House Rules Committee on the Commodity End -User Relief Act
House Rules Committee
Meeting on H.R. 2289 – Commodity End-User Relief Act
Tuesday, June 2, 2015
Key Topics & Takeaways
- Structured Rule: The Commodity End-User Relief Act will be sent to the House floor under a structured rule that: 1) would allow for one hour of general debate, split evenly between the Chair and Ranking Member of the House Agriculture Committee, 2) would use a substitute amendment consisting of the text of Rules Committee Print 114-18 as the text of the bill for the consideration of amendments, and 3) would allow five amendments to be made in order.
- Allowing Innovation: Chairman Sessions said that the legislation would allow for economic growth and job creation by ensuring that the CFTC does not unnecessarily inhibit innovation or harm end-users.
- Ranking Member Objections: Ranking Member Peterson of the House Agriculture Committee expressed many concerns with the legislation, saying he wished he could support the bill, but would not because it is not bi-partisan.
- Cross-Border Harmonization: Peterson said that the cross-border provision in the bill is the “most troubling” because it would stop the progress made by the CFTC in seeking harmonization of rules between the U.S. and Europe. Peterson said that the CFTC Chairman told him that about 85 percent of the equivalency issues would be finalized “probably this month.”
Witnesses
- Rep. Michael Conaway (R-Texas), Chairman of the House Agriculture Committee
- Rep. Colin Peterson (D-Minn.), Ranking Member of the House Agriculture Committee
Opening Statement
Chairman Pete Sessions (R-Texas) noted that H.R. 2289, Commodity End-User Relief Act, would reauthorize the Commodity Futures Trading Commission (CFTC) through 2019. He said the legislation would allow for economic growth and job creation by ensuring the CFTC does not unnecessarily inhibit innovation or harm end-users.
Witnesses
Rep. Michael Conaway (R-Texas), Chairman of the House Agriculture Committee, said that H.R. 2289 is the result of bi-partisan work done over the past three years, which included 11 hearings on various topics affecting market participants. He said the bill: 1) protects customers and margin funds; 2) reforms the operations of the CFTC to improve the deliberative process and require a more robust system of cost-benefit analysis; and 3) provides relief from regulatory burdens to end-users. Conaway concluded that the bill would preserve the ability to hedge without undermining the goals of Title VII of Dodd-Frank.
Rep. Colin Peterson (D-Minn.), Ranking Member of the House Agriculture Committee, said he wished he could support the bill, but would not because bill is not bi-partisan, adding that only two Democrat members of the Agriculture Committee supported it. He expressed concern with a provision in the bill that is similar to an executive order from President Obama on cost-benefit analysis. He explained that the executive order does not allow cost benefit analysis to be used in court, but noted that H.R. 2289 does allow such use, which he said could be used to stall rulemakings.
Peterson then expressed concern with other provisions in the bill. First, he mentioned a provision that he said was written because of a dispute between the former CFTC Chairman and another Commissioner, but added that this problem no longer exists and the language would make the CFTC’s job more difficult in the future. Next, he said that a provision relating to core principles of swap execution facilities (SEFs) and voice brokering would go against the goals of transparency because voice brokering is “done in the dark.” Lastly, he said that the cross-border provision in the bill is the “most troubling” because it would stop the progress made by the CFTC in seeking harmonization of rules between the U.S. and Europe. Peterson said that the CFTC Chairman told him that about 85 percent of the equivalency issues would be finalized “probably this month.”
Peterson also noted that the Congressional Budget Office (CBO) reported that the cost-benefit and cross-border provisions would require the CFTC to hire 30 additional full time employees and spend an additional $45 million over the next five years.
Question and Answer
Cost-Benefit Analysis
Rep. Louise McIntosh Slaughter (D-N.Y.) expressed concern about “unraveling Dodd-Frank” and asked why the CFTC should be required again to conduct cost-benefit analysis when it already does so. Conaway replied that the CFTC’s rules are not subject to substantive cost-benefit analysis and that H.R. 2289 would require them to conduct this analysis “in a rational way.”
International Regimes
Slaughter then asked if the bill would cut off negotiations between the U.S. and Europe on swaps rules. Peterson said that while the bill does not directly cut negotiations, it would “have that effect.”
Slaughter asked if institutions would be able to pick and choose which jurisdiction’s rules they would be subject to. Conaway explained that institutions would not a have a choice, but that the bill would require the CFTC to “have a matrix” of where other jurisdiction’s rules are equivalent and allow institutions to adhere to these rules.
Peterson agreed that institutions would not have a choice but said that banks could arbitrage international regulations “against each other” in a “race to the bottom.” He added that the problems seen with end-users are issues for prudential and bank regulators, not the CFTC, and thus need to be solved through the House Financial Services Committee. Conaway responded that while regulatory arbitrage was happening as rules were being developed, this problem “no longer exists.”
Structural Changes
Rep. Dan Newhouse (R-Wash.) said that if the CFTC’s structure can be improved to address issues previously seen, then Congress should seize the opportunity to do so, and asked the witnesses to explain the provisions further.
Conaway noted that the bill would: 1) add stricter cost-benefit requirements to the CFTC, including a requirement to account for internal costs of new rules; 2) require that all five CFTC commissioners have access to all the information they need to do their job; and 3) strengthen the administration of the agency.
Peterson said he did not know how much harm or good these provisions would cause but said that if a Republican were to become Chairman of the CFTC, they would ask for such provisions to be removed.
Funding
Rep. Jim McGovern expressed concern about the funding level of the CFTC, saying that they receive inadequate resources and Congress is “setting it up to fail.” He worried that “chipping away” at Dodd-Frank would return markets to a state that got the country into the previous economic crisis.
StructuredRule
Rep. Virginia Foxx (R-N.C.) said H.R. 2289 would come to the House floor under a structured rule that: 1) would allow for one hour of general debate, split evenly between the Chair and Ranking Member of the House Agriculture Committee, 2) would use a substitute amendment consisting of the text of Rules Committee Print 114-18 as the text of the bill for the consideration of amendments, and 3) would allow five amendments to be made in order.
Request for Open Rule
Slaughter asked that the bill be considered under an open rule to allow for floor amendments. This request was voted down seven to two.
CFTC Waiver Amendment
Rep. Alcee Hastings (D-Fla.) put forth and amendment from Rep. Maxine Waters (D-Calif.) that would prohibit the CFTC from waiving bad actor disqualifications arising under a law other than the Commodity Exchange Act. This amendment was voted down eight to two.
For more information and materials, including submitted amendments, please click here.
To view an archived webcast, please click here.
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House Rules Committee
Meeting on H.R. 2289 – Commodity End-User Relief Act
Tuesday, June 2, 2015
Key Topics & Takeaways
- Structured Rule: The Commodity End-User Relief Act will be sent to the House floor under a structured rule that: 1) would allow for one hour of general debate, split evenly between the Chair and Ranking Member of the House Agriculture Committee, 2) would use a substitute amendment consisting of the text of Rules Committee Print 114-18 as the text of the bill for the consideration of amendments, and 3) would allow five amendments to be made in order.
- Allowing Innovation: Chairman Sessions said that the legislation would allow for economic growth and job creation by ensuring that the CFTC does not unnecessarily inhibit innovation or harm end-users.
- Ranking Member Objections: Ranking Member Peterson of the House Agriculture Committee expressed many concerns with the legislation, saying he wished he could support the bill, but would not because it is not bi-partisan.
- Cross-Border Harmonization: Peterson said that the cross-border provision in the bill is the “most troubling” because it would stop the progress made by the CFTC in seeking harmonization of rules between the U.S. and Europe. Peterson said that the CFTC Chairman told him that about 85 percent of the equivalency issues would be finalized “probably this month.”
Witnesses
- Rep. Michael Conaway (R-Texas), Chairman of the House Agriculture Committee
- Rep. Colin Peterson (D-Minn.), Ranking Member of the House Agriculture Committee
Opening Statement
Chairman Pete Sessions (R-Texas) noted that H.R. 2289, Commodity End-User Relief Act, would reauthorize the Commodity Futures Trading Commission (CFTC) through 2019. He said the legislation would allow for economic growth and job creation by ensuring the CFTC does not unnecessarily inhibit innovation or harm end-users.
Witnesses
Rep. Michael Conaway (R-Texas), Chairman of the House Agriculture Committee, said that H.R. 2289 is the result of bi-partisan work done over the past three years, which included 11 hearings on various topics affecting market participants. He said the bill: 1) protects customers and margin funds; 2) reforms the operations of the CFTC to improve the deliberative process and require a more robust system of cost-benefit analysis; and 3) provides relief from regulatory burdens to end-users. Conaway concluded that the bill would preserve the ability to hedge without undermining the goals of Title VII of Dodd-Frank.
Rep. Colin Peterson (D-Minn.), Ranking Member of the House Agriculture Committee, said he wished he could support the bill, but would not because bill is not bi-partisan, adding that only two Democrat members of the Agriculture Committee supported it. He expressed concern with a provision in the bill that is similar to an executive order from President Obama on cost-benefit analysis. He explained that the executive order does not allow cost benefit analysis to be used in court, but noted that H.R. 2289 does allow such use, which he said could be used to stall rulemakings.
Peterson then expressed concern with other provisions in the bill. First, he mentioned a provision that he said was written because of a dispute between the former CFTC Chairman and another Commissioner, but added that this problem no longer exists and the language would make the CFTC’s job more difficult in the future. Next, he said that a provision relating to core principles of swap execution facilities (SEFs) and voice brokering would go against the goals of transparency because voice brokering is “done in the dark.” Lastly, he said that the cross-border provision in the bill is the “most troubling” because it would stop the progress made by the CFTC in seeking harmonization of rules between the U.S. and Europe. Peterson said that the CFTC Chairman told him that about 85 percent of the equivalency issues would be finalized “probably this month.”
Peterson also noted that the Congressional Budget Office (CBO) reported that the cost-benefit and cross-border provisions would require the CFTC to hire 30 additional full time employees and spend an additional $45 million over the next five years.
Question and Answer
Cost-Benefit Analysis
Rep. Louise McIntosh Slaughter (D-N.Y.) expressed concern about “unraveling Dodd-Frank” and asked why the CFTC should be required again to conduct cost-benefit analysis when it already does so. Conaway replied that the CFTC’s rules are not subject to substantive cost-benefit analysis and that H.R. 2289 would require them to conduct this analysis “in a rational way.”
International Regimes
Slaughter then asked if the bill would cut off negotiations between the U.S. and Europe on swaps rules. Peterson said that while the bill does not directly cut negotiations, it would “have that effect.”
Slaughter asked if institutions would be able to pick and choose which jurisdiction’s rules they would be subject to. Conaway explained that institutions would not a have a choice, but that the bill would require the CFTC to “have a matrix” of where other jurisdiction’s rules are equivalent and allow institutions to adhere to these rules.
Peterson agreed that institutions would not have a choice but said that banks could arbitrage international regulations “against each other” in a “race to the bottom.” He added that the problems seen with end-users are issues for prudential and bank regulators, not the CFTC, and thus need to be solved through the House Financial Services Committee. Conaway responded that while regulatory arbitrage was happening as rules were being developed, this problem “no longer exists.”
Structural Changes
Rep. Dan Newhouse (R-Wash.) said that if the CFTC’s structure can be improved to address issues previously seen, then Congress should seize the opportunity to do so, and asked the witnesses to explain the provisions further.
Conaway noted that the bill would: 1) add stricter cost-benefit requirements to the CFTC, including a requirement to account for internal costs of new rules; 2) require that all five CFTC commissioners have access to all the information they need to do their job; and 3) strengthen the administration of the agency.
Peterson said he did not know how much harm or good these provisions would cause but said that if a Republican were to become Chairman of the CFTC, they would ask for such provisions to be removed.
Funding
Rep. Jim McGovern expressed concern about the funding level of the CFTC, saying that they receive inadequate resources and Congress is “setting it up to fail.” He worried that “chipping away” at Dodd-Frank would return markets to a state that got the country into the previous economic crisis.
StructuredRule
Rep. Virginia Foxx (R-N.C.) said H.R. 2289 would come to the House floor under a structured rule that: 1) would allow for one hour of general debate, split evenly between the Chair and Ranking Member of the House Agriculture Committee, 2) would use a substitute amendment consisting of the text of Rules Committee Print 114-18 as the text of the bill for the consideration of amendments, and 3) would allow five amendments to be made in order.
Request for Open Rule
Slaughter asked that the bill be considered under an open rule to allow for floor amendments. This request was voted down seven to two.
CFTC Waiver Amendment
Rep. Alcee Hastings (D-Fla.) put forth and amendment from Rep. Maxine Waters (D-Calif.) that would prohibit the CFTC from waiving bad actor disqualifications arising under a law other than the Commodity Exchange Act. This amendment was voted down eight to two.
For more information and materials, including submitted amendments, please click here.
To view an archived webcast, please click here.