In his opening speech to the committee, Senator Patrick Leahy, chairman of the senate judiciary committee, urged both houses to hold strong on derivatives reform.
“I want to congratulate Agriculture chairwoman Blanche Lincoln and Banking Committee chairman Chris Dodd for shepherding this significant piece of legislation through the United States Senate,” Leahy, a Democrat from Vermont, began.
“Getting to this point was no small feat, and Senators Lincoln and Dodd – along with majority leader Harry Reid – have persevered because they know that fixing our troubled financial system is absolutely and unequivocally in the best interests of our country and its citizens.
“If this financial crisis has taught us anything, it is that the look-the-other way, hands-off deregulatory policies that were in vogue in recent times can jeopardise not only private investments, but our entire economy. We need more transparency and oversight of Wall Street – and we need to prohibit financial institutions from growing ‘too big to fail’.”
Leahy added that he hoped the final bill would include provisions he had worked on as chairman of the Senate Judiciary Committee, empowering law enforcement and federal agencies to investigate and uncover financial crimes.
“The American people
He also voiced his support for Blanche Lincoln’s proposal, which would force investment banks to divorce their swap trading desks. “The Agriculture Committee’s derivatives section is a major step toward finally bringing the $600tr derivatives market out of the dark and into the light of day – ending the days of backroom deals that put our entire economy at risk.
“A narrow end-user exemption will allow legitimate commercial interests – like electric cooperatives and heating oil dealers – to continue hedging their business risks, but it will stop Wall Street traders from artificially driving up prices of heating oil, gasoline, diesel fuel and other commodities through unchecked speculation. We need to keep this narrow end-user exemption – and we need to end government bailouts of these risky swap endeavours.”
Leahy’s comments are sure to please those who have campaigned for tighter restrictions and position limits on US energy markets.
“The problem is,” he concluded,“these bets on derivative schemes are usually made with other people’s money, and in magnitudes that can, and have, threatened to bring the entire economy crashing down. That’s not a game; it’s risking the livelihoods of millions of American families. And this is everyone’s economy, not just theirs.
“Mr Chairman, we are on the cusp of a major victory for the American people with a bill that will rein in Wall Street abuses, end government bailouts, and give everyday Americans the consumer protection they deserve and expect. I believe that cleaning up these Wall Street abuses will help build confidence in our economy and continue our progress toward economic recovery.”
Tom Osborn +44 207 779 8361 firstname.lastname@example.org