Ed Markey

Mr. MARKEY

Mr. MARKEY. Right now under the law any person who has this kind of a conflict is absolutely prohibited, and if they try to get around it without getting an exemption, then they do face the penalty of 2 years in jail or a $10,000 fine, and I think that changing that kind of a law that has protected our country quite well from conflict of interest is something that we should very seriously deliberate on before the vote this afternoon.

Mr. MARKEY. I yield to the gentleman from Texas.

Mr. MARKEY. Mr. Chairman, this is a quite simple amendment, and it goes towards the objective of curing what is a very glaring error which has been built in. Mr. Chairman, the problem with this legislation is that it, unbelievably, allows for the corporate insiders, the lobbyists, the scientists, of companies that are, in fact, with financial interest in the regulation which is being considered, to be able to sit on the peer review group which is going to be evaluating that risk, that regulation which will be put on the books. Here is the language from H.R. 1022 that we are considering out here on the floor today. Here is what it says. It says that peer review panels, quote, shall not exclude peer reviewers merely because they represent entities that may have a potential interest in the outcome, provided that interest is fully disclosed to the agency. Well, what that means, my colleagues, is that the Gucci-clad lobbyists that are surrounding this building right now wondering how the legislation is going to turn out will have the capacity to actually serve on the peer review panels. So, after they get done sitting in our committees, listening to and lobbying on the legislation itself, they are then able to put themselves on the peer review panel and ultimately insert their views into the record, and, if they are unsuccessful, to then turn over to their own corporate lawyers their dissents that can be used as the basis for an appeal in the courts if they are unhappy with the regulations.

Mr. MARKEY. Mr. Chairman, I demand a recorded vote.

Mr. MARKEY. Mr. Chairman, again, we are not excluding the companies that are affected. They can still participate legally by commenting upon the regulation, by meeting with the regulators, by participating in any number of ways. What we are talking about here is, as the gentleman from Texas calls it, the jury over here on the peer review panel. Except for that one part of the process, they are allowed to fully participate in making their case and in ensuring that all the evidence and information is before the agency.

Mr. MARKEY. Mr. Chairman, will the gentleman yield?

Mr. MARKEY. Mr. Chairman, again, I think the gentleman is heading in the right direction, but it is not enough, and it is already covered by the language which I have in my amendment. We make it a ban, but a ban which can be waived by the agency if they need the experts. By the way, that is how every Federal agency today now operates. We are not changing anything, we are not adding anything new here. There are peer review groups today, there have been for 50 years, and they have always used experts. They will continue to use experts. The only change we are debating here today is whether or not people with financial conflicts of interest should be able to serve on the panel. That is the only thing in the debate. Historically, they have always had the latitude of waiving, if they want to, under the U.S.C. 208 that allows for the Federal agency to let those people in if they needed them, so the law is already there to do it. I do not know why we are changing it at all. Again, to avoid the conflict of interest, and again, if I may in conclusion just say to the gentleman from Pennsylvania [Mr. Walker], it is not with the intention of killing this legislation that we are offering the amendments. It is just the opposite, it is to improve it before it does become the law of the land.

Mr. MARKEY. Mr. Chairman, if I may reclaim my time, the amendment which I have offered already provides that flexibility to the Federal agency. It allows for the agency to make a determination that the interest would not be reasonably expected to create a bias, and therefore, to allow that expert to testify.

Mr. MARKEY. I yield to the gentleman from Pennsylvania.

Mr. MARKEY. I am glad to yield to the gentleman from Pennsylvania.

Mr. MARKEY. Mr. Chairman, if I may reclaim my time one final moment, the point is if there is a lobbyist, if there is a scientist, we will not even call them lobbyists, we will just say employees of the company, if they have stock options in the company that personally enrich them if a regulation does not go on the books, let us not kid ourselves, there is a tremendous bias with regard to how the individual will view that regulation going forward. If a Federal regulator passes a regulation, he does not personally or she does not personally find any monetary remuneration because of the passage of that regulation or defeat of that regulation. One might say they have a professional stake, no question about it, but they do not have a financial concern, and that is really the whole heart of this debate. I urge anyone listening, if they do not believe people should have a financial stake, please vote for the Markey amendment. It still allows for every other expert in every field to serve on the peer review panels.

Mr. MARKEY. Mr. Chairman, if I may reclaim my time, let us not confuse whether or not other people are hired at agencies with the issue of whether or not the person gets personally enriched by a decision which is made. No Federal employee can profit, by law, from any decision which they make. There is absolutely a total prohibition against that. I do not think it is proper to equate that situation with a Federal regulator with the lobbyists' interests which a chemical, a tobacco, a drug, or a toy manufacturing concern would have with the promulgation of a regulation and personal enrichment of the individual.

Mr. MARKEY. I yield to the gentleman from Wisconsin.

Mr. MARKEY. Mr. Chairman, if I may reclaim my time, I think it is noteworthy that in our language we make it clear that it is not just financial, but other interests in the outcome, which would qualify as bias. We would want the agencies to look at other interests as well that may not be financial. That is why I deliberately included those words after the full committee markup when that subject was raised, because I agree with the gentleman, where there is bias, regardless of whether there is a financial interest, there should be an ability to remove those people from the panel. However, that is the whole point. It does not really make any difference whether you are going to get rich because the regulation is coming out your way, or your whole career is obviously so tainted by a pattern of behavior that that person should be excluded as well. Mr. Chairman, I understand that there are some people who want industry lobbyists to serve on the panel, who want a biased position to be represented as part of these hearings. That is what the bill allows. The amendment bans that. It puts up a wall, and if Members want, I will add in the extra language which I have which keeps out bias other than financial, so that the gentleman can legitimately object when in fact there are those who have other interests.

Mr. MARKEY. I am glad to yield to the gentleman from Virginia.

Mr. MARKEY. Mr. Chairman, I do not want to prolong the debate, except to, here at its conclusion, make a simple point, once again. We do not want any of these agencies to exclude experts. We do not want anyone who can contribute to an evaluation of any of these scientific questions to not be able to serve on any of these peer review panels. The issue is bias. If in fact the scientist, the lawyer, the lobbyist who is being offered as an expert has a bias on that issue, we are arguing that they should not serve on that peer review panel unless the agency determines that there is a significant contribution that can be made, and the bias is incidental.

Mr. MARKEY. Mr. Chairman, I move to strike the requisite number of words.

Mr. MARKEY. Mr. Chairman, will the gentleman yield?

Mr. MARKEY. The example which the gentleman uses is absolutely ridiculous. When a regulator fines a company for polluting, the money does not go back to the regulator. The money goes back to the Federal Treasury. When a lobbyist is on a peer review panel, proposing that a regulation pass, he gets rich if that regulation is blocked.

Mr. MARKEY. Mr. Chairman, will the gentleman yield?

Mr. MARKEY

Mr. MARKEY. Mr. Speaker, today I am introducing the Derivatives Dealers Act of 1995. This legislation is aimed at providing a framework for improved supervision and regulation of previously unregulated dealers and assuring appropriate protections for their customers. Today's newspapers report on the disastrous consequences of derivatives losses by Barings PLC--one of Great Britain's oldest merchant banks. According to these reports, Baring's has lost at least $950 million due to unauthorized derivatives trading by a 27-year-old trader in its Singapore office. This sorry episode underscores the risks inherent in failing to assure that regulators have adequate tools on hand to minimize the potential for OTC derivatives to contribute to a major disruption in the financial markets, either through excessive speculation and overleveraging, or due to inadequate internal controls and risk management on the part of major derivatives dealers or end users. Despite the best efforts of the Bank of England to rescue Barings, apparently the scale of the losses is so great that as collapse could not be averted. As a consequence, both European and Asian financial markets are in turmoil today. The bill I am introducing today will help assure that no similar disaster befalls American derivatives dealers or our financial markets. Derivatives are financial products whose value is dependent on--or derived from--the value of some underlying financial asset such as a stock, bond, foreign currency, commodity, or an index representing the value of such assets. Some derivatives have been around for many years, such as the exchange-traded futures and options used by investors and dealers seeking to hedge positions taken in the stock and bond markets, or to speculate on future market movements. Within the last few years, however, such exchange-traded futures and options have been supplemented by a vast and dizzying array of over- the-counter [OTC] derivatives. These include forwards, swaps, options, swaptions, caps, floors, and collars that may be linked to the performance of the Japanese stock market, the dollar-deutschemark exchange rate, the S&P 500, or virtually any other asset. Today, the total outstanding value of the principal underlying such over-the- counter derivatives is estimated to be over $12 trillion. The dynamic growth of the OTC derivatives market is the direct result of developments in computer and telecommunications technology and breakthroughs in modern portfolio management theory that have created a new world of cyber-finance that is reshaping U.S. and global financial markets. These new financial instruments are an important component of modern financial activity and provide useful risk management tools for corporations, financial institutions, and governments around the world seeking to respond to fluctuations in interest rates, foreign currency exchange rates, commodity prices, and movements in stock or other financial markets. While OTC derivatives are frequently used to hedge foreign currency or interest rate risks or to lower borrowing costs, there has been a proliferation of increasingly exotic, customized financial contracts or instruments that enable dealers and end users to make speculative synthetic side bets on global financial markets. This development has raised concerns over the potential for OTC derivatives to increase, rather than reduce risk of financial loss or contribute to a future financial panic. In addition, the concentration of market-making functions in a small number of large banks and securities firms, the close financial interlinkages OTC derivatives have created between each of these firms, and the sheer complexity of the products being traded raise serious concerns about the potential for derivatives to contribute to serious disruptions in the fabric of our financial system. My bill will help assure that Federal regulators have the ability to effectively monitor the activities of certain heretofore unregulated derivatives dealers. In addition, my bill will help assure that our financial regulatory structure includes appropriate customer protections in place in the form of full disclosure, accurate financial accounting, appropriate sales practices, and restrictions against fraudulent or manipulative activity. While the Barings PLC disaster underscores the some of the risks and dangers associated with derivatives, the Subcommittee on Telecommunications and Finance, which I chaired in the last Congress, has been closely monitoring the financial derivatives market for the Accounting Office [GAO] to request a comprehensive study of the derivatives market. At that time, the subcommittee noted that the trading of new and complex derivative products by financial institutions and their customers had greatly increased in recent years, creating a corresponding need to assure that knowledge of how to manage and oversee the risks associated with these products was keeping pace. The GAO derivatives study submitted on May 19, 1994, in response to the subcommittee's request, has identified some serious gaps in the current legal and regulatory structure relating to OTC derivatives. The GAO made a number of important recommendations for reforms in the regulation of financial derivatives disclosure, financial accounting, and dealer regulation. Of particular concern to me was GAO's finding that serious gaps existed in the current legal and regulatory framework that allows derivatives dealers affiliated with securities firms or insurance companies to largely escape the type of regulations which are already in place for derivatives dealers affiliated with banks. GAO also identified potential gaps in antifraud and antimanipulation enforcement authority, and sales practice regulation. In response, the GAO recommended that this ``black hole'' be plugged by granting a Federal regulator, such as the Securities and Exchange Commission, appropriate authority to conduct examinations and set capital standards for these currently unregulated dealers. The subcommittee closely examined the derivatives markets and the findings and recommendations of the GAO study in oversight hearings held on May 10, 19, 25, and July 7th of last year. Based on the information gathered in the course of these hearings and other inquiries, I have crafted a piece of legislation which would close the most glaring legal gap affecting the derivatives markets--the presence of virtually unregulated OTC derivatives dealers in the market. This bill will close the regulatory ``black hole'' that has allowed derivatives dealers affiliated with securities or insurance firms to escape virtually any regulatory scrutiny. It will give the SEC the tools needed to monitor the activities of these firms, assess their impact on the financial markets, and assure appropriate protections are provided to their customers against any fraudulent or abusive activities. It is not a radical restructuring of the derivatives market; it is focused laser-like on the real gaps that exist in the current regulatory framework that need to be closed, and closed now before we have our own Barings PLC disaster right here in America. I urge my colleagues to cosponsor and support this important legislation.

Mr. MARKEY

Mr. MARKEY. Mr. Chairman, I thank the gentleman from Michigan for yielding me this time and I rise in opposition to the legislation that is before us today. It is a Frankenstein monster of ill-conceived and excessive provisions grafted together from bits and pieces of the Science Committee and Commerce Committee reported versions of the so- called Job Creation and Wage Enhancement Act of 1995. Unfortunately, the only people whose jobs are going to be enhanced and created and whose wages are going to go up will be the attorneys of the United States who will be litigating under this legislation for the next decade, countless billable hours, filing lawsuits to challenge virtually every action taken by Federal regulators and legions of bureaucrats needed to generate the mountains of paperwork necessary to comply with the complex substantive and procedural requirements of the act. I am particularly concerned because it could transfer scientific peer review panels into special interest pleadings. This legislation allows, believe it or not, the lobbyists and the scientists of the industries being regulated to sit on the scientific peer review panels that are going to judge whether or not the regulations should be put on the books to protect the public health and safety and environment. It is absolutely a built-in conflict of interest that will result not only in bad laws being put on the books, but endless litigation as people challenge the rules that are finally put on the books. In addition, it would construct a legislative labyrinth of procedures which would have to be engaged in. We would have no reason to close down House Annex 2. Just like the final scene of Raiders of the Lost Ark, we could need to fill it with all of the regulations, all of the procedures that had to be gone through in order to ensure that the regulators of the lost ark had been tied into knots and made absolutely powerless by the Lilliputians of bureaucrats and peer reviewers who will block any meaningful health, safety or environmental regulations from being placed upon the books. And finally, all of this is subject to judicial review, thousands of lawyers crossing fingers back in their law firms right now, praying that this bill goes through. We have billable hours of such a gargantuan number that it is almost unimaginable. This is a bill which is a dream for lawyers across this country. And finally, the safety of our Nation's nuclear powerplants, of the nuclear waste sites, protecting children against unsafe toys, preservation of our natural environment, clean food, clear water. Is our water too clean? Is our food too safe? Are the airlines too safe against any disasters befalling the American people? And finally, before we avoid making policy on the basis of false or misleading, anecdotal information, for example, over the last several days we heard one of the proponents of this legislation claim that the Consumer Product Safety Commission had a regulation requiring all buckets have a hole in the bottom of them so water can flow through and avoid the danger of someone falling face down into the bucket and drowning. Sounds bad. Now, that would be ridiculous regulation, if it existed. But the truth is that there has never been such a rule, and there never will be such a rule. The fact is that nearly 30 infants, toddlers, each year have been drowning in 5-gallon buckets, and the Consumer Product Safety Commission has worked with the industry to come up with a program of voluntary labels warning parents about the drowning danger. Voluntary. This is an example of the public-private sector cooperation which is prevalent through many areas of the regulatory world. I urge my colleagues throughout this debate, first make such that lobbyists and scientists of the companies being regulated cannot serve on the peer review panels; second, ensure that there is no reduction, no reduction in the overall health, safety, and environmental protections that are offered to all Americans; and, ensure that at the end of the day that we have not turned back the clock of progress which we have made in extending the life expectancy of all Americans, which is what has happened over the last 30 and 40 years in this country. Let us not tie the hands of those who have been committed to health and safety so that the private interests, the special interests, can go back to an era where those products that endangered the public were made available without any warning, without any protection against danger.

Mr. MARKEY

Mr. MARKEY. Mr. Speaker, I rise today in strong support of the Technology Reinvestment Project [TRP], an innovative government- industry partnership which deserves continued funding within the Federal budget. This year, as we mark the anniversaries of important battles of World War II and pay tribute to those who fought so bravely some fifty years ago, the realities of the post-cold-war world have compelled us to make dramatic changes in our military, economic, and political thinking. While we commemorate the monumental events of the past, we also look toward the future and the approach of the 21st century. Today we are presented with tremendous opportunities for creating lasting peace in historically volatile areas such as the Middle East, while at the same time we are faced with new challenges such as how best to curb the spread of weapons of mass destruction which threatens our security and the security of generations to come. As we enter this new era, the enormous opportunities and challenges which await us apply also to our industrial competitiveness and economic security. Since its inception in 1992, the Technology Reinvestment Project has been an important part of our military and economic strategy for the next century. It is clear that the collapse of the Soviet Union and the end of the cold war did not bring an end to the need for a strong U.S. military. Instead of a potential confrontation with a global nuclear superpower, however, we now must prepare for regional conflicts and protect our position as a world leader in technology development for both military and civilian uses. The TRP has been a key tool for maintaining the future readiness of our Armed Services by ensuring that cutting-edge technologies continue to be developed in support of U.S. soldiers around the world. As the first comprehensive post-cold-war approach to defense technology, the TRP has greatly expanded the ability of our forces to utilize the creativity and strength of the commercial marketplace to affordably obtain the technology needed today and in the future. Mr. Speaker, the U.S. Army now is the seventh largest in the world and is heading towards eighth place. Leading edge technology always has permitted our Armed Services to be the world's best fighting force. Over the years, our technological superiority has made it possible for our soldiers to work smarter, not harder. The TRP is crucial for the maintenance of our leadership in both the military and civilian sectors. As such an important transition point in world history, when we are adjusting to the changes brought about by the fall of communism and measuring national security not merely in military terms, but also in economic terms, the need for the TRP never has been greater. I urge my colleagues to support full funding for the TRP and similar programs aimed at bolstering our military and economic strength.

Mr. MARKEY

Mr. MARKEY. Mr. Chairman, will the gentleman yield?

Mr. MARKEY. If the gentleman will yield further, they can issue the licenses under the exemption. What they cannot do is establish the regulations for the conditions dealing with the issuance of the license, and that is not in fact exempted in your language; they will be handcuffed in terms of the ability to take the next step, and as a result, all the bidders will pull the $6 billion worth of bids for this spectrum off the table. You have an error here in terms of the overall operation of how the FCC actually promulgates regulations, and it has an impact on a bipartisan piece of legislation that passed which will generate $6 to $10 billion if the FCC is allowed to proceed as they have.