05.19.10
Says stopping debate now would result in lax reform of dark derivatives markets
Cantwell Votes to Continue Efforts to Strengthen Wall Street Reform Legislation
Says stopping debate now would result in lax reform of dark derivatives markets
WASHINGTON, DC – Today U.S. Senator Maria Cantwell (D-WA) voted to continue debate on financial regulatory reform legislation, saying that the bill as it stands fails to close loopholes on unregulated derivatives trading. Those loopholes, Cantwell said, were primarily responsible for the severe economic meltdown that has increased unemployment and cut off investment capital. Senate rules require 60 votes to stop debate; the move to end debate garnered only 57 votes. Cantwell was among 42 senators voting to continue debate on the regulatory reform bill.
The issue, Cantwell said, is ensuring transparency and oversight of the currently unregulated derivatives market. Even seemingly small loopholes can create structural flaws in the financial system that can cause tremendous damage in the long term as they are exploited by Wall Street. She likened the issue to building a dam.
“Even something like the Hoover Dam, with all the great concrete and all the great engineering … still has a problem if somebody drills a hole in the bottom of it,” Cantwell said in a Senate floor speech just after the vote. “This issue is a fundamental one. We won’t have reform if we don’t have exchange trading and clearing, if we don’t bring derivatives onto the same kind of mechanisms we have for other products in the financial markets. And if we don’t have that, then I don’t know what we’re doing out here in the context of what brought us into this crisis.”
Cantwell is seeking derivatives reforms including: minimum requirements for capital behind trades; transparency in pricing; real-time monitoring of trading activity; transparent valuation of derivatives; limits on speculation; and public transparency. The pending reform bill contains many strong provisions that Cantwell not only supports but co-authored. But she said the derivatives language in the current version of the bill retains loopholes that could once again cause serious financial disruption.
Senators Cantwell and Blanche Lincoln (D-AR) have coauthored an amendmentthat has not yet been considered by the Senate that tightens clearing requirements for trading derivatives. The amendment requires that all standardized swaps must be cleared and that failure to do so makes the swap unlawful and could void the swap.
Senators Cantwell and John McCain (R-AZ) have filed another amendment not yet debated that would reinstate the Glass-Steagall Act’s separation of commercial and investment banking. In her floor speech, Cantwell said she would like a vote on this measure, but that her primary concern was the derivatives issue.
Throughout the debate, Senator Cantwell has tirelessly fought to defeat efforts to weaken the legislation, and she has championed amendments that strengthen the bill, particularly in the areas of derivatives trading. Cantwell, a leader in the fight to prevent a repeat of the financial meltdown of 2008, and in previous years to end energy market manipulation, helped craft the tough derivatives language under consideration in the financial regulatory reform bill on the floor. She is fighting to strengthen that language further.
On May 17, the Senate passed an amendment co-sponsored by Cantwell that provides strong protections for investors while promoting small business startups vital to job creation.
On May 13, the Senate passed an amendment 61 to 38 submitted by Cantwell and Senator George LeMieux (R-FL) to remove the federal government’s ‘seal of approval’ from investment rating agencies and force federal regulators to develop more diverse and accurate measures of credit worthiness. Economists, regulators, and industry experts have agreed that an over-reliance on credit ratings contributed significantly to the recent economic crisis.
On May 6, the Senate unanimously passed Cantwell’s anti-manipulation amendment, which makes it easier for the Commodities Futures Trading Commission (CFTC) to deter and enforce manipulation in futures and derivatives markets. Under current law, the standard the CFTC must meet to prove market manipulation is so high that there has only been one successful prosecution in the past 35 years.
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The issue, Cantwell said, is ensuring transparency and oversight of the currently unregulated derivatives market. Even seemingly small loopholes can create structural flaws in the financial system that can cause tremendous damage in the long term as they are exploited by Wall Street. She likened the issue to building a dam.
“Even something like the Hoover Dam, with all the great concrete and all the great engineering … still has a problem if somebody drills a hole in the bottom of it,” Cantwell said in a Senate floor speech just after the vote. “This issue is a fundamental one. We won’t have reform if we don’t have exchange trading and clearing, if we don’t bring derivatives onto the same kind of mechanisms we have for other products in the financial markets. And if we don’t have that, then I don’t know what we’re doing out here in the context of what brought us into this crisis.”
Cantwell is seeking derivatives reforms including: minimum requirements for capital behind trades; transparency in pricing; real-time monitoring of trading activity; transparent valuation of derivatives; limits on speculation; and public transparency. The pending reform bill contains many strong provisions that Cantwell not only supports but co-authored. But she said the derivatives language in the current version of the bill retains loopholes that could once again cause serious financial disruption.
Senators Cantwell and Blanche Lincoln (D-AR) have coauthored an amendmentthat has not yet been considered by the Senate that tightens clearing requirements for trading derivatives. The amendment requires that all standardized swaps must be cleared and that failure to do so makes the swap unlawful and could void the swap.
Senators Cantwell and John McCain (R-AZ) have filed another amendment not yet debated that would reinstate the Glass-Steagall Act’s separation of commercial and investment banking. In her floor speech, Cantwell said she would like a vote on this measure, but that her primary concern was the derivatives issue.
Throughout the debate, Senator Cantwell has tirelessly fought to defeat efforts to weaken the legislation, and she has championed amendments that strengthen the bill, particularly in the areas of derivatives trading. Cantwell, a leader in the fight to prevent a repeat of the financial meltdown of 2008, and in previous years to end energy market manipulation, helped craft the tough derivatives language under consideration in the financial regulatory reform bill on the floor. She is fighting to strengthen that language further.
On May 17, the Senate passed an amendment co-sponsored by Cantwell that provides strong protections for investors while promoting small business startups vital to job creation.
On May 13, the Senate passed an amendment 61 to 38 submitted by Cantwell and Senator George LeMieux (R-FL) to remove the federal government’s ‘seal of approval’ from investment rating agencies and force federal regulators to develop more diverse and accurate measures of credit worthiness. Economists, regulators, and industry experts have agreed that an over-reliance on credit ratings contributed significantly to the recent economic crisis.
On May 6, the Senate unanimously passed Cantwell’s anti-manipulation amendment, which makes it easier for the Commodities Futures Trading Commission (CFTC) to deter and enforce manipulation in futures and derivatives markets. Under current law, the standard the CFTC must meet to prove market manipulation is so high that there has only been one successful prosecution in the past 35 years.
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