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Garrett Explains How Bailout Bill Hurts Business's Ability to Protect Themselves from Risk

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Published on Dec 10, 2009

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.

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