HEARING TO REVIEW THE ROLE OF CREDIT DERIVATIVES IN THE U.S. ECONOMY HEARINGS BEFORE THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION OCTOBER 15, NOVEMBER 20, DECEMBER 8, 2008 Serial No. 110–49 ( Printed for the use of the Committee on Agriculture agriculture.house.gov U.S. GOVERNMENT PRINTING OFFICE 51–569 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 09:13 Aug 20, 2009 Jkt 041481 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 I:\DOCS\110-49\11049 AGR1 PsN: BRIAN COMMITTEE ON AGRICULTURE COLLIN C. PETERSON, Minnesota, Chairman TIM HOLDEN, Pennsylvania, BOB GOODLATTE, Virginia, Ranking Vice Chairman Minority Member MIKE MCINTYRE, North Carolina TERRY EVERETT, Alabama BOB ETHERIDGE, North Carolina FRANK D. LUCAS, Oklahoma LEONARD L. BOSWELL, Iowa JERRY MORAN, Kansas JOE BACA, California ROBIN HAYES, North Carolina DENNIS A. CARDOZA, California TIMOTHY V. JOHNSON, Illinois DAVID SCOTT, Georgia SAM GRAVES, Missouri JIM MARSHALL, Georgia MIKE ROGERS, Alabama STEPHANIE HERSETH SANDLIN, South STEVE KING, Iowa Dakota MARILYN N. MUSGRAVE, Colorado HENRY CUELLAR, Texas RANDY NEUGEBAUER, Texas JIM COSTA, California CHARLES W. BOUSTANY, JR., Louisiana JOHN T. SALAZAR, Colorado JOHN R. ‘‘RANDY’’ KUHL, JR., New York BRAD ELLSWORTH, Indiana VIRGINIA FOXX, North Carolina NANCY E. BOYDA, Kansas K. MICHAEL CONAWAY, Texas ZACHARY T. SPACE, Ohio JEFF FORTENBERRY, Nebraska TIMOTHY J. WALZ, Minnesota JEAN SCHMIDT, Ohio KIRSTEN E. GILLIBRAND, New York ADRIAN SMITH, Nebraska STEVE KAGEN, Wisconsin TIM WALBERG, Michigan EARL POMEROY, North Dakota BOB LATTA, Ohio LINCOLN DAVIS, Tennessee JOHN BARROW, Georgia NICK LAMPSON, Texas JOE DONNELLY, Indiana TIM MAHONEY, Florida TRAVIS W. CHILDERS, Mississippi PROFESSIONAL STAFF ROBERT L. LAREW, Chief of Staff ANDREW W. BAKER, Chief Counsel APRIL SLAYTON, Communications Director WILLIAM E. O’CONNER, JR., Minority Staff Director (II) VerDate 0ct 09 2002 09:13 Aug 20, 2009 Jkt 041481 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 I:\DOCS\110-49\11049 AGR1 PsN: BRIAN C O N T E N T S Page Wednesday, October 15, 2008 Etheridge, Hon. Bob, a Representative in Congress from North Carolina, opening statement ................................................................................................ 3 Prepared statement .......................................................................................... 4 Goodlatte, Hon. Bob, a Representative in Congress from Virginia, opening statement .............................................................................................................. 2 Prepared statement .......................................................................................... 3 Peterson, Hon. Collin C., a Representative in Congress from Minnesota, open- ing statement ........................................................................................................ 1 WITNESSES Lukken, Hon. Walter, Acting Chairman, Commodity Futures Trading Com- mission, Washington, D.C. .................................................................................. 5 Prepared statement .......................................................................................... 8 Sirri, Erik R., Director, Division of Trading and Markets, U.S. Securities and Exchange Commission, Washington, D.C. .................................................. 11 Prepared statement .......................................................................................... 13 Pickel, Robert G., Executive Director and CEO, International Swaps and Derivatives Association, Washington, D.C. ........................................................ 35 Prepared statement .......................................................................................... 37 Hu, J.D., Henry T.C., Allan Shivers Chair in the Law of Banking and Fi- nance, University of Texas School of Law, Austin, TX ..................................... 41 Prepared statement .......................................................................................... 42 Short, Johnathan H., Senior Vice President and General Counsel, IntercontinentalExchange, Inc., Atlanta, GA .................................................... 47 Prepared statement .......................................................................................... 49 Taylor, Kimberly, Managing Director and President, Clearing House, Chicago Mercantile Exchange, Inc., and CME Group, Inc., Chicago, IL ....................... 52 Prepared statement .......................................................................................... 54 SUBMITTED MATERIAL Dinallo, J.D., Eric R., Superintendent, Insurance Department, State Of New York, submitted statement .................................................................................. 79 Dunn, Hon. Michael V., Commissioner, Commodity Futures Trading Commis- sion, submitted statement ................................................................................... 73 Parkinson, Patrick M., Deputy Director, Division of Research and Statistics, Board of Governors, Federal Reserve System, submitted statement .............. 73 Thursday, November 20, 2008 Goodlatte, Hon. Bob, a Representative in Congress from Virginia, opening statement .............................................................................................................. 88 Peterson, Hon. Collin C., a Representative in Congress from Minnesota, open- ing statement ........................................................................................................ 85 Prepared statement .......................................................................................... 87 WITNESSES Radhakrishnan, Ananda, Director, Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, Washington, D.C. ....... 89 Prepared statement .......................................................................................... 90 (III) VerDate 0ct 09 2002 09:13 Aug 20, 2009 Jkt 041481 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 I:\DOCS\110-49\11049 AGR1 PsN: BRIAN IV Page Parkinson, Patrick M., Deputy Director, Division of Research and Statistics, Board of Governors, Federal Reserve System, Washington, D.C. .................... 92 Prepared statement .......................................................................................... 94 Sirri, Erik R., Director, Division of Trading and Markets, U.S. Securities and Exchange Commission, Washington, D.C. .................................................. 96 Prepared statement .......................................................................................... 98 Dinallo, J.D., Eric R., Superintendent, Insurance Department, State Of New York, New York, NY ............................................................................................ 101 Prepared statement .......................................................................................... 103 Monday, December 8, 2008 King, Hon. Steve, a Representative in Congress from Iowa, opening state- ment ...................................................................................................................... 143 Prepared statement .......................................................................................... 144 Peterson, Hon. Collin C., a Representative in Congress from Minnesota, open- ing statement ........................................................................................................ 141 Prepared statement .......................................................................................... 142 WITNESSES Duffy, Hon. Terrence A., Executive Chairman, CME Group Inc., Chicago, IL ........................................................................................................................... 145 Prepared statement .......................................................................................... 147 Short, Johnathan H., Senior Vice President and General Counsel, IntercontinentalExchange, Inc., Atlanta, GA .................................................... 150 Prepared statement .......................................................................................... 152 O’Neill, John, Manager, Fixed Income Derivatives, Liffe, NYSE Euronext, London, United Kingdom .................................................................................... 156 Prepared statement .......................................................................................... 158 Book, Thomas, Member of the Executive Boards, Eurex and Eurex Clearing AG, Frankfurt am Main, Germany ..................................................................... 166 Prepared statement .......................................................................................... 167 Damgard, John M., President, Futures Industry Association, Washington, D.C. ........................................................................................................................ 195 Prepared statement .......................................................................................... 197 Pickel, Robert G., Executive Director and CEO, International Swaps and Derivatives Association, Washington, D.C. ........................................................ 199 Prepared statement .........................................................................................