House members support tough derivatives regs in financial reform bill

By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

Washington, June 23 – With the House/Senate conference on the financial reform bill due to take up the contentious derivatives issue Thursday, six House members and a major end user called for tough derivatives regulation.

At a press conference Wednesday, Rep. Rosa DeLauro (D-CT) who chairs the House Appropriations Subcommittee on Agriculture called on House conferees “to uphold the strong regulatory language on derivatives included in the Senate legislation. The House should recede to the Senate on this.” Referring to the stringent new regulations championed by Senate Agriculture Committee Chair Blanche Lincoln (D-AR), DeLauro called for “the broad clearing and exchange trading requirements, real-time reporting, heightened standards of fiduciary duty, and clear capital and margin requirements that are included in the Senate bill.”

Backing tough derivatives regulations, L to R, Reps. Mike Thompson (D-CA), Bart Stupak (D-MI),
Marcy Kaptur (D-OH), John Larson (D-CT) and Rosa DeLauro (D-CT). Photo: Agri-Pulse.

DeLauro said the Lincoln provisions are essential to “ensure that commercial banks are not using taxpayer money to fund what to all intents and purposes is gambling on the derivatives markets.” Blaming “Wall Street malfeasance” and “a casino culture where traders played with taxpayers dollars,” she urged House conferees “to stand with working families against the reckless gambling culture that plunged our economy into a recession.”

Representing major end users, Air Transport Association President & CEO Jim May was equally forceful in calling for far tighter control of the still unregulated derivatives market which ballooned to an estimated $600 trillion. He said that “In 2008 during the height of the oil crisis, airlines burned about the same amount of fuel that we burned in 2003 but we paid $42 billion more . . . and it was due almost exclusively to speculation in the markets.” He said the Senate proposal, rather than the weaker House version, “closes loopholes, provides transparency, provides stability to these markets and is critical to the future of all Americans whether it is by controlling the rampant speculation in heating oil or gasoline prices or jet fuel. We strongly support the Senate bill . . . and we hope the Congress will put this bill on the President's desk before the Fourth of July.”

Rep. Marcy Kaptur (D-OH) said tough derivatives regulation and transparency are essential to draw “a strong line between speculation and banking in this country.” She said reining in derivatives is “a fight about power. It's a fight about Main Street power versus Wall Street power . . . It's about the power of ordinary people to have their money belong to them again. . . the real money that's earned by people who grow product or make product. . . This is all about making money and those that are harmed by the Senate language are those who have been making truckloads of money and it's been paid for by the taxpayers of this country.” She warned that “If the House language is retained as the conference language, half of the derivatives in this country will not be regulated.”

Rep. Bart Stupak (D-MI) said that as chair of the House Energy & Commerce Committee's Oversight & Investigations Subcommittee he's investigated “the unchecked speculation . . . that takes place in the oil market. You can see it every day how it fluctuates, without cause. That's unregulated trading going on, speculation, no real-time reporting, no transparency.” He called for strict derivatives regulation to protect the “whole financial basis of this country.”

Among other speakers, Rep. Mike Thompson (D- CA) said it's important “to make sure that we adopt the Senate language and put forth the strongest consumer protections, the strongest Wall Street reform, that we possibly can.” Rep. John Larson (D-CT) said “we must let the fierce light of scrutiny shine in the dark markets.” Rep. Jackie Speier (D-CA) said it's long overdue “to make sure that derivatives are strongly regulated moving forward.”

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