Senate Democrats

Reid, Dodd, Lincoln, In Letter, Highlight Reform Measures To Stop Excessive Risks In Derivatives Market

Washington, D.C. – Senate Majority Leader Harry Reid, Senate Banking Committee Chair Chris Dodd and Senate Agriculture Committee Chair Blanche Lincoln sent a written response to a bipartisan group of Senate colleagues today in response to their letter last week which called for strong and effective oversight of the derivatives market   In their response, Senators Reid, Dodd and Lincoln reported on a recent agreement that addresses concerns about the excessive risks in the derivatives market by “bring(ing) transparency and regulation to a market that currently operates with little of either.”  Further, they expressed confidence that the new measure “maximizes transparency and prevents risky activities from escaping tough regulatory requirements, thereby ensuring a safer, sounder financial system.”  In addition, they called on the bipartisan group of Senators to support moving to a floor debate on Wall Street accountability legislation.
 
Excerpts of Reid, Dodd and Lincoln’s letter to Senate colleagues:
 
“We write in response to your April 23 letter asking that Chairmen Dodd and Lincoln work together to merge their individual bills into a single bill that, ‘includes the strongest and most effective possible regulation of [over-the-counter] derivatives.’  We are pleased to report that these chairmen and their staffs reached agreement this weekend on a single bill that does just that.”
 
“In essence, the new joint title on derivatives combines the strongest features of the Senate Agriculture and Banking Committee’s framework for mandatory clearing, exchange trading, margin and capital requirements.  It brings transparency and regulation to a market that currently operates with little of either.”
 
“Furthermore, we want you to know that we intend to offer this merged bill as the first amendment once the Senate begins consideration of financial reform legislation.” 
 
“We hope you will agree with us that this merged bill meets the tests of strong reform and encourage you to vote with us to proceed to Wall Street reform legislation.” 

 
Below is the full text of the letter:
 
April 26, 2010
 
Dear Senators Cantwell, Feinstein, Nelson, Dorgan, Harkin, Brown and Snowe:
 
We write in response to your April 23 letter asking that Chairmen Dodd and Lincoln work together to merge their individual bills into a single bill that, “includes the strongest and most effective possible regulation of [over-the-counter] derivatives.”  We are pleased to report that these chairmen and their staffs reached agreement this weekend on a single bill that does just that.  Furthermore, we want you to know that we intend to offer this merged bill as the first amendment once the Senate begins consideration of financial reform legislation. 
 
Specifically, your letter enumerates eleven issues that we agree must be adequately addressed in financial regulatory reform legislation in order to meet your test for strong reform.   We believe the merged bill addresses each of these issues in a manner consistent with the views expressed in your letter.
 
In essence, the new joint title on derivatives combines the strongest features of the Senate Agriculture and Banking Committee’s framework for mandatory clearing, exchange trading, margin and capital requirements.  It brings transparency and regulation to a market that currently operates with little of either.  For firms whose positions could seriously destabilize the financial system, this joint product would subject them to stronger margin and capital requirements.  We are confident this new title maximizes transparency and prevents risky activities from escaping tough regulatory requirements, thereby ensuring a safer, sounder financial system.
          
As a result of the excellent work by the Banking and Agriculture Committees, advocates for true Wall Street reform are now in the best position possible to deliver the kind of reform the American people expect.  We hope you will agree with us that this merged bill meets the tests of strong reform and encourage you to vote with us to proceed to Wall Street reform legislation. 
                      
 
Sincerely,
 
HARRY REID                       CHRIS DODD                       BLANCHE LINCOLN
Majority Leader                      United States Senator             United States Senator

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