Remarks of Chairman Gary Gensler, OTC Derivatives Reform, American Bar Association, Committee on Derivatives and Futures Law
January 29, 2010
Good afternoon. I thank the American Bar Association’s Committee on Derivatives and Futures Law for inviting me to speak today. This morning, I visited some friends that I made a couple years ago in Immokalee, which is about an hour east of here. Immokalee is Florida’s largest farm working community. About 95 percent of the tomatoes you eat in the United States between October and June come from Florida, with many of them grown in Immokalee.
The migrant workers who pick and package the tomatoes earn less in a year than what some in this room may bill in a day. They sleep in metal trailers with up to ten other workers, hoping that each morning they will be selected to go into the field and earn a little money. A couple of years ago, I met the people of Immokalee and was asked to help in their efforts for better wages and working conditions. It might not sound like much, but together we negotiated an additional penny per pound for tomatoes sold to Burger King. Still, they have struggled day after day to support themselves and their families.
In the last two years, even as this community has made further strides to improve living and working conditions, they have been hit by an unrelated setback: the global financial crisis. Derivatives and Wall Street might seem quite removed from people’s everyday lives, but the struggles of the people of Immokalee and so many other communities around this country are reminders that our work in Washington and our debates about reform have real effects throughout our great land. The proud, hardworking people in Immokalee do not use derivatives markets. Like so many Americans, though, their lives have been affected by the steep economic recession born out of the financial crisis. Their lives have been affected by the failure to contain the risks created by Wall Street.
Wall Street's interests do not necessarily reflect the broader interests of the American public. In maximizing their profits, banks are fulfilling their fiduciary duty to shareholders, but they do not owe a similar duty to taxpayers. Many of these banks have opposed essential components of reform. Now, I know that some of these banks may be represented by some of the lawyers in this room. On their behalf, some of you may have argued that particular regulations would hurt not just Wall Street, but the American public. I’ve heard many of these arguments, both over the last year and during earlier debates. While they are often well-articulated, I, for one, come to different conclusions. What’s good for Wall Street is often not what’s good for the American public. Thus, as we vigorously advocate for transparency and regulation in the derivatives markets, these positions may be at odds with what some of you advocate on behalf of your clients. But, as the saying goes, where we stand on a matter is often influenced by where we sit.
It took about 60 or 70 years after the first derivatives, called “futures,” traded before they were regulated. Nearly fifty years later, in 1981, new products emerged called “over-the-counter derivatives.” Some of you may have advised clients when the first over-the-counter derivatives were transacted. Nearly 30 years later, these products remain largely unregulated.