As prepared for delivery.
“The Senate Committee on Agriculture, Nutrition, and Forestry will now come to order. Thank you, Senator Chambliss, and fellow members of this Committee, for being here today as we address one of the most important issues facing our nation and our economy. I cannot overstate the significance of the subject matter of our hearing today. Financial market oversight reform is, quite simply, the single most important factor in our long-term economic recovery; it will be the foundation for our nation’s financial future. Reform is essential to reaffirm the integrity and soundness of our financial system, and to maintain our nation’s preeminence as a global leader in worldwide financial markets. Perhaps most importantly, we need financial reform to give comfort to consumers and businesses so that they can trust our markets to determine fair prices and to help manage risks.
“Over the last decade, we’ve seen deregulation sweep over America in a way that has simply devastated our economy. From the tragedy of the Enron bankruptcy in 2002 to the massive failures of Bear Stearns and AIG in 2008, a steady stream of market calamities has exposed fatal flaws in our regulatory system. These flaws have cost America dearly. Given this reality, “business as usual” is not acceptable – fundamental financial market oversight reform must pass.
“It is important to remember that, while we must correct mistakes of the past, we do not want to overreact or veer too far in the other direction. We have no desire to, nor will we, act in ways that will prevent legitimate business activity or stifle innovation. But the word “innovation” can’t be a code word for unacceptable practices. “Smoke and mirrors” accounting schemes, massively leveraged but under- or non-capitalized transactions, or “house of cards” entities posing as “investment vehicles” are not the kind of innovations that prudent financial market oversight should foster. We can do better. And we will.
“The task set before us is considerable, but not impossible. It is difficult, but it is not unattainable. It will be—at times—confusing, but the answers are not impenetrable. We will get it done. Senator Chambliss and I intend to work together to produce legislation that will bring much needed transparency and accountability to the over-the-counter derivatives markets. In our legislation, I am looking to address issues such as prudential regulations related to enhanced capital and margin requirements, clearing of over-the-counter transactions, as well as a host of other matters including forex trading and foreign boards of trade. The list is long, but we will get there. And I look forward from hearing from all interested participants, getting their views, and cultivating a healthy debate on these topics. Today we will focus specifically on three areas: end-user margin and clearing, the definition of major swap participants, and mandatory clearing of “standardized” products. I particularly look forward to today’s testimony from end-users. Knowing the importance of cash flow and working capital to businesses, I will be paying as much attention to what they say about clearing requirements and "margin” as I will to how we address systemic risk. On December 2, we plan to hold a second hearing, at which Treasury Secretary Geithner will testify, and we will further analyze these and other issues. I look forward to hearing views from all sides on these important matters.
“Lastly, I want to commend Senator Dodd for the draft legislation he released last week, and its comprehensive review of the nation’s banking oversight system. There are areas of mutual interest in financial market oversight and I look forward to working cooperatively with him and his Committee as we move forward. There is a lot of work to be done, but I know that we will pass reform legislation that truly does “build something better.” We owe that to America’s consumers and businesses, and they deserve no less than our best efforts to ensure that the U.S. financial oversight system promotes and fosters the most honest, open, and reliable financial markets in the world. Thank you for your time here today, and I look forward to hearing from our witnesses and from my colleagues as we move forward to reach this goal.”
