Swap Jurisdiction Certainty Act

Floor Speech

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Mr. LYNCH. Mr. Speaker, I thank the gentlelady for yielding.

I rise today in strong opposition to the bill before this House today, H.R. 1256, the Swaps Jurisdiction Certainty Act. It should be called the Wall Street Bailout Certainty Act because that's the actual effect this is going to have. It will do serious and irrevocable harm to our efforts to rein in the reckless behavior of Wall Street.

In the words of our own Commodity Futures Trading Commission Chairman Gary Gensler, this bill will ``blow a hole'' in the hard-fought derivatives reforms we passed 3 years ago. Section 722 of the Dodd-Frank Act gives the CFTC authority to regulate overseas derivatives that have a direct and significant effect on the commerce of the United States.

If my colleagues need an example, I harken to the ranking member's example of why this cross-border authority is so critically important, and that's the case of AIG, the insurance giant. AIG engaged in increasingly complex and risky derivatives bets on the subprime mortgage market out of its AIG Financial Products subsidiary in London. And because there was virtually no oversight of derivatives markets, AIG Financial Products was able to deal in the shadows. And when the housing bubble burst, no one, not its directors, not its counterparties, not even its regulators, knew just how deeply in trouble AIG was.

So while we have adopted a number of regulations within Dodd-Frank, this bill will allow all of the companies that would be regulated to escape that regulation by doing these derivative deals through their foreign subsidiaries. And the four biggest derivative dealers in this country have over 3,000 foreign subsidiaries each. So this is an escape hatch for them. Vote ``no'' on this bill.

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Mr. LYNCH. Mr. Speaker, I thank the gentlelady for yielding.

Let me just make one final point on this. What this bill will do now is to give the Cayman Islands or London or some other jurisdiction the ability to write derivatives rules that cover U.S. affiliates.

Now, the problem with that very idea is that the Cayman Islands or any other jurisdiction has no interest in protecting the U.S. taxpayer. That's the truth.

When the bailout for AIG came, it was $160 billion in U.S. currency, supported by the U.S. taxpayer, that bailed AIG out. So any of these foreign affiliates that go under in foreign jurisdictions, those foreign jurisdictions, whether it be the Cayman Islands or any other jurisdiction, have no interest, they have no dog in the fight to protect the American taxpayer.

That's the problem with this bill. That's the bottom line. We should vote against it. This is a disgrace. But it does show the power of Wall Street, I'll say that.

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