Sen. Debbie Stabenow(D-MI), who is chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, gave the keynote address at the Buyside and End-User Perspective on the Safety and Liquidity of the Swaps Market Forum. Rep. Jim Himes (D-CT), a member of the House Financial Services Committee, also delivered remarks during the forum and participated in a Q&A session with the audience.
Here are highlights from their remarks.
Sen. Debbie Stabenow
Sen. Debbie Stabenow
“As we look back at what brought us here, there’s no question that the system, as it existed prior to reform, was broken. Eight million Americans lost their jobs because of reckless and irresponsible behavior.
My position is pretty simple – fix what’s broken. We know that despite the few bad actors who abused the system, derivatives play an important role in our global economy. More than 38 million Americans work at companies that use derivatives to manage their risk and many more, from pensions to municipalities, use them to protect against market volatility.
The decisions made in the coming months will shape the derivatives regulatory landscape and global financial markets for decades to come.
Last year, Congress passed the Dodd-Frank Act to address the abuses in these markets and to give significant authority to regulators to prevent future crises. While Congress greatly expanded the authority of the agencies, it also came with the understanding that they must take a thoughtful, cautious approach that reflects Congressional intent.
Most importantly, we increased transparency in these markets. Transparency will provide important market and pricing information to buyside firms; it will protect the integrity of these markets; and, simply put, it levels the playing field.
Given the strong legislative intent, the regulators still have broad new authorities, and the devil is in the details. While the regulators are thoughtful and dedicated to getting this right, they need to hear from market participants in order to get there. The agencies, from the Fed to the SEC to the CFTC, need to hear about the costs and benefits associated with reform. They need to hear specifics from your best technical experts.
As we move towards a ‘new normal,’ you need to work with the regulators, reiterating the message that these markets must function globally and that the new swaps regime must mitigate risk, not create it. The new accountability and transparency we have created is clearly in the public interest, and the most important thing is to get it right.
And we won’t get it right if the agencies don’t have the tools they need to do the job. Underfunding regulators that have just been given significant new authorities will pull staff away from the important tasks of registering participants, approving products and regulating the markets, which may create more uncertainty and could actually harm competitiveness.
These are dynamic, diverse markets, and we need to provide as much certainty as possible.
I look forward to working with market participants, my colleagues in the Senate and the regulators to make sure we get the implementation of these reforms right to protect our system from another crisis, while maintaining the competitiveness of U.S. businesses and financial markets.
Given the potential unintended consequences, we are left with a fundamental question – how do we strike the right balance? Discussions with market participants and policymakers will help us find the answer.”
Rep. Jim Himes
Rep. Jim Himes
During a Q&A session with Rep. Jim Himes (D-CT), the two-term representative covered a wide range of issues in the debate over financial reform. Himes brought a unique perspective to the day’s events by mixing his decade-plus experience in the financial industry with his in-depth knowledge of public policy and his role as a member of the House Financial Services Committee.
Himes stressed the need for harmonizing regulations across the U.S., Europe and Asia in response to several questions from the audience. He noted that regulators will need to work together in the months ahead to ensure a consistent set of market rules to prevent regulatory arbitrage or a “race to the bottom.” He also said regulators will need to proceed cautiously when implementing the new rules under Dodd-Frank to avoid unintended consequences that could hurt the U.S. economy and impede job creation.
Himes, who noted that he was proud of his work on Dodd-Frank, said the bill was designed to help restore investor confidence in the financial system while promoting robust and competitive markets. To achieve these objectives, Himes said the CFTC and SEC would need a substantial increase in funding to carry out their added responsibilities. At the same time, he urged the regulators to become more flexible and adaptable in response to changes in market structure. @