Maxine Waters

Ms. WATERS

Ms. WATERS. Mr. Speaker, I ask unanimous consent that I may hereafter be considered to be the first sponsor of H.R. 1508, a bill originally introduced by Representative Edward Markey of Massachusetts, for the purposes of adding cosponsors and requesting reprintings pursuant to clause 7 of rule XII.

Ms. WATERS

Ms. WATERS. Mr. Speaker, I ask unanimous consent to revise and extend my remarks in strong opposition to the farm bill rule and the underlying bill because it takes the safety net away from America's poor families and takes food out of the mouths of children.

Ms. WATERS

Ms. WATERS. Mr. Speaker, I yield as much time as he may consume to the gentleman from New York (Mr. Meeks), who has put so much time and work into researching this whole issue about auditor rotation. He's worked very closely with Mr. Hurt and helped to educate the members of the committee about the difficulties and the complications of this whole issue of auditor rotation.

Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, the 2008 financial crisis cost Americans more than $13 trillion, leaving many families unable to make ends meet as they lost their jobs and saw their nest eggs disappear. Five years later, as we began to pick up the pieces of the mess largely caused by deregulation, the American investing public is now much more cautious when investing its valuable savings. As a member of the Financial Services Committee, I see my job to ensure that there are appropriate rules in place that will hopefully prevent such a debacle from ever happening again. One such initiative to improve the functionality of our markets is to improve the independence of the market's fact checkers--the public company auditors. These companies play a vital role of validating the authenticity of a company's financial statements and keep all public companies honest when reporting to investors how they have performed. I applaud the government regulator of the auditors, the Public Company Accounting Oversight Board, or PCAOB, for its persistent efforts to identify structural changes in the current system that may improve auditor independence. After all, we know that auditors generally performed poorly leading up to the 2008 financial crisis, failing to warn investors of the outsized risk posed by banks' bets on the housing market. Having said that, I understand that one such proposal floated by the PCAOB, the mandatory rotation of auditors, has raised serious concerns that will significantly increase costs for companies, as well as diminish the quality of information upon which investors base their investment decisions. For these reasons, I support H.R. 1564, which prohibits this proposal from being implemented. It is not clear to me that requiring a public company to change auditors every so many years would contribute to auditor independence. What's more, given the time it takes an auditing firm to truly understand the business of a company, there will be at least a few years of less than ideal audits as an auditor has to learn everything they need to know about the new firm. Additionally, the small number of major auditing firms, coupled with specialization within the auditing industry, means that requiring rotation, in many cases, will not leave companies with much choice at all. In my view, while enhancing auditor independence is a crucial goal, I do feel there may be better ways to accomplish it. I would also note that this bill does not in any way limit the ability of a company's audit committee to rotate its auditors. Such committees, as some investors have pointed out, are best suited to select their own auditors. Having said that, I do have concerns about tampering with the authority of a regulator when it raises an issue that we disagree with. The PCAOB asked the public for feedback on a range of proposals all targeting the concern that auditors have become too close and dependent on the companies they are supposed to examine. It's not unreasonable for the PCAOB to include this as one of a large range of issues it's examining. To address this concern with the bill, I offered an amendment during our markup of H.R. 1564 that requires the GAO to update its previous study regarding auditor rotation. The previous GAO study, completed shortly after the passage of the Sarbanes-Oxley Act of 2002, found that ``mandatory audit firm rotation may not be the most efficient way to strengthen auditor independence and improve auditor quality.'' However, the GAO also noted that ``several years' experience with implementation of the Sarbanes-Oxley Act's reforms is needed before the full effect of the act's requirements can be assessed.'' The GAO needs to update this outdated study. This amendment requires the GAO again to evaluate the potential costs and benefits of mandatory audit firm rotation, now that more than 10 years have passed since the passage of Sarbanes-Oxley. The amendment requires consideration of various factors, including whether rotation would actually mitigate against conflicts of interest between audit firms and issuers and whether audit quality could suffer due to audit firm rotation. And the study would also include an assessment of the impact of Sarbanes-Oxley on audit firm independence and whether additional reforms are needed. Importantly, this study will inform a future Congress as to the wisdom of the statutory prohibition on auditor rotation in H.R. 1564. With the adoption of my amendment, I and every member of the committee voted for this bill. Let me reiterate, I am supportive of the role and mission of the PCAOB but believe that the regulator would do well to look at the benefits to investors as it examines auditor independence. Doing so will take the PCAOB away from focusing on auditor rotation and towards other areas that provide more meaningful improvements in auditing and financial reporting. Mr. Speaker, I reserve the balance of my time.

Ms. WATERS. Mr. Speaker, as I have no additional speakers, I yield back the balance of my time.

Ms. WATERS

Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume. Just last week, the government made an important step towards repairing our financial system after the worst financial crisis since the Great Depression. The Federal Reserve adopted final rules implementing Basel 3, including new capital requirements intended to bolster capital throughout the financial system. As losses mounted during the financial crisis, the woefully inadequate capital cushions at banks and others nearly brought our entire economy to a halt. I also appreciate that the bank regulators have taken a commonsense approach, for which I had strongly advocated, related to community banks, including the treatment of residential mortgages. I applaud the banking regulators for finalizing these critical rules, which, along with the other Dodd-Frank reforms, will create the conditions for a robust and resilient financial sector. This legislation before us today, H.R. 1341, requires the Financial Stability Oversight Council, or FSOC, to conduct a study of the potential effects of any differences between the U.S. and other jurisdictions' implementation of one aspect of the Basel 3 Accords-- the credit valuation adjustment capital requirement related to derivatives transactions. The Basel signatory countries rightly agreed that banks should hold capital against the possibility that their counterparties, be they airlines or other banks, would default. However, despite agreeing to do so under Basel 3, the European Union has made a preliminary decision to exclude the credit valuation adjustment from the calculation of European banks' capital requirements. As a result of the EU dropping this requirement, some U.S. banks think that they may be disadvantaged relative to their international counterparts. Under the bill, the FSOC will study these and other differences between the regulators' implementation of this requirement. I agree that it is important for U.S. regulators to ensure that the way by which the CVA is calculated for domestic financial institutions includes an appropriate methodology that will not inadvertently create an unlevel playing field relative to foreign competitors. At the same time, we must be mindful not to engage in a global race to the bottom when it comes to capital requirements for our largest, most globally interconnected financial institutions. After all, the strength of the U.S. financial system is and will be based on its stability and transparency. Importantly, during consideration of the bill, Mrs. Beatty of Ohio added language balancing the study's scope. As a result, the FSOC study will also consider the effects that failing to implement the CVA would have on the stability of U.S. financial markets in a period of market stress as well as how the regulators are fulfilling their statutory mandate to respond to emerging threats to financial stability. With the addition of this language, the bill's study now balances not just the implications for derivatives market participants of this specific capital charge but also the effects on our economic stability. Undercapitalized derivatives exposures were one of the major drivers of the 2008 financial crisis. Market participants should hold capital against the risk of a counterparty defaulting or entering bankruptcy. We can certainly consider how the implementation of the CVA could best be accomplished; but, again, we cannot engage in a global race to the bottom when it comes to capital rules. It is my hope that the FSOC will use the findings from this study to urge the other global regulators to expeditiously adopt standards that are as strong as ours. I yield back the balance of my time.

Ms. WATERS

Ms. WATERS. Thank you so very much. I would like to first take a moment to thank you, Congressman Chaka Fattah, for putting together this moment for us to reflect on the life and legacy of Bill. I want you to know that we are so pleased that you're carrying on in his style and his tradition. Thank you so very much for this evening. I rise today deeply saddened by the sudden passing of my friend and former colleague, Congressman Bill Gray. He was loved by everyone, and his legacy will continue to inspire all who knew him. I feel fortunate to have had the distinct honor of working with him over the years as both a colleague and a dear friend. I join the people of Philadelphia and Americans across the Nation in mourning the loss of an effective leader and passionate advocate of the public good. Bill Gray will certainly be missed. First elected in 1978, Congressman Gray's 12 years in Congress were marked by extraordinary achievement. Not only was he was the first African American to serve as chairman of the House Budget Committee, he was also the first African American to serve as majority whip. In addition to his outstanding leadership, Congressman Gray's skill as a politician and orator raised awareness about the talent of the Congressional Black Caucus. During his tenure, Congressman Gray also authored legislation that implemented economic sanctions against South Africa during apartheid. As our thoughts and prayers are with Nelson Mandela, we must remember and appreciate the fact that it was Congressman Gray who spearheaded Federal efforts to eradicate apartheid. Bill Gray was a close friend both to my husband and me long before I entered Congress. At Bill's invitation, I was honored to serve as guest speaker at Bright Hope Baptist Church in Philadelphia, where Bill served as pastor until his retirement in 2007. My husband regularly played tennis with Bill in Washington, D.C., and many cities across this Nation. Bill was a strong and influential advocate for his constituents in Philadelphia and Americans around the country. I extend my sincerest condolences to his wife, Andrea, and their three sons, William, IV, Justin, and Andrew, during this difficult time. I would just like to share with you--when I first came to the Congress of the United States, Bill embraced me and he took me on my first codel. We went to the Middle East. Here's a picture of us in Israel. It was the first codel that I went on. I watched Bill, how he conducted himself, how he dealt with the dignitaries and the heads of states, and I've tried to model him all of these years. So I have a lot to be thankful for. We are saddened, but I am so pleased that I had the opportunity to learn from him, and I certainly admired him so very much. Thank you very much for organizing this opportunity for us to share our thoughts about him today. Thank you, Chaka.

Ms. WATERS

Ms. WATERS. I would like to, if I can, engage you in a little colloquy here. What reason would the Members of Congress try and protect the oil companies from simply sharing how much they're paying to governments? What reason would they have for doing that?

Ms. WATERS. Well, I just want to make clear what this exemption is they're trying to do. It's a very simple request that's in law that says just tell us what you're paying. And we have now included in this bill, where there is an agreement, an exemption that will not allow them or keep them from being able to share that information. As you said, they would now, if this passed, they would be able to make payments in secret. They would be able to make bribes. They would be able to maybe even be disruptive to countries that they are paying bribes to when they get into these conflicts in other countries. So why would they want to do this? I don't understand it. I thought maybe you may have some additional information that I don't have. But to mess up an agreement simply because you want to protect the oil companies from saying how much they're paying is beyond my comprehension.

Ms. WATERS. Just as you have come to some conclusion that maybe we are opposing this bill because we're opposed to offshore drilling, which is not true----

Ms. WATERS. Thank you very much. When you raised the question about why didn't we offer an amendment and the Senate can offer an amendment, I have drawn a conclusion. Why are you trying to get credit for putting this in the bill with the oil companies?

Ms. WATERS. Will the gentleman yield?

Ms. WATERS. Mr. Speaker and Members, I hear my friends on the opposite side of the aisle keep talking about this is as bipartisan as you can get. It was bipartisan before you sneaked in the exemption that would allow companies to bribe governments and pay under the table and create chaos in other countries. It was a bipartisan agreement. I keep hearing reference to this having the support of the administration. Let me be clear. This bill, in this form, does not have the support of the administration. It did have before you sneaked in the exemption. Dodd-Frank made it very clear. It is the law. We worked very hard. Both sides of the aisle, in the conference committee, worked on this part of the bill. And now we have you coming in the dark of the night, one more time trying to undo Dodd-Frank. And this is awful. It is really, really awful because we have the opportunity to have an agreement with Mexico where we could both benefit from the drilling, and we all support that. But, no, you have decided to undermine the work of both sides of the aisle by putting this exemption in this bill, and so it does not have the support of the administration. It is no longer bipartisan. We no longer support it. And you have the possibility of a veto on your hands.

Ms. WATERS. Mr. Speaker, as ranking member of the Financial Services Committee and a member of the conference committee that passed the Dodd-Frank reform legislation, I rise in opposition to H.R. 1613. I oppose the bill because of the exemption it includes for companies from the transparency requirements under section 1504 of Dodd-Frank Act. Section 1504 of Dodd-Frank requires companies to disclose payments they make to governments for oil, gas, and mining resources. It covers companies listed on U.S. exchanges, including the U.S., Chinese, Brazilian, Canadian, European, Australian and other companies. Section 1504 has a long legislative history. The Financial Services Committee held its first hearing on extracted industry transparency in 2007. In 2008, our committee held a legislative hearing where we debated the specific provisions that eventually became law. The Senate introduced similar legislation, and they held hearings. The provision was adopted into the Dodd-Frank Act through a bipartisan amendment. Then, before issuing a rule to implement the law, the Securities and Exchange Commission solicited input, held meetings, and considered hundreds of comments from industry, trade groups, Members of Congress, and civil society. Section 1504 was very carefully considered by Congress over the course of several years, with input from all quarters. It is now the law of the land. Let me tell you why it's important. Public disclosure of extractive industry payments help diminish the political instability caused by OPEC governance, which is not only a threat to investment, but also to our own national security. Resource revenue transparency also allows shareholders to make better informed assessments of opportunity costs, threats to corporate reputation, and the long-term prospects of the companies in which they invest. Countries rich in natural resources are often developing countries that are politically unstable, many rife with corruption, with a history of civil conflict fueled, in part, by natural resources. Opening the extractive industries to greater public scrutiny is key to increasing civil society participation in these countries. This is crucial in order for citizens in resource-rich countries to be able to demand greater accountability from their governments for spending that serves the public interest. This in turn can help reduce poverty and create more stable, democratic governments. It can also help create more stable business environments. The provision in H.R. 1613 that exempts companies from the disclosure requirements under section 1504 is entirely unnecessary. The bipartisan Senate version of this bill includes no such exemption. Also, the U.S.-Mexico agreement explicitly respects the domestic laws of both countries, so it already accommodates the Dodd-Frank disclosure requirement. Moreover, there are no laws in Mexico that would prohibit the disclosure of company payments. Let's also listen to what the administration has to say about this. After all, this administration negotiated the terms of the agreement with Mexico. The administration very much wants legislation to implement the agreement, and they know what they need to do this. And they don't want this bill. The White House issued a statement strongly opposing H.R. 1613 precisely because of the provision waiving the requirements for the public disclosure of extractive payments to governments. The exemption in this bill is nothing more than an effort to undermine transparency and to undo good public policy that has become an international standard. I urge my colleagues to oppose this bill in its current form. Members deserve the opportunity to vote on a clean bill that they can support, and I urge the leadership to give the House that opportunity. Ladies and gentlemen, you have heard talk from both sides of the aisle about how important this bill could be without this exemption. Why would you undo the work of both sides of the aisle, the conference committee, the Senate, and all in working out this agreement by putting this exemption in? I want you to know that those of us who are working very hard to make sure that we implement reform, those of us who are very much involved with Dodd-Frank, we not only understand all of the ways that people are trying to get around Dodd-Frank, to get under Dodd-Frank, to undo the reforms of Dodd-Frank, why does this exemption show up in this bill? It has no place in this bill. This is another attempt to get around Dodd- Frank and not to comply with the law, and you're messing up a good agreement. It does not make good sense. I oppose this bill in this form. The administration opposes this bill in this form. And if you want the kind of agreement that you say you want with Mexico, if you're interested in sharing those resources, if you're interested in what you claim can be done creating jobs, you would not move forward with this bill. You would not try to force this exemption on this agreement.

Ms. WATERS. Will the gentleman yield?

Ms. WATERS

Ms. WATERS. I yield 1\1/2\ minutes to the gentleman from Texas (Mr. Al Green).

Ms. WATERS. Mr. Speaker, I demand a recorded vote.

Ms. WATERS. I yield myself the balance of my time. Mr. Speaker and Members, I'm very disappointed and worried that this bill has been brought to the floor under a closed rule, as have more than one-third of the bills so far this Congress. I believe there are important issues concerning the structure of this bill, particularly the bill's presumption that the rules of the nine largest foreign markets will be broadly equivalent to our own. The bill would require the SEC and the CFTC to act in order to allow U.S. rules to apply to transactions, even though the risk of the transactions will ultimately be imported back to the United States. My amendment would have the reverse of this presumption, directing the SEC and CFTC to jointly consider the regulatory framework of these countries to provide appropriate exemptions when jurisdictions have derivatives rules that are truly broadly equivalent to our own. A closed rule prevents us from considering these issues. Why do they have a closed rule? Why did they try to hide this bill inside the DOD? They don't want this debate. They didn't want an opportunity for any amendments. They don't care that foreign countries would be determining our fate when they set up their regulatory regimes, which won't be comparable to ours. We owe it to the American people to do better than we have done. We have had the subprime meltdown. We've had the economic crisis. Why throw us back into that simply because you're trying to protect Wall Street? Our citizens don't deserve that. They deserve for us to stand up and protect them from having to bail out these big institutions that will fail. We have gone through AIG. We have gone through JP Morgan, the London Whale, the $6 billion failure. Why should we do that again? I yield back the balance of my time.

Ms. WATERS. I yield 1 minute to the gentleman from Texas (Mr. Al Green).

Ms. WATERS. Reclaiming my time, the gentleman from Texas knows how it works. We have Dodd-Frank reform, and it has to be implemented. You know the living wills have to be done. You know that we have to put in place all that it takes to have the orderly liquidation procedure. And it is important that you understand, and that all of our Members understand, that derivatives are an important part of reform. If we allow this bill that presumes that other countries are comparable to us in their regulatory regimes without even checking, without vetting, without asking any questions, without requiring anything, then we absolutely put our own country at risk, and we put at risk the American taxpayers who will have to bail out the major financial institutions if we allow you to pass a bill like this, presuming that they are okay, that these countries are okay. The other thing is--I know and understand now. I understand very well that if we allow this presumption to take place, then you'll just go to court and you'll argue that you have the presumption, and you'll try and tie up the CFTC all over again. I reserve the balance of my time.

Ms. WATERS. I yield to the gentleman from Texas.

Ms. WATERS. I yield myself as much time as I may consume to refute. The gentleman from Texas keeps talking about we make the claim that we ended ``too big to fail.'' That's what we're trying to do. That's what we're standing up against, what you're attempting to do in this piece of legislation. Derivatives are an important part of the reform of Dodd-Frank. It is important because we're trying to create transparency. The over-the- counter derivatives market that has been working for so long in the shadows we cannot continue to have.

Ms. WATERS. I yield 1 minute to the gentleman from Massachusetts (Mr. Lynch.)

Ms. WATERS. I yield an additional 1 minute to the gentleman from Massachusetts (Mr. Capuano).

Ms. WATERS. I yield 1\1/2\ minutes to the gentlewoman from Connecticut (Ms. DeLauro).