the speaker pro tempore: on this vote the yeas are 238. the nays are 186. the resolution is adopted.

without objection, to reconsider is laid upon the table. for what purpose does the gentleman from illinois rise? mr. davis: i ask unanimous consent to have my name removed as a co-sponsor of h.res. 951. the speaker pro tempore: without objection. the speaker pro tempore: the unfinished business is the question to suspend the rules and agreeing to h.r. 55 which the clerk will report by title. the clerk: house resolution 55, resolution expressing support for the designation of a national syndrome awareness month to raise awareness and

promote research into this challenging disorder. the speaker pro tempore: the question is will the house suspend the rules and agree to the resolution. so many as are in favor say aye. those opposed, no. in the opinion of the chair, 2/3 of those voting having responded in the affirmative, the rules are suspended, the resolution is agreed to, and without objection the motion to reconsider is laid upon the table. pursuant to house resolution 964 and rule 18, the chair declares the house in the committee of the whole house on the state of the union for the further consideration of h.r. 4173. will the gentlewoman from california, ms. sanchez, kindly take the chair.

the chair: the house is in the committee of the whole house on the state of the union for the further consideration of h.r. 4173 which the clerk will report by title. the clerk: bill to provide for financial regulatory reform to protect consumers and investors, to enhance federal understanding of insurance issues, to regulate the over-the-counter derivative markets, and for other purposes. the chair: when the committee of the whole rose on wednesday, december 9, 2009, all time for general debate had expired pursuant to house resolution 956. and pursuant to house resolution 964, no further general debate shall be in order. the bill is amended shall be considered for amendment under the five-minute rule and shall be considered as read. no further amendment to the bill as amended shall be in order except those printed in house report 111-370 and amendments en bloc described in section 3 of house resolution 964. each amendment printed in the

report shall be considered only in the order printed in the report except as specified in section 4 of that resolution. may be offered only by a member designated in the report, shall be considered as read, shall be debatable for the time specified in the report equally divided and controlled by the proponent and an opponent. shall be subject to amendment, and shall not be subject to demand for division of the question. it shall be in order at any time for the chair of the committee on financial services or his designee to offer amendments en bloc consisting of amendments printed in the report not early disposed of. amendments en bloc pursuant to this section shall be considered as read, shall be debatable for 20 minutes, equally divided and controlled by the chair and ranking minority member of the committee on financial services or their designees. shall not be subject to amendment and shall not be subject to demand for division of the question. the original proponent of an amendment included in such

amendments en bloc may insert a statement in the congressional record immediately before the qm rise? mr. frank: i rise to offer amendment number one. the chair: the clerk will designate the am the clerk: amendment number 1, printed in house report number 111-370, offered by mr. frank of massachusetts. the chair: pursuant to house resolution 964, the gentleman from massachusetts, mr. frank, and a member opposed, each will control 15 minutes.

and the chair now recognizes the gentleman from massachusetts. mr. frank: i yield 30 seconds to my colleague from massachusetts, ms. tsongas. the chair: ms. tsongas is recognized. ms. tsongas: i urge adoption of mr. frank's manager's amendment which includes my amendment to guarantee that consumers have the same action sess to their credit scores that lenders now have. i have heard from a number of my constituents like carla from concord, mass, that quote, it seems unthinkable to me that consumers would be placed in the dark in regard to their creditworthiness, unquote. i'm proud to say the manager's amendment levels the playing field for consumers. i urge my colleagues to support the manager's amendment and the underlying bill. thank you. the chair: the gentlewoman's time has expired. who seeks time? mr. frank: i will now recognize -- i now yield 2 1/2 minutes to the gentlewoman from new york,

mrs. mccarthy: who wants to engage me in a colloquy. the chair: the gentleman is recognized and the gentlewoman is recognized for the stated amount of time. mrs. mcyarty: i would like to thank the gentleman from massachusetts to engage in a colloquy. i would like to clarify the analysis of systemic risk would be applied by the financial service oversight council and fund assessment. is it the chairman's intention that the factors used for identifying companies subject to strict standards should be allied in light of the more detailed and balanced risk matrix set out in the bill? mr. frank: the gentlewoman knows. there was a clerical glitch at the last minute so that we missed by a very narrow margin a submission time for the rules committee and what i am glad to have a chance to do now is agree with the woman that this language will go if we have anything to say about it into the conference report. the answer is yes.

mrs. mcyarte: i thank the chairman. and look forward to working with him and the process move forward. i yield back the balance of my time. the chair: does the gentleman reserve his time? mr. frank: we will take back that time and save it. . the chair: for what purpose does the gentleman from alabama rise? mr. bachus: at this time i'd like to recognize the gentleman from opposition, mr. bartlett, for a minute and a half. the chair: the gentleman is recognized for a minute and a half. mr. bartlett: it's not surprising that this legislation, like much legislation, might have an unintended consequence. one of my constituents pointed out just such in this legislation. i took the problem to the chairman and he graciously has fixed it in his manager's amendment. i'd like to yield to him so he can explain.

mr. frank: i'm trying to prevent fraud from various programs. in the subprime mortgage bill, which we're re-enacting here, which the house voted on we put in strict restrictions against people who had a pattern or history of fraud. the gentleman not only pointed out quite correctly that it was overly rigid, that it excluded someone who many, many years ago had been in an unrelated situation where culpability was uncertain, there wasn't a criminal conviction, this provides needed flexibility for minor offenses that were long ago. i thank the gentleman for calling it to my attention and we're pleased to make this change. mr. bartlett: i want to thank the chairman for helping solve this problem. -- problem, i yield back. the chair: the gentleman yields back. who seeks recognition? mr. frank: i yield 2 1/2 minutes to mr. miller. the chair: the gentleman from

north carolina is recognized for 2 1/2 minutes. mr. miller: thank you, madam speaker. or madam chair. and mr. frank. we will -- i will include in my revise and extend -- in my revised and extended remarks, the colloquy, i ask mr. frank to explain one committee amendment offered by mr. moore and me and explain the revisions tonight on the floor. the committee amendment and the revised amendment was originally a suggestion of the fdic to get at one of the most infuriated episodes in the entire financial crisis and the best example was the collapse and the rescue of a.i.g., which was not about a.i.g. but the counterparties to a.i.g. and we have now heard the counterparties, morgan stanley,

deutsche bank, refused to take anything less than 100% on the dollar of what a.i.g. owed them. according to the special director general from the tarp program, they did that because they had gained collateral of their debt in the last days of a.i.g.'s collapse so they knew they could get paid in full, even if a.i.g. went into bankruptcy. the fdic says it believes it is better to take over company, to take into resolution companies that are failing sooner rather than later so they don't arrive and find that every asset of the company has been pledged as collateral which leads to a more expensive resolution, a resolution that inevitably is more disruptive of the economy. it gets at two problem, one the collateral -- where the company

was insolvent and pledged collateral for existing debts in the last 90 tais before the resolution, the fdic can disregard it altogether. disregard the security altogether. then second, the short-term collateralized lending without any market displain based entirely on collateral without any thought to the actual condition of the borrower of the company. the amendment gets at that by allowing some portion of that tb set aside, 10% to be disregarded and then in limited circumstances, only short-term credit, one month or less, where the security is not a treasury or other government secured debt, it will impose market displain. thank you, madam speaker. the chair: the gentleman's time has expired. the gentleman from alabama. mr. bachus: i yield three minutes to the gentlelady from west virginia, mrs. capito. the chair: the gentlelady is recognized for three minutes.

mrs. capito: thank you. i'd like to speak to on -- in opposition to the bill but i'd like to talk about the manager's amendment as well. before i get into the manager's amendment, i'd like to reinforce my opposition to the bill in its entirety because of the permanent bailout fund that's created, the continuation of bailout the implied government guarantee in the financial marx place and the way that taxpayers are placed on the hook potentially for billions, if not trolls of dollars to bail out failed nonbanks. but specifically, i'd like to talk about the two parts of the manager's amendment added without discussion, specific discussion, by the committee, to my knowledge and also go to a larger point which is not only, we've labeled this bill tarp two, this goes back to tarp one, and using tarp funds to fund things that the tarp money was not intended to go for. i voted against the tarp funding in the first place and now in the manager's amendment, we have another $4 billion in

existing tarp funds going to unproven foreclosure relief programs. $3 million to reinstate a 1975 program, the emergency ohm owners relief act to provide emergency mortgage relief. we just had a hearing in our committee this week on the making home affordable plan, the administration's plan that in our opinion, i think across the board in a bipartisan way is a bust. it has not met with much success and it has murky, if uncertain, guidelines attached to it. so i think in this case, strapping an unemployed homeowner with more debt is not the answer. congress needs to support policies that create jobs and do not perpetuate any more bailouts. the other part of this amendment adds another $1 billion to the neighborhood stabilization program. this program is costly, is a costly bailout for lenders and speculators.

this could also have the unintended consequences of making foreclosure a more attractive option for lenders, thereby compounding the problem. we've already committed in two separate times six -- $6 billion to the neighborhood stabilization program and this adds another $1 billion. i think we also need to consider that this program of the $4 billion allocated to it in 2008, only 25% of the funds are even out the door. what is adding another $1 billion going to do and when can those funds get out the door and of the $1.9 billion allocated in january of 2009, not $1 has been made -- has made it through h.u.d.'s cumbersome bureaucracy. i object to the fact that this was added on to the manager's amendment on a complicated, 1,000-page bill but it also adds two additions on here thatible -- that i believe were part of the reason this bill has been held up through this

week and was held up yesterday, was to satisfy certain interests in this house and i think we need to have them discussed in front of the whole committee or in front of the whole house. the chair: the gentlewoman's time has expired. mr. frank: i yield two 1/2 minutes -- two and a half minutes to the gentleman north carolina. the chair: the gentleman is recognized for two and a half minutes. mr. watt: thank you, madam chair. it is an inconvenient fact that the constitution reserves certain rights to the states and allows the federal government to have certain rights and it sometimes gets inconvenient for those people who profess to believe in states' rights that we have to accommodate them. one of the most difficult parts of making the appropriate accommodation has been finding the right preemption of state

law standards to put into this bill. i'm deeply indebted to all of the members of the committee, particularly ms. bean, who's been very active on this issue. we worked out 10 different things on federal pre-emption. some reserve to the state, some reserve to the federal government. and as i said at the very outset of the discussions about this, we would know we would find the right place to be on pre-emption if the consumer groups were unhappy and the if the industry was unhappy. and both of them, we have succeeded in making unhappy, and they are equally unhappy, so i think we found the right balance on pre-emption. that's about all i can say because i don't have time to go

through the 10 things that we were table agree on, but nobody is jumping up and down and threatening to shoot any of us, but i can tell you that everybody is kind of equally unhappy. i appreciate the gentleman -- the chairman giving me the opportunity to explain that and i'm sure nobody understands it, but that's ok. the chair: the gentleman yields back. the gentleman from alabama. mr. bachus: madam chairman, i'll recognize the gentleman from texas, mr. neugebauer, for three minutes. the chair: the gentleman is recognized for three minutes. mr. neugebauer: there are a number of provisions in the manager's amendment that make this bill less bad. and really we've come a long way from the bill that was originally introduced to the one that's on the floor now. we went through a very lengthy markup process. in many cases, sometimes during those markups we were able to make the bill better.

and in this manager's amendment, there are some changes that in fact do make this bill a little less egregious to me. but the problem is, fundamentally, the bill still does what it originally started out to do, that is too perpetuate bailouts. one of the things that my creags -- colleagues and i said from the beginning is that the american people are tired of bailouts. unfortunately, this bill per pitch waits bailouts in this country. we continue to award -- reward bad behavior and punish good behavior and this bill perpetuates that. one thing that also concerns me about this bill, it's still, even with some improvements, it still becomes a job killer. one of the provisions in this bill would give secured creditors a haircut. here's somebody who took collateral to make a loan, thought they were securitized

and collateralized and now arbitraryly they can be gaven 20% haircut for their collateral. that's going to cause huge implication in the credit markets because these people, little small businessman, going out to borrow money on his plant or equipment or other things, lenders making what they think are secured loans and all of a sudden the lender finds himself at some point in time where their security is going to be shared with someone else. the other piece of this is that this bill does something i feel very strongly about, it limits the choices for consumers. i still believe that the american people are smart people. i think it's their money, their credit, they ought to have a lot more to say about the types of credit, the types of loans they take out and they don't need the federal government telling them they think this is the kind of loan we think is appropriate to you. this is the kind of loan you should use to send your child to college or this is the kind of car loan you should use or small businessman, this is the loan we give small businesses,

take it or leave it. the other part of it is that this bill does something i think is very egregious, i think the american people ought to be outraged. here we are, secretary geithner gave the democrats an early christmas present he said, you know what, that slush fund we got, we're going to keep it to next october and man, a day doesn't go by, here we go, we're going to put our hand in the cookie jar here, $4 billion out of the tarp money that was not represented to be used for these kinds of purposes, it was emergency to stabilize the markets, but we're going to put our hand in the cookie jar and take $4 billion and by the way, it's $4 billion we didn't have to begin with. we we had to borrow that $4 billion. instead of taking the participate money, as the treasury secretary recently told us, they said, i think the financial markets are basically stabilized. this is a bad bill, we should defeat it. the chair: the gentleman's time has expired. the gentleman from massachusetts.

mr. frank: i yield one of the strongest advocates of fairness and equitied on critics of lack of action to stop the foreclosure crisis, ms. waters of california. the chair: the gentlewoman is recognized for 2 1/2 minutes. . ms. waters: triggered by greed and risk that caused this country to almost collapse. this bill addresses all of the elements of that collapse by allowing the government to wind down too big to fail institutions before their failure threatens the entire global economy regulating risky over-the-counter derivatives and requiring credit rating agencies to avoid the conflicts of interest that cause them to inflate the value of toxic

assets. perhaps the most important part of this bill is the creation of a new consumer financial protection agency. this new agency's role will be to spot the next subprime crisis before it starts and prevent the next predatory product from stripping consumers of their homes and their wealth. i would especially like to thank financial services committee chairman barney frank for including a provision at the request of the members of the congressional black caucus to use $3 billion in troubled asset relief tarp dollars to provide low-interest loans to unemployed homeowners that are having difficulty making their mortgage payments. we also thank barney frank for including another $1 billion to strengthen the neighborhood stabilization program that will rehab foreclosed housing and also create jobs. this funding is needed because our current foreclosure prevention programs address the initial cause of our

foreclosure crisis, subprime and predatory lending, and not the current cause, unemployment, which is, at 10% nationally, and minority communities 13% to 15% plus. we know that these kinds of loans can work. since 1983 pennsylvania has run a very successful loan program, just ask mr. fattah, that has saved 42,700 unemployed homeowners from foreclosure. mr. speaker, foreclosures and unemployment present a systemic risk to our economy. therefore i strongly urge my colleagues to vote yes on the manager's amendment and on h.r. 4173. this is a very important piece of legislation. i yield back the balance of my time. the chair: the gentlelady's time has expired. the gentleman from alabama. mr. bachus: thank you, madam chairwoman. i yield myself such time as i may consume. the chair: the gentleman is

recognized. mr. bachus: i rise in strong opposition to the manager's amendment. i think the manager's amendment illustrates the contradictions between the statements we have heard from the other side and the actual substance of the legislation. i just want to point out three or four conflicts between what it says and what they say it says. the changes in the majority is $150 billion permanent bailout fund actually contradict the will of the majority of the financial services committee by underlining the orderly and expedient resolution of failed firms. the body will recall, members of the financial services committee, that we adopted an amendment in the committee that

eliminated the conservative -- conservatorship and limited the receivership to one year. and chairman frank has said this is going to be a death panel. we are going to put these companies to death. in committee they were going to be given one year. but the manager's amendment comes back and extends the term limit for doing this to three years. three years in which these failed companies or counterparties or considered as read torgs -- creditors won't be being put to defendant as the chairman said but they will be subsidized out of this $150 billion fund or what could actually turn into another $50 billion if the treasury asks for -- asks the congress to fund it with taxpayer money.

and adds an additional $50 billion. but this is another example of why we need the republican substitute. instead of pickling -- picking which politically important firms we are going to let survive and which we are going to -- which less connected firms we are going to let disappear and fail as we do in the republican substitute, which we in our substitute utilized a fair, transparent rules-based bankruptcy process to resolve and liquidate these failed financial firms. not keep them going at expense of what could be billions of dollars of money. we think that the republican alternative is the only real option for eliminating taxpayer bailouts. the chairman of the financial services committee is also fond

of saying that this legislation puts the end to the too big to fail policy. which led to the bailout of our g.s.e.'s, of a.i.g., and other financial firms. but despite this claim, the reality's quite different. if you look at page 45 of the manager's amendment, it specifically excludes fannie mae and freddie mac from the dissolution provisions of the underlying bill. in other words, they fail, they are excluded. we don't wind them down. why? these two companies, they were at the center of the subprime lending problems that caused the financial market meltdown. and taxpayers have already pumped more than $100 billion into these failed g.s.e.'s and are likely to lose $300 billion

more. it's unconscionable that we are going to exempt these two firms of our g.s.e.'s from this dissolution authority. finally, the last aspect i'll mention is that -- this probably is disturbing as anything, we are raiding this tarp program rather than ending it for another $4 billion. the manager's amendment diverts $4 billion from tarp to a number of other programs that the law was never intended to support. tarp was intended to be a temporary plan to restore the health of the credit markets and protect the economy from systemic risk posed by the collapse of firms that the government really allowed to become too big to fail.

the money then -- we heard promises all last fall that the money would go back to the taxpayers. instead now we are talking about surpluses. we are talking about money that hadn't been used. it's almost like this is a walking around fund. and just going to take money out of it and use it on this pet project or this pet project or this good idea or that good idea. and here's the first of those things. and it's the $4 billion. not giving it back to the taxpayers but -- and those promises made last september are now being broken. the president -- i'll close by saying, the president himself has said that he's extending tarp to october 10 of this year so that -- and what he's doing, he's turning into a permanent bailout agency and kind of a petty cash drawer for politically favored interest. here we see the first one of those things.

$4 billion. part of it is $4 billion to help move this legislation across the finish line. let me close by saying, we need to end tarp. that's the solution. we need to end it now and we require -- we need to require all repayments to go directly towards paying down the debt. that's the bottom line. end tarp right now, require that all payments be used to pay down the debt. there is no surplus. there are only deficits and debts. mr. chairman, i urge my colleagues to oppose this irresponsible breach of trust and attack on our promises that we made last year. i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. the gentleman from massachusetts. mr. frank: what's the time remaining on both sides? the chair: the gentleman from massachusetts has 6 1/2 minutes.

the gentleman from alabama has 2 1/2 minutes remaining. and the gentleman from alabama has the right to close. mr. frank: i yield two minutes to the gentleman from colorado. who hasn't had enough floor time this week. the chair: the gentleman from colorado is recognized. mr. perlmutter: thank you, mr. chairman. i would say to my ranking member of the committee, he said that the republican approach was to liquidate failed institutions. it's just the opposite, to let them linger and reorganize. that was the proposition made to us in financial services. but my point here is to enter into a colloquy with the chairman. mr. chairman, i had submitted an amendment to exempt certain smaller banks and credit unions that was not approved in the

rules committee. so it is my understanding that the legislation would give the new c.f.p.a. the authority to delegate the authority to conduct examinations and enforce consumer protection provisions to the functional regulator for financial institutions that fall above the $10 billion asset threshold. would it be fair to say that the intent here is not to increase burdens on those institution that is have been good actors, for example if an institution has an on-site examination or audit team from their functional regulator, it would seem adding a c.f.p.a. team to work with those already there would not be as big a burden. however, if an institution's functional regulator has deemed that it's consumer compliance record is strong and the institution's regulator is doing an effective job, it would seem that subjecting them to c.f.p.a. examinations and enforcement would increase the regulatory burden on the interconstitution. is this the situation where the chairman would envision the

c.f.p.a. delegating that authority back to the functional regulator? mr. frank: if the gentleman would yield. with regard to the permanent audit team they may be the large institutions, that's a separate question. for those that don't have a permanent team, not only would it be better for the regulated entity, it would be better for the c.f.p.a. they have limited resources if you have a bank that's $13 billion, $17 billion in assets and has had a good record t. would be a great waste of regulatory resources to be doing that where they would have the option instead of simply sending the c.f.p.a. member to join the other team. i would hope they would take full advantage of this authority with those pangs. mr. perlmutter: i yield back. the chair: the gentleman's time has expired. the gentleman from alabama. mr. bachus: continue to reserve my time. the chair: the gentleman from alabama reserves his time. the gentleman from massachusetts. mr. frank: madam chair, i yield myself just 10 seconds to say one of the members whose business experience and general good judgment has been a very

major asset for us is the gentleman from illinois -- the gentlewoman from illinois, ms. bean. she's had a significant and positive impact to this bill. i yield two minutes. the chair: the gentlewoman from illinois is recognized for two minutes. ms. bean: thank you, madam chair. i thank chairman frank for yielding. i want to commend him and the committee for their hard work on this financial services regulatory reform bill we are considering today. chairman frank's leadership and determination is the reason we are here on the verge of passing the most historic and comprehensive regulatory modernization of our financial system since the great depression. mr. chairman, i rise in support of the manager's amendment in support for h.r. 4173, the wall street reform and consumer protection act. included in the manager's amendment is compromise language i negotiated with the majority leader and the administration to preserve the century old precedent of national banks and federal savings associations who are chartered nationally to operate in some cases under a uniform national set of rules. the manager's amendment

addresses key concerns, many of my colleagues and i had, with the underlying text which included changes to existing law and preemption standard and judicial deaf frens. the compromise allows for the national bank regulator to make determinations on an individual state's consumer financial laws and then apply that determination to categories of state consumer financial laws that have equivalent terms. in addition, the amendment allows states to formly pe tension the cfpa to approve the protection standards. if a majority of states petition cfpa by passing resolutions in their respective slurkse they can require the cfpa to conduct rule making. in regards to the underlying bill before us, i want to express my strong support. reforming our financial system is vitally important to creating a functional and sustainable system that american families and businesses can count on. last september when we were at the precipice of financial collapse, we promised the american people that we would

enact just such comprehensive reforms. this bill lives up to that promise. passing it will reduce the see virt of future downturns or likelihood of subsequent bailout we experienced last year from happening again. there's much to be proud of. i want to emphasize thecies dough lution authority which removes any implicit government guarantee tore bailout. the chair: the gentlelady's time has expired. mr. frank: i yield 15 seconds. the chair: the gentlewoman is recognized for 15 secretaries. ms. bean:00 thank you, mr. chairman. this is the anti-bailout. when the fails you are fired. there will be consequences for your executives and shareholders. i urge my colleagues to support the manager's amendment and the underlying bill. yield back. the chair: the gentlewoman yields back the balance of her time. who seeks recognition? mr. frank: i yield myself the remaining time. how much is that? the chair: the gentleman has two minutes remaining. .3 the chair: the gentleman has two minutes remaining. mr. frank: i sympathesize with

the loss that my republicans feel that we don't give a bailout for them. first, as they did yesterday, made an issue out of the fact that we include bankruptcy but the whole issue is bankruptcy as the gentleman from colorado said there is nothing in their bill that prevents this being extended under bankruptcy, technically we have time limitations, but that is part of bankruptcy. here's what we do say, if the fdic would decide with a failed institution to keep it going, it would do it without any funds. on page 397, there is established a separate fund to facilitate and provide for the orderly and complete dissolution of any failed financial company that poses a taxpayer threat. page 399, the funds shall be available to cover the costs incurred by the corporation as receiver, repay such funds, cover the costs of systemic if

you wipe it out prematurely, you may cost more money not to the institution. this is very clear, as to the permanence of this, the authority to borrow here is sunseated in 20 13. there will be a fund of assessment from private financial institutions. i know the republicans don't want us to discome owed. we levy money on them if a major

institution fails, the money can be used to manage that. but the biggest difference is we try to stop the failure and they do nothing to try to stop it. the chair: the gentleman's time has expired. the gentleman from alabama is recognized. mr. bachus: i claim the balance of the time. the chair: the gentleman has 2 -- 2 1/2 minutes remaining re--. mr. bachus: what this legislation does, it allows once again the creditors and the counterparties to be paid off. so that is a bailout. a.i.g. was a bailout of creditors and counterparties. i yield the balance of my time to the the gentleman from texas. the chair: the gentleman is recognized. mr. frank: parliamentary

inquiry. when a member says he is reserving his time to close, is it permissible to split it? i thought the gentleman was closing and i thought only one member closes. the chair: the gentleman from texas is recognized. mr. hensarling: thank you, madam chair. regardless of any particular inquiry, the inquiry the american people want to know is where are the jobs. and now what we've seen from the democrats, our friends on the other side of the aisle is an attempt to spend our way into jobs, an attempt to borrow our way into jobs and now an attempt to bail out our way into jobs and what is the result? the result is the highest unemployment rate in a generation, the first $1 trial cron deficit in our nation's history. and a tripling of the national debt in the next 10 years.

bailouts do not work. the democratic bill enshrines us as a bailout nation and still allows people to privatize their profits and socialize their losses. section 1609 n of the underlying bill creates a permanent bailout fund. now maybe some aspect of it is sunset, but no where else do you find a permanent bailout fund is going to be sunset. and i assume you create the bailout fund for bailouts. this is what will happen. the american people believe we can bail out our way into more jobs and somehow we will have less systemic risk, they ought to support it. if they are tired of the bailouts, they need to support the republican bill that is the bailout. ultimately under their plan, you will have more taxpayer bailouts. the speaker said if she passed

tarp, she would make sure the taxpayers are repaid. we have another tarp grab here by the chairman of the committee tore yet another taxpayer-funded foreclosure mitigation plan when ever other foreclosure mitigation plan has failed. the only one that will work is a job. that's what we need, jobs, not bailouts. i yield back the balance of my time. the chair: the gentleman's time has expired. the question is on the amendment offered by the gentleman from massachusetts. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. mr. bachus: madam chair. i request a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentleman from massachusetts will be postponed.

mr. sessions: i have an amendment at the desk. the chair: now in order to consider amendment number 2 printed in house report 11-310. mr. sessions: my amendment number 96, i would like to speak on. the speaker pro tempore: the clerk will designate the amendment. the clerk: amendment number 2 printed in house report 111-370, offered by mr. sessions of texas. the chair: pursuant to house resolution 964, the gentleman from texas, mr. sessions, and a member opposed, each will control five minutes. the chair now recognizes the gentleman from texas. mr. sessions: since 2002, congress has significantly built upon the budget, payroll and authorities of the securities and exchange commission to provide proper investor and consumer protections. among the s.e.c.'s many responsibilities is handling

regulatory dispute, which they are engaged in on a day-to-day basis. the bill we are considering increases the securities and exchange commission budget by doubling their multibillion dollar budget, by doubling their multibillion dollar budget. my democratic colleagues claim that the additional monies will provide additional protection for consumers and investors. however, instead of allowing the securities and exchange commission to use these new resources assigned to this legislation to enhance enforcement, my friends on the other side of the aisle in this bill assign new private rights of actions to allow trial lawyers to run wild with enforcement capacities. so, madam speaker, i know my friends, the democrats want both bigger government and open house for trial lawyers. if they double the budget to ensure the necessary protections, then why would they open this up to trial lawyers as well?

for these reasons, i have introduced amendment number 96, which strikes the provisions creating a new private right of action against credit rating agencies. despite the fact that the s.e.c. is already handling regulatory dispute with no backlog, this provision allows trial lawyers to take regulatory enforcement in their own hands in the form of unnecessary lawyers. investors already have the right to sue credit rating agencies. this provision is completely unnecessary and i encourage all of my colleagues to support my amendment to allow the s.e.c. to do their job. i yield the balance of my time to the gentleman from new jersey, mr. garrett. the chair: the gentleman is recognized. mr. garrett: i thank the chair and how much time do we have? the chair: the gentleman has three minutes remaining. mr. garrett: i yield myself two minutes. the chair: the gentleman is recognized for two minutes. mr. garrett: the american public

has stated and i said so on the floor the other night that it's looking for congress to do three things, first make sure that we have no more bailouts, secondly, make sure that whatever legislation we do does not create any more impedements to job creation and thirdly make sure we don't lead to a bigger and more expansive government. we have seen over the past several days now that the legislation before us would do the wrong thing. it will create more bailouts and hurt job creation and create larger government. to the underlying portion of this bill here dealing with credit rating agencies, we all know it was a bipartisan action taken by this congress back in 2006 when we passed bipartisan credit rating agency form at. that formalized the registration process of credit rating agencies to become national organizations. what are we about to do here? throw that out the window. before it is fully implemented, before we have had the opportunity to see it be played

out as congress intended it to in a bipartisan manner, we are about to throw that out. to what end? as the gentleman from texas just pointed out, to the end that you allow for less competition in the credit rating agencies with unintended consequences that will be uneventful. that means it will be harder for them to make the evaluations that are necessary for the industry and harder for credit to be obtained in the marketplaces and what that means for businesses, of course, harder for them to get the credit they need to expand and create jobs. this amendment here is necessary to counter all the other aspects of this bill so we can work hard to make sure we create jobs in this county and make sure that businesses that need credit can get the credit and businesses are able to expand. this amendment is a positive piece of amendment and i support this amendment and i yield back.

the chair: -- mr. garrett: i reserve my one minute. the chair: the gentleman will control the remaining time. mr. sessions: we reserve our minute. the chair: for what purpose does the gentleman from california rise snr mr. sherman: i rise to claim the time in opposition. the chair: the gentleman is recognized for five minutes. mr. sherman: let me recognize mr. fattah for a unanimous consent request. mr. fattah: i seek the opportunity to revise and extend my remarks and support the underlying bill. mr. sherman: i yield to the the gentleman from pennsylvania, the chair of the relevant subcommittee, for one minute. the chair: the gentleman is recognized for one minute. mr. kanjorski: i rise in opposition to this amendment. during the argument, my good friend, ranking member of my subcommittee from new jersey made the point and now i understand why we are at loggerheads here.

he said we are preventing any further bailouts. the promise i made to the american people that we have no more financial crises. the bailouts follow the crises. we won't have to have bailouts. if we had responsible activity by rating agencies, we wouldn't have had the tremendous failure last year of so many securityized operations that our friends around the world and most of the american people felt like they were cheated by the american government because there are agencies out there that gave them three-plus ratings to securities that didn't deserve them. what we're doing here is a simple thing. you want to make the bad ratings and don't want to follow your own plans, if you want to put at risk investors, you will suffer the consequences and pay for your gross negligence. this is an integral part of this

amendment and absolutely essential. the chair: the gentleman's time has expired. the gentleman from new jersey. mr. garrett: i reserve. mr. sherman: does the gentleman from new jersey have only one more speaker? i yield two minutes to the the gentleman from massachusetts. the chair: the gentleman from massachusetts is recognized for two minutes. mr. capuano: ladies and gentlemen, this amendment is actually quite simple as mr. kanjorski said it is essential to this bill. without this particular amendment, credit rating agencies will not be held accountable for anything they do, simply put. the s.e.c. has failed to do anything and any limited action is limited by the first amendment. they have got a decision in the courts of law that their provisions, that their expenses have been protected by the first amendment. you cannot sue them. all this does and it is a very high standard, it holds them to the same standards with respect to knowledge and recklessness as

everybody else. if they know what they're saying is bad or they know it is wrong, they should be held accountable. if they are reckless by not looking at an accounting report, they should be held accountable. that's all this does. it is a pretty high standard. i would like it a little lower, because i have a lot of trial attorneys that need the work. more importantly, what mr. kanjorski said is 100% right. all this does is protect the american economy, a minor little thing. and we have to go back many, many years. tell me the last time that a credit rating agency was held accountable for giving a aaa rating to a piece of junk? enron, junk bonds, credit default swaps, credit default options squared. they're never held accountable. all this says is they have to actually look at the books. they have to use anything they know and they cannot be reckless about it. that's all it says.

it doesn't say they're held accountable if they're wrong, nor should they be. a legitimate error is fine. all this says it has to be held accountable to the american public when they basically don't do their jobs. with that, i yield back the remainder of my time. the chair: does the gentleman from california reserve? mr. sherman: i reserve right to close. mr. garrett: i believe it's our right to close. the chair: the gentleman from california has the right to close. mr. garrett: then i will yield to the gentleman from texas myry maining time. the chair: the gentleman from texas is recognized. mr. sessions: thank you very much. madam chairman, my friends who are arguing on the behalf of trial lawyers usually argue on behalf of government and now we're hear being how government's really not empowered and really not going to do their job. but at the same time we look at

a lower standard in this bill where we take it from knowingly or recklessly or grossly negligent to just gross negligence, a lower standard. this lower standard is there to help the trial lawyers. trial lawyers do not build value in this country, they diminish the value. we need to give the s.e.c. the authority, the responsibility, we're already giving them the money, the s.e.c. will double in size the amount of money they get as a result of this bill. we're empowering the s.e.c. to do their job, we should not lower the standard and then allow the trial bar to come after what should be an enforcement action. an enforcement action is what this statute should be all about with the credit rating agencies. i'll support my bill. the chair: the gentleman's time has expired. the gentleman from california is recognized. mr. sherman: thank you. first, let's set the record

straight. republicans are coming to this floor calling this a bailout bill. they're quoting my statement that the original draft of the bill was tarp on steroids. the fact is this bill now reins in executive branch bailout authority and the republican substitute is the thing to vote for if you want to be a bailout nation. second i want to thank the chair of the committee for including my revisions of section 1109 in the manager's amendment. now as to this amendment, the bill's language is designed to hold credit rating agencies accountable. these are the agencies that gave triple -- a.a.a. to alta. that's to say they gave the highest ratings to bad mortgage bonds and nothing did more to put us in this recession than the trillions of dollars that investors bet on these bad mortgages only to see the whole thing unwind.

now, we provide that they will be held accountable. the s.e.c. has taken no enforcement action. all of the incentives in the present system push in the wrong direction. the way a credit rating agency gets business is to get a reputation for being a liberal grade sore that one issuer after another will hire them to give a high rating to their bad bonds. it's like the empire being selected by the home team. instead we need to pressure on the other side. and say that if you are grossly negligent in assigning a high rating to bad bonds that hurt investors and also hurt the entire economy, you will be held accountable. that now is the time to change the system, to make sure that the economic pressures on credit rating agencies are not all on the side of the liberal rating. we need to make it clear to credit rating agencies, if you

given a.a.a. to alt a you'll pay. the chair: the gentleman's time has expired. the question is on the amendment offered by the gentleman from texas. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it. the amendment -- mr. sessions: madam speaker, i ask for a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings on the amendment offered by the gentleman from texas will be postponed. it is now in order to consider amendment number 3 printed in house report 111-370. for what purpose does the gentleman from minnesota rise? >> i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 3 printed in house report 111-370 offered by mr. peterson of minnesota. the chair: pursuant to house resolution 964, the gentleman from minnesota, mr. peterson, and a member opposed each will control 15 minutes. the chair recognizes the

gentleman from minnesota. mr. peterson: madam chair, thank you very much. i yield myself such time as i may consume. and i rise today in support of the peterson-frank amendment to h.r. 4173, the wall street reform and consumer protection act of 2009. while much of the attention of this financial reform package is focused on the mortgage and credit crisis of last year, this amendment is the product of years of public debate about the regulation of derivative markets in the united states. it began with the price volatility we saw in energy futures markets, first with natural gas, then with crude oil, and we examined in our committee the influx of new kinds of traders into these markets like hedge funds and index funds, we looked at the relationship between what was occurring on the regulated markets and the even larger unregulated over-the-counter market and more aptly this -- this probably more aptly should have been called the under-the-counter market because trillions of dollars in

transactions affecting commodity prices were being conducted out of sight and out of reach of market regulators. last year the house of representatives responded approving bipartisan legislation to give the cftc greater authority over these dark markets. in an attempt to restore price discovery and hedging utility of regulated markets. unfortunately it was only after the house passed this bill that we learned the real consequences of what can happen if an unregulated markets with a near collapse of our financial system. as warren buffet correctly pointed out in his 2003 annual letter to shareholders, the large amount of credit risk concentrated in the hands of the relatively few meant that the troubles of one could quickly infect the others. last year's collapse proved him right. madam chair, the house agriculture committee acted very early this year to get a handle on these swaps and minimize the very real systemic risk to the economy that they pose. a key part of that legislation

was a requirement that swap contracts be cleared. the clearing requirement has served the futures market well for decades. it increases transparency and effectively manages risk. not just for the public but for all participants in the market. and equally important, madam chair, our committee said that exemptions to the clearing requirement should be available because not every swap is appropriate for clearing and not every market participant should have to bear the burdens of clearing. these two key principles of requiring clearing and exemptions are carried forward from the previous work in our committee and are expanded upon in the peterson-frank amendment. madam chair, our target for greater regulation and oversight is not the end user but their swap dealer or major swap participant counterparty. end users did not get a bailout of billions of dollars. end users are not responsible for what happened in the markets last year. under this amendment swaps will

be centrally cleared if a clearing house will accept the transaction and regulators determine clear something necessary. cleared listed swaps must be traded on exchange or registered swapped execution facility and all swap creates must be reported with counterparties adhering to record keeping and reporting requirements. this amendment will hold swap dealers like large financial institutions accountable to -- accountable to new standards for capital, margin and business conduct to reduce their ability to place our financial system in such dire states are. in addition, madam chair this amendment -- straits. in addition, madam chair, this makes progress solving our -- some of the jurisdictional issues that have plagued financial regulation in the past. the amendment strengthens confidence in trading position limits, on physically deliverable commodities as a way to prevent excessive speculation trading and it call for international harmonization for

requiring foreign boards of trade to share trading data and adopt speculative position limits on contracts of trade u.s. commodities similar to u.s. regulated exchanges. madam chair, we have calm long way to get here. the situation -- we have come a long way to get here. the situation might make you wonder if we could have of ever -- ever allowed such reckless trading environment to have existed and that those involved would have learned their lesson. but believe it or not, the big banks on wall street don't think that they did anything wrong. in fact, they'd like to keep doing what they've been doing. they already got their bailout and they wouldn't mind topping it off by voting any new regulation or oversight. to me, that is an unacceptable outcome. i urge my colleagues to approve the peterson-frank amendment and to finally bring real accountability and oversight to the over-the-counter derivatives market and i reserve the balance of my time and could i ask how much time i have remaining? the chair: the gentleman has 11

1/2 minutes remaining. the gentleman reserves. for what purpose does the gentleman from new jersey rise? >> claim time in opposition. the chair: the gentleman is recognized for 15 minutes. mr. garrett: i yield myself just two minutes initially. the chair: the gentleman is recognized for two minutes. mr. garrett: thank you. madam chair, if there's anything the last few months have taught us and that's the american people telling us is that we don't need more government and overreach and big government solutions when targeted reforms are more appropriate and effective. when thinking about how to draft a legislative response to the recent financial crisis in regards to this issue of derivatives, we must ask ourselves one seminal question. what are we trying to resolve here? the vast majority of all otc derivative marketplace had absolutely nothing to do with the crisis. it provides critically important risk management tools for virtually the -- all large companies and many small and

medium sized companies as well. when you think about it, the a.i.g. situation, even the problem there with the derivatives had much more to do with the extremely bad bets on the housing market along with failed prudential regulators who were supposed to be overseeing them than anything specifically to do with the derivatives themselves. so quite honestly, madam chair, we don't think it's appropriate to set up a truly cumbersome dual regulatory regime that would require the cftc and s.e.c., two entities that have not shown the ability to cooperate in the past, that they have two very different missions and reasons for being to approach very different marketplaces in derivatives and to do so now in the same manner. the democrats' underlying bill sets these two entities up to be two regulators, setting margins and other prudential requirements when they were never envisioned to play this role. when you think about this, also, the s.e.c. has failed mibbley as a prudential regulate when are it tried to do the consolidated relling la -- regulator for investment banks. so the proposal contains an

underlying bill overly broad definition. new capital in margin requirements and broad authority for regulators to determine which transactions are standardized and subject to mandatory clearing in exchange trading. these are unnecessary government burdens that could impire the -- impair the usefulness of derivatives as a management tool, thereby increasing the exposure to the marketplace and the participants in them which all get to the last point and i'll yield myself 15 more seconds to make the final point. the chair: the gentleman is recognized for 15 seconds. mr. garrett: all of these points in the underlying bill will lead to one thing, a loss of credit and therefore a loss of jobs in america today and in the future as well. the american people have spoken loud and strongment do not pass any legislation -- strong. do not pass any legislation that's going to create hardships for the creation of jobs in this country and the underlying legislation with its language would do such that. and with that i will yield such time as the gentleman from oklahoma will consume. the chair: the gentleman from oklahoma is recognized.

mr. lucas: i thank the gentleman and i thank the chairwoman for recognizing me and i rise in support of the peterson-frank amendment. it represents a year-long attempt to balance the needs of stronger regulation and a need to manage legitimate financial risk. thunderstorm amendment end users will not be regulated as -- under this amendment end users will not be regulated as though they were the financial houses residing on wall street. they are not systemically risky, they did not cause the financial collapse and they should be not be regulated like they did. not all concerns, however, have been resolved. and i would have preferred language that would have made clear only those that can cause a significant adverse impact on the u.s. financial system to be regulated as major swap participants. for that purpose i'm supporting congressman murphy's amendment that we'll see shortly to cure

that deficiency. similarly i don't understand why market makers that only deal in cleared products need to have additional capital and margin requirements imposed on them by the federal government. instead this amendment allows the appropriate financial regulator to be more closely monitor the markets and those that may accumulate or generate too much risk for a healthy and robust financial system. it then gives the regulators the appropriate tools to reduce the risk before it can negatively effect our economy. i have other concerns about this amendment. i'm sure we would all do things differently. if we could. this amendment isn't perfect but it is a marked improvement over other legislative efforts either proposed or considered. this amendment is worthy of our support. .

i admit that the hard work may have been overwhelmed by the rest of the reach of this bill. but we should support this amendment. i yield back. the chair: the gentleman reserves. the gentleman from minnesota is recognized. as a reminder from the chair the gentleman from minnesota has 10 1/2 minutes remaining. mr. peterson: i recognize the leader on this issue, mr. boswell, for three minutes. the chair: the gentleman from iowa is recognized for three minutes. mr. boswell: i ask unanimous consent to revise and extend. my friend across the aisle, he

often says we don't need more government. well, maybe so, if under the previous administration our friends that you would have done the job that we have to do cleanup on now. i would like to thank chairman peterson for your leadership and bringing oversight to the overthe counter derivatives markets. large financial institutions like bear stearns, a.i.g. got into trouble before anyone knew it. had these provisions been in place, the government wouldn't have had to spend billions to rescue a.i.g. from sending shockwaves throughout the financial system. the compromise was the agriculture and financial services reach was to bring greater transparency and oversight to these markets. we must provide necessary jeefer

sight. this compromise strikes a careful balance and protects use of derivatives by so-called end users who hedge the cost of their operation. whether dealing with grain, energy, steel or financing, american companies use derivatives to lock in prices to plan for the future. when the agriculture committee first considered this, i offered an amendment to require mandatory clearing. i'm pleased to see this compromise with the chairman maintains this concept. clearing exposes a credit risk which up until now has been hidden behind closed doors. while every derivative does not need to be cleared, it will be make sure that will all classes have the clearance. it ranges from 400 to $600

trillion. to allow something this massive that impacts every american to continue to operate unregulated is simply not acceptable. this legislation will strike a good balance of consumer protection without obstructing companies from conducting their businesses and managing their risk. i yield support for this amendment and i thank you and yield back. the chair: does the gentleman yield or reserve? mr. peterson: we we remb -- reserve. the chair: the gentleman from new jersey is recognized. mr. garrett: i yield myself three minutes. the chair: the gentleman is recognized for three minutes. mr. garrett: i appreciate the underlying amendment we are discussing, let me point out that republicans have submitted a substitute to address this issue. republicans have done so in a targeted approach, addressing actual problems and it's the more sensible approach to the derivative reform issue. the standard piece of the

republican alternative is something found in the chairman's bill which is a trade repository. it would then provide provide valuable transparency to the entire o.t.c. marketplace and give them the data to analyze and broader data to the marketplace. while we don't set up a regime over the many market participants and we don't pre assume that these entities needed to be micromanaged in this manner, we do require for the regulators to review the data and report back to congress if an entity is not already regulated, whether they should be more heavily regulated due to its size, scope or activities in the o.t.c. marketplace. so the republican substitute does not have a broad requirement for mandatory clearing, but it does codify the

commitments that the private sector has already made and done so working responsibly and cooperatively with the appropriate regulators and do so to engage in central clearing now and into the future as well. when you think about it, these changes all take time and they need to be done in a responsible manner. if you were going to force central clearing through central counterparties and having adequate counterparties for risk, they could exacerbate the systemic risk. the central clearing should be opened up to as many participants as responsible in a responsible manner so as not to do more harm than good. we require requirements between dealers and major market participants and that would address a major issue with the a.i.g.-related problems that i discussed earlier. in regards to the capital

requirements, prudential regulators are really required by our substitute to take the swap activities of supervised entities into account when setting capital requirements. let me say that, in the a.i.g. situation is what we should have had occur there is the prudential regulators should have been looking at the swap requirements when they set the capital requirements over at a.i.g. or over like situations. it is not appropriate to set these bank-like cap requirements on nonfinancial entities or our republican substitute would not do so. finally we generally agree with the overall chairman's regard -- and i yield myself one more -- 30 more seconds. the chair: the gentleman is recognized for 30 seconds. mr. garrett: we agree with the chairman with regards to segregating margins with regard to o.t.c. swaps.

this is based on both the buy and sell side. margins should be treated if a counterparty wishes it to be so. they are related to this very issue. so requiring margins configuration we believe would be an appropriate response to that issue and that problem and solve it in the future. the chair: the gentleman's time has expired. gentleman wish to -- the gentleman reserves. the gentleman from minnesota is recognized. mr. peterson: i yield two minutes to the gentlelady from illinois, ms. bean. the chair: the gentlewoman from illinois is recognized for two minutes. ms. bean: i want to thank chairman frank and chairman peterson and their committees for their efforts and appreciate the open nature in which we have worked on this piece of legislation. i have the honor to serve as the

vice chair of the new dem coalition and the task force and derivatives reform is where we have worked diligently with both committees of jurisdiction. i want to recognize mike mcmahon and jim heins and scott murphy whose perspective was constructive. our caucus and country benefited from their insights. lacking and lagging regulation was a major contributing factor to last year's crisis including the default swaps at a.i.g. that prompted government intervention. for the first time we are going to regulate over the counter derivatives market which is an unregulated market. this brings necessary transparency by requiring all derivatives will be exchanged, cleared traded or reported and gives tools to oversee this

industry. this amendment and underlying bill attempts to strike the right balance that will bring transparency and accountability to the derivatives market while preserving end users to legitimately hedge their risk in order to protect their businesses. we are taking an important step to reform legislation that will better protect our financial system, our economy and american taxpayers. to my colleagues across the i'll who suggested that it will create loss of credit or jobs, i request if he has been paying attention to the loss of jobs and credit following the financial crisis last year. i urge my colleagues to support this amendment and the underlying bill and yield back. the chair: does the gentleman from minnesota reserve? does the gentleman from minnesota reserve?

mr. peterson: we reserve. you want us to go ahead or do you have speakers on your side? mr. bachus: the gentleman from new jersey has the time on our side, but i intend to close. the chair: does the gentleman from minnesota or yield? mr. peterson: i reserve. the chair: the gentleman from new jersey is recognized. mr. garrett: we have the right to close. mr. peterson: i recognize the the gentleman from connecticut, mr. himes for three minutes. the chair: the gentleman is recognized for three minutes. mr. himes: i thank you, chairman for this important work that we do now to restore a sense of faith and trust in the financial system which american companies and families rely on for the credit that allow them to create jobs and offer employment. one of the least understood

portions of this bill, madam chair, but one of the most important is the work that has been done on derivatives. instruments that allow our farmers to get rid of the risk of future soybean prices if they don't want to bear those risks, allow our exporters to get rid of currency risk, but despite the comments of my good friend from new jersey, we are very much at the core of the financial meltdown that we have seen and are now living through. my friend seems to forget three letters, a.i.g. he forgets that that great enemy of american capitalism, wild-eyed critic, warren buffet called credit default swaps weapons of mass destruction and in reviewing some of these, he said these must have been contracts devised by madmen. this is warren buffet. the democratic amendment would do several market-friendly

things. one, it would say that these contracts will trade in the light of day and clear in clearinghouses. this is an idea that is thousands of years old. economics 101. markets are healthier if we know who is selling what to whom and at what price and see who is taking on what risk, something that if the market had known in the a.i.g. experience, we might have been saved the awful spectacle of taxpayer dollars being injected into private companies. the democratic amendment says it will trade in the light of day. it is not a heavy-handed or cumbersome idea. it's plain, good market economics. the democratic amendment would say that if you take big bets, we're going to make sure you have the capital to make good on those bets, again, not a terribly radical idea, but if you're going to ensure someone we will make sure you have the capital to make good on the insurance you have sold.

and lastly and importantly, a derivatives contract involves someone getting rid of risk, that farmer, that company. we protect those end users and say you will not be subject to regulation. but the people who buy that risk, the financial entities that brought us to this place will be subject to oversight. my colleagues, this is a good, smart, market friendly amendment and i urge its passage and support and reserve the ballance of our time. the chair: the gentleman reserves the balance of his time. the gentleman from new jersey is recognized. mr. garrett: do you have any other speakers or should we close? mr. peterson: i would like to thank a few people and i will yield back if that's ok. our committee has spent a lot of time on this a i want to thank all the members for the many, many hours that they put in to working on this and the members of the banking committee and i want to thank my ranking member,

mr. lucas, his staff, kevin, bill and josh for engaging with us in a cooperative process to bring this together. i thank chairman frank and his staff, peter, loran for working us in the spirit of compromise that allowed us to reach agreement in a relatively short period of time and thank chairman bachus and his staff kevin and jason, despite their concerns, were willing to thoughtfully contribute to our discussions. i want to thank my own staff, andy, rebecca, matt and clark for their hard work and long hours to bring this amendment to fruition. this is a good amendment. i encourage members to adopt it. and i yield back the balance of our time. the chair: the gentleman yields back the balance of his time. the gentleman from new jersey is recognized. mr. garrett: i will yield 30 seconds and then balance of my time for 30 seconds.

. the underlying legislation was set up and addressed a problem that really was not the underlying cause of the financial situation we have today. i will also point out before i yield over that in the amendment that's before us today it does one thing that's better than the underlying bill which is to say that there should not be margin requirements on end users which is better in the sense that they have not have to post those. but i will close on this point, the underlying bill is still a problem atcal to the overall larger issue of saying that if you create a system like this and address a problem of the o.t.c. market in such a manner and creating additional burdens on that than is necessary we will create less jobs for the future. and with that i yield to the ranking member. the chair: the gentleman from alabama is recognized. mr. bachus: thank you, madam chairman. i rise to claim the time in -- the remaining time in opposition.

the chair: the gentleman is recognized. mr. bachus: although i'm not opposed to the amendment as such. i am opposed to what the underlying bill does and chairman peterson, i think, and most on our side have a disagreement with that underlying regulation and unfortunately the amendment makes -- is a step in the right direction but we feel like even with the amendment substituting the original language that we still have our objections. and it's those objections i wish to speak on. although we don't plan to, at least i don't personally plan to oppose the amendment itself. as the gentleman from oklahoma said, we do believe that it is some improvement. but the regulation of the derivatives markets created in the underlying legislation and we think creates an unnecessarily and burdensome

requirements on thousands of american companies that have used derivatives to manage price fluctuations and hedge against business risk and they've done that successfully and safely. the underlying legislation and even with this amendment in it is going to empower our government regulators to institute what appears to be a fairly complex and sweeping new regulatory regime to govern, as i said, a secretary of the marketplace -- a section of the marketplace that has functioned well and help most american companies weather the financial crisis, not contributed to the financial crisis but actually helped moderate it and i think the derivatives market has allowed companies -- companies in many cases to insulate themselves from uncertain market

conditions. several in the majority have alluded to the failure of lehman brothers as a reason for the needed reform of the over-the-counter derivative market. and we do propose some reform and i'm going to discuss those in a minute. the gentleman from new jersey also discussed them. so there are some points that we do agree with chairman peterson and even chairman frank. but lehman, i don't believe, can be used as an excuse to inject the government into a derivatives market that is used primarily by thousands of small and medium sized and even large companies to hedge against business risk and as i said have done that safely. the reality is that lehman's portfolio, includingity derivatives positions --

including its derivative positions, without any government assistance was unwound with relative eeds -- ease. it was unwound. the real problem with lehman's derivative business was the lack of segregation of collateral, a problem that is addressed by our republican substitute. the comprehensive republican substitute we plan to offer provides a commonsense approach to oversight of the over-the-counter derivatives marketplace without what we consider an excessive overreach by the federal government and its regulators into the capital markets. a theme that unfortunately we think is being repeated many times in this legislation. the substitute promotes strong transparency of over-the-counter derivatives activities conducted by all market participants. it also addresses the two derivative problems identified

by the majority and the administration and that was a.i.g. and lehman. the isolated behavior of these two large corporations and a few others like them was -- it was an isolated behavior. and that type of behavior would be detected under the republican substitute. the trading activity and positions they took. the republican substitute also holds dealers accountable to improve operational inefficiencies with the over-the-counter derivatives marketplace, provides vital transactional information to regulators on a realtime basis and ensures the treasury department cannot become a de facto regulator. additionally our substitute does not punish those main street end users of derivatives and finally

in conclusion our substitute addresses another need in the derivative marketplace which is to provide timely and accurate information to market participants and regulators in order to ensure market transparency. madam chairman, we have to curb abuses of the past and promote responsible approaches to the -- to oversee the use of over-the-counter derivatives. we all agree on that however, we believe the underlying bill, even with this amendment, is fundamentally the wrong approach and is a very expensive way to address the problem. so i urge my colleague, even though we don't oppose this amendment, to underline -- to oppose the underlying legislation and this is just one more reason and that's that we increase the cost of any end user of derivatives and we're talking about, as we said last

night, car guile said that this it alone could cost them $1 billion. another company testified that they would not -- no, that was john deere said it would cost them bds 1 billion. carguile said they probably wouldn't complete a new facility in kansas city if we impose these costs. so with that i yield back my remaining time. the chair: the gentleman's time has expired. the question is on the a -- the question is on the amendment offered by the gentleman from minnesota. those in favor say aye. those opposed, no. in the opinion of the chair the ayes have it. the amendment is agreed to. it is now in order to consider amendment number 4 printed in house report 111-370. for what purpose does the gentleman from minnesota rise? mr. peterson: i have an amendment at the desk. the chair: the clerk will

designate the amendment. the clerk: amendment number 4 printed in house report 111-370 offered by mr. peterson of minnesota. the chair: pursuant to house resolution 964 the gentleman from minnesota, mr. peterson, and a member opposed each will control five minutes. the chair now recognizes the gentleman from minnesota. mr. peterson: thank you, madam chair, and i yield myself such time as i may consume. this amendment puts forth a process where we can obtain some clarity regarding limited exception to clearing requirements and specifically it requires the c.f.t. to define the terms commercial risk, operating risk and balance sheet risk which are used in the statute to define what types of risk a company may hedge and remain eligible for limited exception to clearing. i understand how some could be concerned that the balance sheet could be interpreted more broadly to encompass financial risk but not commerce risk and that is why i introduced this amendment directing the regulater to define these terms. by providing for the agent to

define these terms the burden will be placed on them to ensure the companies seeking the limited exception to the clearing requirement do not abuse that exception. and if we think the cftc gets it wrong, between the agriculture committee and the agriculture appropriations subcommittee, we have lots of opportunities to haul them up here and show them the error of their ways. this amendment is supported by the commodity market's oversight coalition and many other groups and i urge my colleagues to adopt the amendment. i reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from new jersey rise? mr. garrett: i claim time in opposition but i am not opposed. the chair: without objection, the gentleman is recognized for five minutes. mr. garrett: and i yield myself -- for five minutes? i yield myself a minute. the chair: the gentleman is recognized for one minute. mr. garrett: i appreciate the work of the chairman with regard to clarifying some of the definitions here and i think this goes to the overall issue of the complexity of the issues

that are before the house tonight on this matter and on the broader matter of the derivative regulations that we are discussing with the previous amendment and this amendment as well. and it goes to the point think a raised just a moment ago in my believe remarks is that if we're going to try to answer to the american public to the three most important questions that they are asking of congress, no more bailouts, no more legislation that destroys jobs and no more expansive larger in spending government, we have to look to what we're doing in the derivative area as well. and in the derivative area that we see in the underlying legislation what we have done is create a businessen tine piece regulation combining two entities that have never worked together in the past before, setting in the underlying legislation margin requirements that potentially end users, although i'll recognize the previous legislation addressed that point, margin requirements on them which basically at the end of the day, if we think about it in simple terms, means that the cost of doing business -- i yield myself such time as i may consume. the chair: the gentleman is

recognized. mr. garrett: and at end of the day what this means is it will be more costly in this country to do business. it will be more difficult for entities to hedge their risk and if businesses can hedge the risk the other fundamental purpose of this legislation that we hear from the other side, to end the idea of systemic risk, will be thwarted as well. so think about that. we will be thwarting one of the basic functions -- functions that they say is the underlying legislation, to end systemic risk, because we cause a hardship on companies to hedge the risk on the one hand and not addressing one of the major problems of this country is faced with today, high unemployment. we must do a better job than that. and i stated before, the republicans have offered a better solution to all those solutions. we have offered a solution with regard to the bailouts to end taxpayer-funded bailouts, we have offered a solution to end the prospects of less jobs in this country and we offered a solution respectively to the whole derivative market as i said before, the center piece of

that solution is something that was found in the chairman's bill and that was the repository idea. we can get all the transparency that we need right now through a trade repository with the o.t.c. trades reported. we can get the accountability and the transparency that the american public looks for as well through the initiatives that are in the republican substitute. but we can do so in a manner therefore that would not impose additional risks or cumbersomeness or a bisintine structure and not effect the credit rating acts or rather the hedge abts or the cost of doing businesses in this country. we can do so in a man that are will not hurt the create -- manner that will not hurt the creation of jobs. when you think about it, we will have probably discussed one, two, three different areas, three different titles of this bill that actually will be hurting jobs where are they? we haven't talksed about the first one too much, cfba, consumer of financial products agency, that has already been documented that that will cost

literally a million jobs. the winddown authority, we've already talked about that previously, that will also cost jobs and here if you do not handle the derivatives situation correctly, that potential willly -- potentially can cause jobs lost in this country as well. we suggest that the republican substitute should be considered in this area as in other areas as well and with that i reserve the balance of my time and commend the gentleman for his work on the underlying amendment that we have here before us today. the chair: the gentleman reserves. the gentleman from minnesota is recognized. mr. peterson: madam chair, i am pleased to yield one minute to the distinguished chairman of the financial services committee, mr. frank from massachusetts. the chair: the gentleman is recognized for one minute. mr. frank: working with the chairman of the agriculture committee has been very constructive and we have enjoyed that working relationship and i am very proud that our committees have avoided the kind of jurisdictional disputes that too often plague this place. we have a couple of interesting -- one, should there be -- but, two, whether you agree or not,

it certainly shouldn't be one that could be manipulated. so this is to make sure that's there. but finally i do want to respond to the gentleman from new jersey, apparently they discovered that jobs are being lost. in fact, the reason jobs are being lost now and were being lost in even greater rate last year is the economic disaster that came from a lack of regulation. so the argument that by putting in place regulations that will prevent the enormous economic disaster which began with the recession in 2007 officially, that somehow that's going to cause job loss is bizarro world. job loss was brought about by the lack of regulation which we are trying to correct and it is true, the republican position is, leave business alone, let them continue to do whatever they think is right, don't have any regulation. that's how we got into this mess. .entleman from minnesota. mr. peterson: i have no further speakers and i yield back the balance of our time. the chair: the gentleman from

minnesota yields back. the gentleman from new jersey is recognized. that is 1 1/2. mr. garrett: the american public if they watch what goes on tonight and the days before and after are not looking for anyone to be pointing fingers or blame. this should not be a partisan issue. as the other side always wants to push back several years of the bush administration, we can push back that it was the democrat majority for 2007, 2008 and now 2009 that has been running this house and that during that time, we have seen the catastrophe in the financial markets and it was during their tenure we saw the catastrophe and unemployment at the roof. pointing fingers and we have seen the results of their legislation over the last three years, that will not solve the problem. what we need to do is pass legislation that will end the pattern of elimination of jobs,

end the pattern of the bailout mentality, end the pattern of expansive government and that's why we come here to offer republican solutions and ask the majority party to consider some of those proposals as we go forward. i yield back. the chair: the gentleman yields. the question is on the amendment offered by the gentleman from minnesota. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. the amendment is agreed to. it is now in order to consider amendment number 5. for what purpose does the gentleman from massachusetts rise? mr. lynch: good evening, i believe i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 5 printed in house report 111-370 offered by mr. lynch of massachusetts. the chair: pursuant to house resolution 964, the gentleman from massachusetts, mr. lynch

and a member opposed, each will control five minutes. the chair recognizes the gentleman from massachusetts, mr. lynch. mr. lynch: i yield myself such i'm as i may consume. the chair: the gentleman is recognized. mr. lynch: i would like to thank chairman frank and chairman peterson and chairman waxman for their great work on this bill and thank those three chairmen for supporting this amendment. my amendment solves a problem and seeks to close a gap in the underlying legislation. madam chair, what many members of congress and the public don't realize is that the u.s. derivatives market is about $605 trillion, which is more than five times the value of the stocks traded on the new york stock exchange. more importantly and simply the scale of the derivatives industry is the fact that according to the comp. controller of the currency, a total of 97% of the derivatives

trading is just controlled by five banks, so it is a near monopoly. four of those five banks were top recipients and during the recent financial meltdown, these same banks engaged in risky behavior involving complex derivatives which endangered the entire financial system and had to be bailed out by the taxpayers. and as a result of all these banks, citigroup, goldman sachs, jp morgan, morgantown stanley and a.i.g., they received $200 billion in taxpayer money. the wall street reform and consumer protection act attempts to prevent that from happening again. the bill will require over the counter trading to be conducted through clearinghouses and make sure there is are sufficient protection from a reckless behavior that these too big banks engage in.

clearinghouses are a good idea. think of them as financial police stations. that's the function they are intended to serve. some describe them as a blast wall that will prevent the failure of a derivatives deal from impacting a real economy. however, the problem is, and this is a huge problem with the bill in my view, the bill would allow these same big banks to purchase the clearinghouses that are being created to police the big banks in their derivative trading. thesehouses -- the big banks will be allowed to set the rules for how their own derivatives deals are handled. my amendment would prevent those big banks and major swap participants like a.i.g. from taking over the police station. these new clearinghouses and do so by limiting to a 20% voting

stake, the ownership interest in those banks and the governance of the clearing and trading facilities. essentially by providing entry to the market, it would introduce competing commercial interests to bring competition and transparency to the derivatives industry and to keep those banks honest. at this time, i would like to reserve the balance of my time. the chair: the gentleman reserves. for what purpose does the gentleman from new jersey rise? mr. garrett: i seek time in opposition. the chair: the gentleman is recognized for five minutes. mr. garrett: i would like to yield two minutes to the the gentleman from new york. the chair: the gentleman from new york is recognized for two minutes. >> i rise in opposition to this amendment and commend the work of chairman frank, chairman peterson and all involved and commend the work of the the

gentleman from massachusetts, who is a great friend and colleague, although i disagree with him on this amendment. this legislation is trying to minimize systemic risk, but the amendment will increase it. and so i speak in opposition to it. ly limiting to 20% collective ownership of clearinghouse exchanges and execution facilities, it will limit what facilities can limit trade, less choice, not more choice. this shouldn't be restricting. by concentrating the market share in the hands of a very few and large institutions, we are more likely to be creating systemic risk than mitigating it. clearinghouses are owned and vast majority are swap participants. it grants the strongest authority to police the markets and support the strong standards in this bill. support the regulations and transparency in this bill and

oppose this business grab through legislative fiat. the amendment is opposed by the new york stock exchange and almost every single exchange and clearinghouse and cost jobs in new york and in my district. this bill should be about improving transparency and enforcement and operating while minimizing systemic risk. instead the proponents of this amendment are losing the legislative process to promote one marketplace over the other and cost jobs. we are here today to reform american financial services in our regulatory structure and not drive companies out of business costing jobs and money. the amendment will give an unfair amendment. i urge my colleagues to vote no on this amendment and i yield the remainder of my time. the chair: the gentleman yields back the balance of his time. the gentleman from massachusetts is recognized.

mr. lynch. mr. lynch: i yield one minute to the chairman of the financial services committee, my friend, mr. frank of massachusetts. the chair: the gentleman from massachusetts, mr. frank, is recognized. mr. frank: i disagree with the premise that the large investment houses and large financial institutions have earned a degree of trust that voting against this amendment would require. we were fairly careful and many were critical because we were too willing to separate out end users, legitimate end users and not sweep them all in, but for that to be justified there has to be integrity in the process. that's what the last amendment and that's what this amendment does. if you let people who have a financial interest and not being clearing, be in charge of clearing, it would take an extraordinarily selfless group of people not to give in toll temptation. and while people on wall street

have been given varying descriptions, some good, some bad, no one has compared them to mother teresa. if you reject this amendment, you are giving people who have an incentive to make these things not work well control over them. . the chair: the gentleman's time has expired. the gentleman from new jersey is recognized. mr. garrett: i would like to yield 1 1/2 minutes to the the gentleman from georgia. the chair: the gentleman from georgia is recognized for 1 1/2 minutes. mr. price: i thank my friend from new jersey in trying to bring focus to the underlying nature of this bill, which is the underlying nature of this amendment as well, and that is that government knows best how to define what the market ought to look like and not the market. and madam chair, as you well know, that's one of the things that got us into the significant problems in the first place.

i know that there is one group that supports this. there are all sorts of folks that don't support thisu the people who know about the issue of trading in this. the a.b.a. securities association, one of the largest securities association, oppose this amendment because they believe it would significantly limit competition and undermine the ultimate goal that all of us ought to have and that is to make certain that the market can work for more individuals across this land, more choices, not fewer choices. the new york stock exchange, securities industry and financial markets association, on and on and on, folks who oppose this amendment because they believe strongly that it will decrease the choices available to the american people. over the counter trades hundreds of trillions of dollars literally in trades and will be markedly limited again, decreasing the ability of the american people to have the choices available to them. what this amendment does is what

the underlying bill does, government knows best, that we ought to limit the ability of creative thinking and jobs to be formed out there across this land because government knows best. vote no. the chair: the gentleman's time has expired. the gentleman from massachusetts, mr. linch -- lynch is recognized. mr. lynch: this does not interpose government into the clearinghouses. this is very light regulation. the people who are against this bill -- against this amendment are the five banks, the five big banks. they are the ones that are against this. instead of inserting the government in here, what we're doing is allowing competitive commercial interests to balance out rather than allow these five banks. these five banks control 97% of the market here, 97%.

and the gentleman is complaining that it might reduce competition? it's a monopoly now. we are trying to break it open and allow more companies in and lower the costs of operating. look, this is a pretty simple issue. the too big to fail banks caused huge damage to the taxpayer the way they operated this derivatives market. we are creating a clearinghouse and they are trying to buy the clearinghouse. the chair: the gentleman's time has expired. mr. lynch: i yield back. mr. garrett: i presume i have the right to close. the chair: the gentleman has 1 1/2 minutes remaining. mr. garrett: the government has said the government isn't getting involved here, of course they are and that's the purpose of the underlying bill. set up these regulations in this area and yes i have read the amendment and i recall it coming

through the committee and the problems that were raised there. but when you centralize this made mandatory, it is important to ensure that there is independence. but that's why in committee, i offered an amendment that would have required that the majority of the directors of the derivatives of clearing organizations not be associated with swap dealers. this goes much further than what is already on the books right now. the s.e.c. has a current policy of limiting position of 20% ownership of a single broker dealer. this amendment goes way farther than that saying that that 20% applies in the aggregate. yeah, i've read the amendment. you have to remember that dealers are among the most likely sources of investment capital to establish these clearinghouses. if you come up with an overly restrictive limit on ownership as you have in this amendment, you are going to have negative

consequences, some of those will be in competition. and so, at the end of the day, what will you have? the amendments could exacerbate risk by forcing more derivative transactions that are out there and who knows how many will be out there after this legislation passes into fewer and fewer and fewer clearinghouses. and it will have the opposite effect. the chair: the gentleman's time has expired. the question is on the amendment offered by the gentleman from massachusetts, mr. lynch. those in favor say aye. those opposed, no.. in the opinion of the chair, the ayes have it. the amendment is not agreed to. -- the amendment is agreed to. the amendment is agreed to. the gentleman from new york? >> i ask for a recorded vet. the chair: pursuant to clause 6

of rule 18, further proceedings on the amendment offered by the gentleman from massachusetts, mr. lynch, will be postponed. it is now in order to consider amendment number six printed in house report 111-370. for what purpose does the gentleman from new york rise? >> madam chairman, i have an amendment at the desk. the speaker pro tempore: the clerk will report the amendment. the clerk: amendment number six printed in house report 111-370, offered by mr. murphy. the chair: the gentleman from new york, mr. murphy, and a member opposed, each will control five minutes. mr. murphy: i yield myself one minute. the chair: the gentleman is recognized for one minute. mr. murphy: this amendment would change the definition of

a major swap that came out of committee. they worked with the committee to come up with the one in the ag committee. it's more restrictive than the one on the floor now, in terms of allowing companies to be exempt from being classified as a major swap participant. more companies would be held to a higher standard. it's less restrictive with manufacturing companies being classified as a major swap participant. i think that's important. we want people who are systemically risky to be held to a higher standard of accountability, but we don't want to capture our manufacturing company, those represented by the national association of manufacturers, to be captured in that regulation. we want them to be able to do their business and use that to hedge their risk. that's why there was such broad bipartisan support for this when it was in the agriculture

committee, that's why we want to support it now. the chair: for what purpose does the gentleman -- does anyone sweek recognition? mr. frank: i claim time in opposition. the chair: without objection the gentleman is recognized for five minutes. mr. frank: the gentleman from new jersey is -- has laid this out, here's the difference. we have adwhreed end users should have an exemption from these requirement, but there is an exemption to the exemption. if an end user is engaged in activity that can cause financial problem, then we want them not to be exempt of regulation. but here's the difference. the bill that's in there now, that's different from the agriculture bill, says if the end user is causing financial losses and problems at a particular counterparty, then you should not have the exemption. the alternative is to say, no,

let's not step in if this or that or many counterparties are in problems, until it's become a systemic risk. we don't want to wait for systemic risk. i don't want to wait until people are at the edge of the cliff to start to pull them back. it is clear for many of us that a lack of regulation and derivatives was a problem. i support an end-user exemption. when an end-user is employeing that exemption at in a way that puts counterparties at risk, i don't want to wait until a cataclysm impends. i would to have the ability to step in and stop it at that point. for the end user, it is very simple. they can avoid the regulation by being careful what they do we this counterparties. it doesn't take it away. it says please be careful before you engage in a transaction with a counterparty who would be at risk and could begin the kind of chain that we hope would not happen.

the chair: the gentleman reserves. the gentleman from new york is recognized. mr. murphy: i would like to yield one minute to the gentleman from new york. the chair: the gentleman is recognized for one minute. >> i aurge all of you to support the murphy-mcmahon-kratovil amendment which would better regulate big investors as major swap participants thosme the regulation of derivatives is compleaks, -- complex, the issue is important for the proper functioning of our capital markets and to almost every business in america and we need to get this right. because derivatives are financial instruments that help all of us, they help keep our energy costs low and stable, if they're overregulated it will cost my constituents back home more money for their electricity. they help insurance companies keep premiums low. the health companies complete construction on time and under budget. and despite the lack of understanding of derivatives market the market for the most

part works well. we cannot throw the baby out with the bathwater we must work to protect the end user, good american businesses that are trying to manage their cash flow and hedge against risk beyond their control in a cost-effective matter. to do otherwise would cripple american industry and jobs in this country. thank you, i yield the balance of my time. the chair: the gentleman from massachusetts. mr. frank: i have only one more speaker and i have the right to close, so i reserve. the chair: the gentleman reserves. the gentleman from new york is recognized. mr. murphy: i yield one minute to the gentleman from maryland, mr. kratovil. the chair: the gentleman is recognized for one minute. mr. kratovil: i rise in support of this amendment to h.r. 4173. as we improve stability and transparency in the derivatives market we must also ensure that we are not limiting the ability of responsible companies to access the over-the-counter derivatives to keep their businesses up and running.

these derivatives are not just used by the larger broker and dealer banks who present a threat to the market but aling by smaller company who use them to manage the risk associated with running an effective business. the fact of the matter is, the legislation needs to distinguish between the two. without this amendment, h.r. 4173 could subject some end users to burdensome costs and penalties that were primarily aimed at companies who do in fact threat then stability of the financial system. our amendment clarifies that end users do not pose a systemic risk and should not be designated as major swap participants and incur the costs. i yield back. mr. frank: i apologize to the body, i have an additional speaker. i yield two minutes to the gentleman from minnesota. the chair: the gentleman is recognized for two minutes.

>> i rise in opposition to this amendment and i do so reluctantly because what the gentleman from new york is trying to accomplish, to restore one piece of the bill to the way it came out they have agriculture committee. defining the term major swap participant has been one of the biggest challenges since treasury first coin the term last august. we were trying to define it in ways that would generally exempt end users while ensuring we are capturing the financial players to whom we believe the new rules and regulations should apply. we heard from some in the end user community who wanted an absolute guaranteed exemption they would never be considered a major swap participant. we dwont that because we don't know what the future will bring and because one of these end users could one day get so large with rapt to their swap activity as to have an impact on the financial system.

through painstaking work we crafted the decision now in the peterson-frank amendment. now most end users feel the definition is adequate because they are supporting that amendment. but they would be more comfortable with the definition we had in the ag committee reported bill. i believe the new definition was -- we crafted accomplishing our goal of protecting end users. while i thank the gentleman for his appreciation for our work product in the agriculture committee, i must reluctantly oppose this amendment. i yield back. the chair: the gentleman from new york. mr. murphy: i yield one minute to the gentleman from oklahoma. the chair: the gentleman is recognized. >> thank you madam chairman, i rise in support of the murphy committee which would insert into the bill the agriculture committee major swap participant. like the definition of the same term in the frank-peterson amendment, the definition in this amendment excludes those positions held pry primarily

for hedging, reducing, or otherwise mitigating commercial risk. unlike the peterson-frank amendment this definition focusings the regulation on those that could have a serious adverse effect on the united states banking system or financial markets. in other words, mr. murphy's definition focuses on the big boy the big guys. those market participants that the regulatory enhancements in this bill are aimed at. it excludes the commercial users that are using over the counter markets to risk management, not to try and create wealth. once again, though, i have to note the good effect of this amendment may well be lost in the rest of the bill. the chair: the gentleman's time has expired. the gentleman from massachusetts. mr. frank: i am ready to close. the chair: the gentleman reserves this egentleman from new york is recognized. mr. murphy: in closing, i want

to say that i think what we have here is an amendment that will take us back to the common sense solution that we found on a bipartisan basis in the ag committee. it's a solution that does get at the root of the problem. we've got large financial institutions who need to have additional accountability and regulation. that's what we're trying to do with our major swap participants. but it carves out our manufacturers and energy companies that use derivatives to hedge their risks thavepls why we've got support nor amendment from the american wind energy association, the national association of manufacturer the national rural electric cooperative. our businesses that are using derive totives to hedge risks need not be subjected to the same requirements as large guys and dealers. we need to make sure end users are protected so they can use this successfully to stabilize their business. that's what is going to protect jobs, that's what we need to

get the economy moving, that's why we need to support this amendment. i yield. the chair: the gentleman yields his time. the gentleman from massachusetts is recognized. mr. frank: how much time do i have remaining? the chair: the gentleman has two minutes remaining. mr. frank: there is no debate here, there is elsewhere, about whether there should be an end user exemption. as he knows. the gentleman from minnesota and i worked hard to do that and we're not trying to take it away. in fact, both versions of this say that an end user exemption can be forfeited for certain economic circumstances. so the question is not whether there should be an end user exemption, there should be. it's what should trigger that not to be there. the amendment says a systemic risk. we say, given the volatility of this instrument derivative, given the uncertainty that

waits too long to say no. that allows caution to be absent for too long a time. we should not wait until the car is about to go over the cliff to test the brakes. we say, let's stop a good ways back. and it's entirely within the control of the end user what this says is, if you are an end user, do not impose on your counterparty the likelihood of significant loss because the loss here and a loss there and losses in another place accumulates to a problem. it's within -- if they say, it's too hard to tell, that's exactly our point. don't make it hard to tell. know who you're dealing with. don't engage in transactions with counterparties when you are in a position to gsh when you're not in a position to gauge their financial responsibility. don't use the exemption you have from our regulation that applies to the financial speculators to engage in imprudent transactions, not just imprudent for you but for

the other guy. what we learned, it's important, these are mutual events. that's precisely the issue. yes, there should be an end user exemption but end users who disregard prudence and engage in transactions with people who don't have the money to back that up are potentially inflicting harm on the system. the proposers of the amendment agree we should take away that exemption if the economy is harmed. but they wait too late for that. the chair: the question is on the amendment offered by the gentleman from new york. those in favor say aye. those opposed, no. in the opinion of the chair, the noes have it, the amendment is not agreed to. mr. murphy: may i ask depr a recorded vote. the chair: pursuant to clause 8 of rule 16, further proceedings on the amendment of the gentleman from new york will be postponed. it is now in order to consider amendment number 7 printed in house report 111-370.

for what purpose does the gentleman from massachusetts rise? mr. frank: i offer amendment number seven. the chair: the clerk will designate the amendment. the clerk: amendment number seven, offered by mr. frank of massachusetts. the chair: pursuant to house resolution 964, the gentleman from massachusetts, mr. frank and a member opposed each will control five minutes this echair now recognizes the gentleman from massachusetts. . mr. frank: this amendment was requested by the regulators who administer this approach and allow them, not mandate that collateral requirements be set. once again, we have accepted here an exemption for end users over the objection of many who think we have gone too far. but we are dealing here with an inexact science and we would have the regulators be able

under this amendment not required, but able, to set margin requirements. it would allow them to be set, margin or collateral requirements in noncash. that's very important. it would not require people who are using this to hedge commercial risk to come up with the cash, and if they were doing this in a prudent way and posted noncash collateral, there would be no great problem because this noncash collateral could still be used for its other purposes. the qu is, should we -- question is should the regulators be denied what they have asked for which is the right to impose the margin or collateral requirements in those cases of lighter regulation where they think this is important to avoid the kind of imbalances we had before. the purpose is to prevent the

situation where one party or the other makes commitments it's unable to live up to. and this is a requirement -- this is an he empowerment of the regulators to act where they think there is a problem to prevent this from happening. i reserve. the chair: the gentleman reserves the balance of his time. for what purpose does the gentleman from new jersey rise? mr. garrett: claim time in opposition. the chair: the gentleman is recognized for five minutes. mr. garrett: i yield myself one minute. this is the most critical amendment we will address which addresses the derivative portion which is should we say yes or no to these derivatives. we should tell them know. neither the administration, nor the majority or chairman has provided substantial evidence of any o.t.c. derivatives how they caused the crisis. derivatives is something that companies use to hedge the risk and we should make sure there is

transparency and accountability. and we can do so in a way that will not hamper their ability to control costs, not to manage risk in the global marketplace. this would all hurt that. when you talk about the end users and what they're doing, remember, it was the end users, large and small, the public and private american businesses, they, they were the victims, not the cause of the financial crisis. derivative dealers and their customers, the end users, they're in the best position to determine what are the appropriate margins requirements not giving more authority to the s.e.c. or any other prudential regulators, i yield back. the chair: the gentleman from massachusetts is recognized. mr. frank: i yield myself one minute. i accept the way the gentleman from new jersey put it. should we give the regulators more power? that is a constant theme. we look at what happened over the past 15 years and say there

is was too little regulatory action because some didn't use it, like mr. greenspan at the federal serve and some of the s.e.c., but because of not sufficient regulatory powers. it doesn't say that every trade has to be marginned. it says no trade that is to be marginned is a mistake and it is a dissneags area grant of authority to the regulators. if you think what we should do is continue a relatively wholly unregulated regime and distrust the notion of regulation to the point where you would not give them discretionary authority, and they have no authority to take away the end user exemption. regulators, the c.f.t.c. didn't like that. we have accepted the legitimacy of the end user exemption.

but to say there shouldn't be an end user requirement is a grave error and i support this amendment. the chair: the gentleman reserves the balance of his time. the gentleman from new jersey is recognized. mr. garrett: i yield two minutes to the gentleman from alabama, two minutes. the chair: the gentleman from alabama is recognized for two minutes. mr. bachus: the end users of derivatives are the ones that utilize these derivatives and these were large national companies. they were small businesses. they set the collateral requirements. they set the margin requirements and did so safely. they didn't cause the financial meltdown. they were the victims of that meltdown. and they established those collateral requirements and the margins and did so in an

appropriate way. in fact, what the chairman is saying, the s.e.c. and cftc ought to do this. well, they didn't act in a responsible manner leading up to this meltdown last september. let me simply say this. requiring greater margin and capital requirements on companies that never got in trouble will lead to fewer jobs and greater volatility and food and energy prices and loss of capital investments. i will give you two pieces of testimony before our committee. steve holmes of deering company said we have a number of contracts that extend well into the future. if the existing crabts are not permitted and exempted from these requirements, we would have to terminate those transactions atal significant cost.

john hixos said, the cost for us of these new collateral requirements would be $1 billion depending on market condition, an additional amount of money we would have to borrow. we built a brand new -- we built a brand new facility, largest in the united states is in kansas city. so we will have to choose whether you put the money in margin requirements or do you continue and build that plant. that's the type of thing we'll have to decide. marginal requirements or jobs. the chair: the gentleman's time has expired. the gentleman from massachusetts is recognized. mr. frank: how many more speakers does the other side have? i'll use up my time. the chair: the gentleman is recognized. mr. frank: again, the question is whether we should decide now that there will never be such a

requirement. as to it costing a lot of money, the amendment specifically says that they should be allowed to use noncash collateral. that means they could pledge certain of their own assets, which could mean no cost. it also says that the regulators should impose the requirements commensurate with the risk involved in the transaction. once again, we give incentives here for people to minimize risk and i think that's the appropriate market approach. wer as i said, not mandating these to be imposed. we are allowing them to be a noncash collateral and be commensurate with risk. the opposition is arguing never, there will never be such a thing there is no need to have them. the failure of trades in an individual case can be a problem for an individual company.

they can accumulate and that is the question. do we say that we are willing to go forward with this issue with no power in any regulator to say that particular trades are being conducted in an imprudent fashion because if they are conducted in a prudent fashion there is no power here because any margin requirement must be commensurate with risk. the gentleman from minnesota raised that point and it doesn't have to be greater than zero but commensurate with risk. that is the issue. we are being asked to say we have complete confidence there will never be the kind of imprudent trades that could begin to cause trouble in the system and therefore deny the regulators the power to consider this. i yield back. the chair: the gentleman yields and the gentleman from new jersey is recognized. mr. garrett: i yield the remaining two minutes to the the gentleman from minnesota.

the chair: the gentleman from minnesota is recognized. mr. peterson: i rise in opposition to this amendment. this issue of authority for regulators to set margin requirements for end users was one issue we could not agree to during our negotiations, so i think it's appropriate that we resolve it here. i want to remind members that in the underlying peterson-frank amendment that we adopted with regard to swap dealers and major swap participants and their swap parties, they will have full authority to set margins for uncleared swaps that they hold. that authority will be in place with regard to banks. because swap ders and major participants are involved in the swap mashts and interconnected with hundreds of different counterparties we believe it's important we regulate their margins for the protection of their end user customers and the financial system as a whole. however, i don't think we need the regulators putting marginal

requirements on users to protect the swap dealers and participants. they can look out for themselves. the so-called end user company of energy companies, manufacturers and on and on did not as has been said cause the problem. and they are concerned about potential impact of this amendment. and so i urge my colleagues to oppose the amendment and yield back. the chair: the gentleman yields back his time. the gentleman from new jersey. mr. garrett: i yield back. the chair: the gentleman yields his time. the question is on the amendment offered by the gentleman from massachusetts. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it, the amendment is agreed to. mr. garrett: i ask for a recorded vote. the chair: pursuant to clause 6 of rule 18, further proceedings

on the amendment offered by the gentleman from massachusetts will be postponed. it is now in order to consider amendment number 8 printed in house report 111-370. for what purpose does the gentleman from michigan rise? mr. stupak: madam speaker, i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number 8 printed in house report 111-370 offered by mr. stupak of michigan. the chair: pursuant to house resolution 964, the gentleman from michigan, mr. stupak and a member opposed, each will control five minutes. the chair recognizes the gentleman from michigan. mr. stupak: madam chair, thank you. chairman frank and chairman peterson have provided regulation for swap markets but we can improve this bill. we could pass the most comprehensive and thorough regulation of the financial sector imaginable but it would be meaningless if we continue to

leave loopholes in place. as we saw in the oil markets of 2008, leaving loopholes in place for speculators cost consumers more. swaps are financial crabts that allow a company to lock in prices from everything currency, oil to pork bellies. in 2008, $80 trillion was traded on regulated exchanges worldwide and as astonishing as that figure is it pales in comparison to the 600 trillion traded over the counter. this is 7 1/2 times. to put that in perspective the total gross domestic product in the united states is 14.4 trillion or 41 times smaller than the unregulated swaps market. these unregulated markets create a systemic risk across the system and help to bring bear stearns and a.i.g. into bankruptcy and our economy on the verge of disaster. the best way to address this problem is require wall street

to clear their swaps on a regulated exchange. if we can't guarantee that wall street will post collateral, we should require that these trades be made in the open transparent markets. my amendment established a simple requirement, swaps by end dealers that could clear will remain exempt from clearing because one of the parties in that contract is a hedger. however, the swaps still should be reported on an exchange. much of the concern is the lack of information to ensure a competitive transparent market. by adopting this amendment, the marketplace will become more open and end users and other important swap users can determine fair prices. nothing and let me repeat nothing requires a clearing requirement. it's about transparency and nothing more. our amendment specifically includes a provision stating that the amendment shall not be interpreted as required any swap to be cleared, end of quote.

cftc chairman originally proposed the concept for reporting on these specific swaps and supports our amendment. i would like to submit his letter of support in the record. as the chairman told the house energy and commerce committee last week, economists have for decades recognized transparency benefits the marketplace and that lack of regulation in these markets has created significant information deficits. there are a number of groups who support this legislation. the americans for financial reform, united food commercial workers and afl-cio. without our amendment would lead to traders would remain out of reach of regulators. i urge to bring swap contracts out of the dark market. i reserve the balance of my time. the chair: the gentleman reserves the balance of his time. for what purpose does the

gentleman from oak rise? >> to claim the time in opposition. the chair: the gentleman is recognized for five minutes. mr. lucas: i yield myself two minutes. . this amendment is just another solution in search of a problem. what risk is this amendment looking to eliminate? both the house agriculture committee passed language and the peterson-frank amendment recognize that there are swaps that need not go through the cost and formality of being executed on an exchange or swap execution facility. as long as the regulator can see the swap has the appropriate tools to mitigate risk to the u.s. financial system, what more does the exchange execution requirement add? it requires unique agreements of no consequence to anyone but the parties involved to be regulated as if it were a credit default swap transacted between two systematically

risky counterparties. these swaps no price discovery function. they are conducted between systematically risky parties, and most are unique -- too unique to assess the risk. forcing them to be on an exchange will only artificially increase the cost or discourage legitimate risk management altogether. neither should be the purpose of this legislation. i urge defeat of the amendment and reserve the balance of my time. the chair: the gentleman reserves. the gentleman from michigan is recognized. >> i yield two minutes to mr. van hollen of maryland. the chair: the gentleman is recognized for two minutes. mr. van hollen: i'm pleased to join with my colleague, mr. stupak, in this amendment. i want to commend chairman

frank for bringing a strong bill to the floor. it's time to hold wall street and the big banks accountable and never allow them to hold the american economy hostage and leave the american taxpayer holding the bag. we cannot ask the taxpayers to pay for bad bets made by wall street bankers. this amendment strengthens what is already a good bill and as my colleague mr. stupak has said, what it calls for is simply great transparent in transaction. transparency in the over the-counter derivatives market will shift to a small group of bankers, municipalities, to the taxpayers. while are we afraid of a little sunshine? that's what this amendment is about. i want to read to the members a letter we re-- received, mr. stupak and i from the chairman of the e.c.c.

he said your amendment accomplishes the critical goal of transparency without imposing any adigal costs on business as it does not require these end-user trades to be cleared by central counterparties. i want to emphasize that point. there are certain trades, obviously, on this legislation that do need to be cleared through central counterparties and clearing-houses but this is for the remainder. we're saying what's left over should at least be transparent. we should know about it. the taxpayers should know about it. he goes on to say, your amendment separates mandatory trading on transparent trading venues that would cause them to post margins. the two should not be confused this does not require anyone to put up margins. we're saying these transactions have to be transparent. finally he makes the point that, quote, transparency can

be required while leaving the clearing decision up to the parties involved in particular transactions. let's vote for transparency. let's vote for sunshine. let's vote for this amendment. the chair: the gentleman from oklahoma is recognized. mr. lucas: i yield two minutes to the chairman of the agriculture committee, mr. peterson of minnesota. the chair: the gentleman is recognize plsmed peterson: i rise in opposition to the amendment, and i do so reluctantly because i know what they're trying to accomplish has been endorsed by ginsberg. they not only have to declare such trade but do them through a -- through an exchange. it will expose banks' trades among themselves to the light of day. it will provide greater transparency and narrow their

spreads and cost them money, all to the benefit of the end users. for the end users we provide an exemption from the clearing mandate and the other mandate. this would impose an execution mandate on end users, the idea being that the more swaps that can go through a swap execution facility, the greater price transparency you receive, the better deal an end user can make. in theory, this makes sense. however, the end user community doesn't buy it. they question whether the price information that will come out of the swap execution facility will be beneficial to them and they also know that there'll be costs to bear because the facilities won't perform this service for nothing. end users don't know if the benefits will outweigh the costs. i have a real problem telling people that are in the business what's good for them or they don't believe it. i have a letter from various groups who like the

peterson-frank approach and among them are the american gas association, the public gas association, public power association, wind energy, edison electric, electric power supply association, independent petroleum association, natural gas supply association, chamber of commerce, 3m, cargill, john deere, med tronic, zimmer, and others. i ask my colleagues to oppose this. the chair: the gentleman's time has expired. all time having expired, the question is on the amendment offered by the gentleman from michigan. those in favor say aye. those opposed, no. in the opinion of the chair, the ayes have it. the amendment is agreed to. mr. lucas: on that, i ask for a recorded vote. the chair: further ed pro seedings on the amendment

offered by the gentleman from michigan will be postponed. it is now in order to consider amendment number nine printed in house report 111-370. for what purpose does the gentleman from michigan rise? mr. stupak: madam chair, i have an amendment at the desk. the chair: the clerk will designate the amendment. the clerk: amendment number nine printed in house report 111-370, offered by mr. stupak of michigan. the chair: pursuant to house resolution 964, the gentleman from michigan, mr. stupak, and a member opposed, each will control five minutes. the chair recognizes the gentleman from michigan. mr. stupak: thank you, madam chair. this amendment was crafted the help of of representative december lauro, larson and van hollen. we worked with chairman frank and chairman peterson to enhance regulation of the over the counter derivatives market. our amendment provides additional assurances that the swaps market will be -- will prevent speculative financial companies from evating

regulation or ignoring the law. thunder amendment, the s.e.c. will be granted authority to prohibit swap transactions that pose a risk to the financial marketplace. such ever certain swaps such as naked credit default swaps are pure speculative bets that a company will fail and should be banned. credit default swaps an other swaps pose a systemic risk to our economy and accelerated the economic collapse. this amendment also narrows the definition of determine chg companies are and are not bona fide hedgers and users. commercial companies that use commodities and securities to lock in prices and hedge the risk of their product, such as airlines, construction company, and electric utilities did not create the current financial crisis. h.r. 4173 reflects this reality. but its exceptions are written so broadly that financial speculators can be treated as bona fide hedgers. to maintain strong standards

for financial company we must ensure illegal swap transactions don't remain a valid contract in a court of law. our amendment prevents them being responsible if their trading partner has illegally reported the swap. this amendment will preserve the ability of bona fide end users to hedge commercial risk with strong standards for wall street financial companies. i urge an adoption of this eafment i ask unanimous consent to be placed in the record letters of support from americans for financial reform and commodities oversight coalition. the chair: that request will be covered under general leave. the gentleman -- does the gentleman reserve? mr. stupak: yes. the chair: the gentleman from oklahoma is recognized. mr. lucas: i seek time in opposition to the amendment.

the chair: the gentleman is recognized for five minutes. mr. lucas: i yield myself 2 1/2 minutes. the chair: the gentleman is recognized for two 2 1/2 minutes. mr. lucas: this amendment strikes the term balance sheet risk from the definition of major swap participant, the result of which prevents corporations from hedging pension fund costs. pension funds are a liability on a corporation's balance sheet. the liability carries risks and that risk needs to be managed. if corporations can't manage pension fund risk, their employees will realize smaller benefits or fewer employees will enjoy pension benefits altogether. some companies may be forced to join the ranks of employers who have terminated company-base red tirmente plans. another part of the amendment allows a party to a swap to walk away from the swap for failure to comply with the clearing requirements or the execution transparency requirement created in this title. sounds like a good idea. but let's take a closer look.

the only time a party to a swap will want to walk away from a transaction is when they're losing money. this provision will encourage a swap participant to call his or her attorney when the deal goes sour to find a way to walk away from the liability created by the transaction. this contractual uncertainty will push companies away from risk mitigation, leading to higher operating costs and higher prices to consumers. in addition, this amendment is not needed to punish a counterparty for lack of compliance. if there's noncompliance with a clearing or execution transparency requirement, the cftc can stop and catch the mall factors. -- the malefactors. i urge my colleagues to vote against this amendment and reserve the balance of my time. the chair: the gentleman from

massachusetts is recognized. mr. stupak: i yield two minutes to my colleague, ms. delauro. the chair: the gentlewoman is recognized. ms. delauro: i'm pleased to join my colleagues in support of this amendment. it grants the cftc and the s.e.c. the authority to prohibit specific swaps, including the abuse of naked credit default swaps that distorted the derivatives market. it's now a bona fide end user exemption in the bill to prevent loopholes that might allow major financial players to evade the requirements of the bill, while ensuring that legitimate end users still have access to this financial tool. it ensures that no illegal swap transaction will remain a valid contract in a court of law. we should not countenance predatory behavior in any way. we should make sure market players are not financially benefiting from the abusive and corrupt practices that helped

initiate this debilitating rere-session. companies took bets that others would fail without facing any risk thems in the case of default. other institutions took those bets even though they could not pay out if the unthinkable happened -- happened. it was a casino culture where traders played with taxpayers' dollars and made sure they won either way. always at the expense of regular people. and when the defaults started to mown up, the whole house of cards came tumbling down. why did the credit default swap , once just a financial tool to hedge risks, become the province of rampant and reckless speculation? because they remained unregulated. this is a good step toward repairing this oversight. we need to do more. taken together, the changes in this amendment will strengthen regulation over these once useful financial tools and will help ensure the entire nation does not geta