Dear Members of the United States Senate:
Re: Support for Passage of H.R. 2682 and H.R. 2779, Two Bills to Protect Derivatives End-Users from Unnecessary and Costly Regulation in the U.S. Senate
Business Roundtable (BRT) urges the Senate to take up and pass two commonsense bills that recently passed the U.S. House of Representatives with overwhelming bipartisan support. A majority of Democrats and a majority of Republicans voted for these measures with votes on final passage of 370-24 and 357-36.
The bills—H.R. 2682, the Business Risk Mitigation and Price Stabilization Act of 2011, and H.R. 2779, a Bill to Exempt Inter-Affiliate Swaps from the Regulatory Requirements of Title VII of the Dodd-Frank Act—would protect businesses from unnecessary and costly regulation and help avoid another washout on the road to economic recovery.
BRT is an association of chief executive officers of leading U.S. companies with over $6 trillion in annual revenues and more than 14 million employees. BRT member companies generate an estimated $420 billion in sales for small and medium-sized businesses annually. Passage of these two bills in the Senate by the end of the current legislative session would help ensure that unnecessary regulations, which would lead to decreased competitiveness and kill jobs, are not imposed on our members.
H.R. 2682 creates a narrow, partial exemption from margin requirements for non-financial businesses that use derivatives in their commercial operations. Imposing unnecessary margin requirements on these end-users would divert working capital away from productive business use. A survey conducted by the Coalition for Derivatives End-Users found that proposed margin rules could reduce capital spending by as much as $5.1 to $6.7 billion among S&P 500 companies alone and cost 100,000 or more jobs.
H.R. 2779 prevents internal, inter-affiliate trades from being subject to regulatory burdens that were designed to be applied to certain street-facing swaps and ensures that companies are not forced to abandon hedging through central risk-mitigation centers. These centers achieve stability by allowing U.S. companies to manage commercial risk more effectively and secure better pricing for their derivatives trades. Better pricing, in turn, generates savings that companies can pass on to consumers or use to grow their businesses and create jobs. Without H.R. 2779, companies would be pushed towards using hedging methods that are riskier and less efficient.
The collegial process that led to passage of H.R. 2682 and H.R. 2779 in the House demonstrates that helping grow businesses and improving the economy is not a partisan exercise. From the start, representatives from both sides of the aisle studied the problem, wrote the language and produced bills that accomplished the dual objectives of preventing unnecessary regulation and preserving the essential goals of the Dodd-Frank Act’s derivatives title. As a result, the bills were reported out of two House committees unanimously. Indeed, during mark-up in committee, Rep. Frank said that “we have alleviated any legitimate concerns about this bill,” referring to H.R. 2779, and Rep. Waters said that “there is no question that this bill should be passed,” referring to H.R. 2682.
BRT urges swift passage of these two bi-partisan bills in the Senate by the end of the current legislative session. While we would not presume to advise the Senate on how to accomplish this objective, we know that the effort must be bipartisan, we know it can be done and we know time is of the essence!