshoo
Farr
Fattah
Frankel (FL)
Fudge
Garamendi
Grayson
Green, Al
Green, Gene
Hastings (FL)
Higgins
Hinojosa
Holt
Honda
Hoyer
Huffman
Jackson Lee
Jeffries
Johnson, E. B.
Jones
Kaptur
Keating
Kennedy
Kildee
Langevin
Larson (CT)
Lee (CA)
Levin
Lewis
Loebsack
Lofgren
Lowenthal
Lujan Grisham (NM)
Lujan, Ben Ray (NM)
Lynch
Maloney, Carolyn
Matsui
McCollum
McDermott
McGovern
Michaud
Miller, George
Moran
Nadler
Napolitano
Neal
Negrete McLeod
Nolan
O'Rourke
Pallone
Pascrell
Pastor (AZ)
Payne
Pelosi
Pingree (ME)
Pocan
Price (NC)
Rangel
Roybal-Allard
Rush
Ryan (OH)
Sanchez, Linda T.
Sarbanes
Schakowsky
Schiff
Scott (VA)
Serrano
Shea-Porter
Sires
Slaughter
Smith (WA)
Speier
Swalwell (CA)
Takano
Thompson (CA)
Tierney
Titus
Tonko
Tsongas
Van Hollen
Velazquez
Visclosky
Walz
Waters
Watt
Waxman
Welch
Wilson (FL)
Yarmuth
NOT VOTING--9
Campbell
Chu
Deutch
Markey
McCarthy (NY)
Meeks
Ros-Lehtinen
Wasserman Schultz
Westmoreland
{time} 1723
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________