As prepared for delivery.
“The Senate Committee on Agriculture, Nutrition and Forestry will now come to order. I thank Senator Chambliss and my colleagues on this Committee for coming together once again in the space of two weeks to address issues of financial market regulatory reform. The timing of these hearings is indicative of the high priority I place on the matters we will address today, and it also is reflective of what I perceive as the need to resolve these issues as promptly as possible. I welcome Secretary Geithner and our other panelists, and I look forward to hearing your testimony this morning.
“Since the financial crisis of last fall, I’ve spent a considerable amount of time talking to folks in Arkansas. I’ve heard from people from all walks of life about how the economic downturn has impacted them. I’ve talked with farmers, small business owners, wage-earners, people from the city and country, single parents, people who have lost their jobs and are looking for work, and people who still have their jobs but who have been stung by the rising prices of commodities and have to make choices about putting food on the table or gas in the tank.
“What I took away from all my conversations was that “business as usual” is simply not acceptable any more. People are hurting, and we need to find answers.
“The financial crisis has struck at the very fiber of our national identity. We are not a nation of spendthrifts, or of fraudsters, or of sharp dealers. We didn’t build our reputation as the premier leader in global financial markets by cutting corners, engaging in risky behaviors, or developing business strategies that are intended in large part to avoid the positive restraints of regulatory oversight. That is not, to put it simply, the American way.
“Yet somehow, somewhere along the way, we lost our compass. In the name of “financial innovation” and rampant “deregulation,” we lost sight of the clear, certain path of hard work, honesty and fair dealing upon which this nation—and our national character—was built. At some point, we were pulled off track by the lure of “too good to be true” financial schemes and scams, and the myth of “too big to fail” financial behemoths. We’re all well aware of where this approach has gotten us.
“I believe it is time we return to those fundamental characteristics of our true national identity—hard work, honesty, and fair dealing—and look to them as guideposts as we go about building a new architecture for financial market regulatory reform in this country. As I see it, our problems with the financial market meltdown of last fall stemmed primarily from two problems: inadequate federal oversight of significant sectors of our financial system—particularly OTC derivatives trading—combined with a failure to use existing authorities to their fullest extent. We now have the responsibility to ensure that market regulators have all the tools they need, and to charge them with the mandate to use those tools.
“Let me reiterate comments I have made previously: I am not about stifling market growth, market innovation, or legitimate business activity in any way, shape or form. Nor do I have any interests in shipping this important economic engine overseas. I have the greatest respect for the financial market engineers and participants who work in and utilize the nation’s commodities and securities markets. That being said, I want to be very clear that a certain amount of “market re-engineering” will be in order as a result of changes in financial market oversight. To address systemic risk and ensure fully transparent markets, we will have to speak to issues relating to the scope of mandatory clearing, the definition of “standardization,” segregation of collateral, open access, enhanced capital and margin requirements, resolution authority, and conflicts of interest, just to name a few. Some of the legislative solutions to these matters will—and should—result in certain changes in the way business is done. We need to expect that. The way we were doing business before took us to the edge of the cliff—now we need to find a better way to oversee these markets so that doesn’t happen again—to us, to our children, or to our grandchildren.
“Let me also be clear on one last point—I want to hear from every interested party on this issue. I have talked extensively with banks, hedge funds, indexers, energy companies, utilities, exchanges, clearing organizations and agencies, and all manner of commodity market participants. Their input is vital to this process. In addition, I am working with my colleagues in Congress, as well as with regulators at the Fed, Treasury, SEC and CFTC to ensure that we are coordinating these complex issues as we should.
“We need to remember our over-arching goal—increasing transparency and accountability in the nation’s financial markets. We must be mindful as we move forward with this new architecture not to create duplicative or unnecessary levels of prudential regulation. We need to strengthen our financial market oversight bodies—the SEC and the CFTC—to give them needed authorities over currently opaque OTC markets, and we need to find the right balance of powers between federal financial oversight authorities to ensure that both markets and regulators operate efficiently.
“Senator Chambliss and I will be working together to produce comprehensive legislation on this issue. And we will coordinate with our colleagues on the Senate Banking Committee in the context of the larger regulatory reform legislation as we address issues that affect matters within the jurisdiction of the Agriculture Committee. In the end, there will be no doubt in anyone’s mind that all have had a fair opportunity to be heard. I recognize that’s a tall order, but we will get there. As a wise man once said, in matters of great importance such as this, “failure is not an option.”
“Our timetable is aggressive because, as I’ve noted, there is an urgency to act—the American people need and deserve financial market regulatory reform. We need to ensure that we have the most open, honest and efficient markets in the world, and we’re going to settle for nothing less. The scope of our hearing today focuses on systemic risk, particularly on clearing issues, and concerns related to clearing. I look forward to hearing from our witnesses as they present their particular points on view and expertise on these matters. Thank you for your participation today.”
