Commodity Futures Modernization Act (The Vote)

"From the Wall Street Watch website.


Financial deregulation led directly to the current economic meltdown. For the last three decades, government regulators, Congress and the executive branch, on a bipartisan basis, steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies. "Sold Out" details a dozen key steps to financial meltdown, revealing how industry pressure led to these deregulatory moves and their consequences:

1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.

2.Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.

3.The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for massive speculation.

4.Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.


A short history of the Commodity futures Modernization Act by the "Sunlight foundation"...

"The saga of the Commodity Futures Modernization Act begins in 1998. At the time, the economy was booming, stocks soared, and new instruments of trading were found to make more money while evading the oversight of regulatory bodies. Two of those growing instruments were financial derivatives and credit-default swaps. As these new financial instruments emerged a debate began over whether or not to regulate them.

The chairman of the Commodity Futures Trade Commission (CFTC) Brooksley Born issued a first call for her regulatory commission to have power to oversee financial derivatives. While previous legislative attempts had been made earlier, Born’s efforts were the most direct and threatening to the financial industry. During an April 1998 meeting of the President’s Working Group on Financial Markets, Federal Reserve chairman Alan Greenspan, Clinton Treasury Secretary Robert Rubin (and later Secretary Larry Summers), and Securities and Exchange Commission (SEC) chairman Arthur Levitt opposed Born’s efforts and attempted to derail her.

Soon afterwards, Born released a “concept” paper with ideas of what regulation of derivatives and swaps could look like under the CFTC’s oversight authority. The response to Born’s paper was swift. The financial industry and government officials responded fiercely in opposition to Born’s ideas. Greenspan, Summers, and Senate committee chairmen all criticized her and her proposals.

In the midst of this debate Long Term Capital Management (LTCM), a major hedge fund employing some of the top economists, collapsed. LTCM was highly over-leveraged and held a big portfolio of swaps. In the end, during the government organized bailout of the company, LTCM recorded a loss of $1.6 billion on swaps alone.

Born felt that an unregulated derivatives market that spawned the LTCM bailout could “pose grave dangers to our economy.” In the end, Born lost her battle and, in May 1999, asked to be replaced as CFTC chairman. The new chairman, William Rainer, was more amenable to the positions of industry leaders and the major government officials Summers, Greenspan, and Levitt. Later that year, the President’s Working Group on Financial Markets released a report calling for “no regulations” of derivatives and swaps and began crafting a program to make that possible. Meanwhile in Congress, lawmakers were still up-in-arms over Born’s attempts to regulate the financial derivatives market and began working to pass their own set of deregulatory language.

Leading the charge in Congress were Sens. Phil Gramm (R-TX) and Richard Lugar (R-IN) and Rep. Thomas Ewing (R-IL). In May of 2000, Rep. Ewing introduced his Commodity Futures Modernization Act. While Ewing’s bill sailed quickly through the House, it stalled in the Senate, as Sen. Gramm desired stricter deregulatory language be inserted into the bill. Gramm opposed any language that could provide the SEC or the CFTC with any hope of authority in regulating or oversight of financial derivatives and swaps. Gramm’s opposition held the bill in limbo until Congress went into recess for the 2000 election.

Throughout the better part of the year Gramm, Lugar and Ewing worked with the President’s Working Group on Financial Markets—most specifically, Treasury Secretary Summers, CFTC Chairman Rainer and SEC Chairman Levitt—to strike a deal on the bill.

Little attention followed Congress as the contentious 2000 presidential election was stuck in a stalemate as lawyers and khaki-clad protesters fought over the Florida recount to decide whether Gov. George W. Bush or Vice President Al Gore would be the next president.

During a lame-duck December session, while the media was focused on the recounts and court cases, Gramm and Ewing sought to strike a compromise on the Commodity Futures Modernization Act. The day after the Supreme Court ruled in favor of Gov. Bush, December 14, Ewing introduced a new version of the Commodity Futures Modernization Act. On December 15, with little warning or fanfare—aside from the overshadowed discussions on the floors of Congress—the new, compromise version was included as a rider to the Consolidated Appropriations Act for FY 2001, an 11,000 page omnibus appropriations conference report.

HedgeWorld Daily News, a trade publication for hedge funds and one of the few news outlets following the bill, stated, “Details of the final language are not immediately available. Congressional aides said Sen. Gramm did succeed in getting additional language protecting the legal certainty of swap, especially those traded by banks, which are the main users of the products.”

The final language, which the public was hardly aware of, contained some new sections not in the original Ewing bill that, for all intents and purposes, exempted swaps and derivatives from regulation by both the CFTC, which had already implemented rules that it would not regulate swaps and derivatives, and the SEC. Also, hidden within the bill was an exemption for energy derivative trading, which would later become known as the “Enron loophole” – this loophole would provide the impetus for Enron’s nose dive into full blown corporate corruption.

On December 15, at 4:48 pm, the conference report containing the Commodity Futures Modernization Act was introduced. At 4:52 pm, the House began consideration of the report. The House approved the legislation 292-60 and the Senate cast a voice vote in favor. The bill was signed by President Clinton on December 21."

The bill that contained this Commodity Futures Moderazation act, was finaly approved in a package of other appropiations, in the House Bill 4577 so by approving this appropiation..they passed this Commodity Futures ACT. The Appropiaption bill looked so wholesome who wouldn't not have voted for it?

H.R. 4577 was an appropriations/budget bill encompassing the funding for the Departments of Labor, Health and Human Services, and Education for fiscal year 2001 which had already begun in September 2000.[17] This budget bill included:

H.R. 5656 - Labor HHS Education Appropriations;
H.R. 5657 - Legislative Branch Appropriations;
H.R. 5658 - Treasury Appropriations;
H.R. 5666 - Miscellaneous Appropriations - except section 123 relating to the enactment of H.R. 4904;
H.R. 5660 - Commodity Futures Modernization;
H.R. 5661 - Medicare, Medicaid and SCHIP Benefits Improvement and Protection;
H.R. 5662 - Community Renewal Tax Relief and Medical Savings Accounts;
H.R. 5663 - New Markets Venture Capital Program; and
H.R. 5667 - Small Business Reauthorization.
Wikipedia

This bill was passed uninamously in the Senate.


H R 4577 YEA-AND-NAY 15-Dec-2000 6:39 PM
QUESTION: On Agreeing to the Conference Report
BILL TITLE: Making Appropriations for Labor, Health and Human Services for Fiscal Year 2001

---- YEAS 292 ---

Abercrombie
Allen
Andrews
Archer
Armey
Baca
Bachus
Baird
Baldacci
Baldwin
Barcia
Barrett (NE)
Barrett (WI)
Bass
Becerra
Bentsen
Bereuter
Berkley
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Boyd
Brady (PA)
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Brown (OH)
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Cooksey
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Dingell
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Emerson
Engel
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Ewing
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Foley
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Fossella
Fowler
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Frelinghuysen
Frost
Gallegly
Ganske
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Gephardt
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Gilman
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John
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Johnson, E. B.
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---- NAYS 60 ---

Aderholt
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Bartlett
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Blunt
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Cook
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Crane
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Smith (WA)
Stark
Stearns
Tancredo
Terry
Thurman
Toomey
Vitter
Weldon (FL)
Wicker



---- NOT VOTING 80 ---

Ackerman
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Ballenger
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Bilbray
Blumenauer
Boehlert
Bonilla
Bonior
Bono
Brown (FL)
Callahan
Calvert
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McKeon
McKinney
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Mica
Millender-McDonald
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Miller, George
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Pickett
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Rogers
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