Financial Reform: FarmPolicy.com Interview with Chairman Peterson
Recall that on Wednesday the House passed financial reform legislation to refurbish the nation’s financial regulatory system.
Yesterday, FarmPolicy.com spoke with House Agriculture Committee Chairman Collin Peterson (D-Minn.) about his early role in the legislative process that culminated in Wednesday’s vote. The record of Congressional activity on this issue indicates that Chairman Peterson was ahead of many others in pushing for reform legislation.
The conversation started with the following background and question: “In the fall of 2008, the U.S. faced the biggest financial crisis since the Great Depression. Nearly two years later, it appears that Congress will pass a financial reform bill that seeks to address some of the shortfalls that led to this near disaster. As I look at the record of congressional activity, it appears that you were the first in Congress to take legislative action. Shortly after the crisis began to unfold, back in July of ’08, you introduced a reform bill that sought to bring greater transparency to commodity markets.
“A bill passed the full House in September of ’08, but was never acted on by the Senate. That set the stage for the new legislation that you reported from your committee in February of 2009, which was eventually incorporated in the Financial Services Committee and passed the House in December of 2009. With that background in mind, my question is why were you so far ahead of the rest of Congress in pushing for reform legislation?”
Chairman Peterson indicated that, “Well, I don’t know. Well, we had jurisdiction in the area that first got on people’s radar screen, and that was a couple of things. One was the situation that happened in the cotton market, where we had a bunch of money come into the market and the market got fouled up. And then with the oil prices going up the summer of ’08, and at the time that was going on, at the peak of that, we ended up having 70% of the money in the oil market was long only financial money that was not intended, was never going to buy any oil. And so we got to looking at the hedge exemption that was given by the CFTC to allow these index funds and others to get into these markets without the normal speculation limits that are applied to everybody else.
“And so that’s what got us looking into this in the first place. And then, you know, as part of that process, I was educated. Other members were educated about some of these other issues that we came to believe were partly responsible for the financial problems that we ran into. So I guess the fact that we got to looking into these markets and spending a lot of time studying this, we probably were a little ahead of the curve, maybe more knowledgeable, and understood what had happened before other people understood. And so that background led us to put a more comprehensive bill together and move that in early 2009.”
Chairman Peterson went on to discuss more specifics about how the legislation seeks to remedy some of the root causes of the financial meltdown; as well as some of the pushback that ensued as the legislation moved forward.
In addition, the issue of regulatory oversight and enforcement was also explored and Chairman Peterson noted that, “I just got off the phone with Chairman Gensler, and he was calling to thank me for working through this with them and Treasury, and so forth.
“And we talked about this very thing, about the rule making and regulations, and it’s going to be a huge amount of work here to get this in place. And I told him and warned him that we will be doing extremely aggressive oversight over that process, and we will be meeting on a regular basis to oversee that process and to oversee the decisions that are made to make sure that we make that the risks are being adequately mitigated in whatever they finally come up with.”
“Gensler is going to be very aggressive in moving these regulations through the process. We will be on top of that every step of the way, and that’s the way it should be,” Chairman Peterson said.
Meanwhile, Victoria McGrane reported yesterday at the Real Time Economics Blog (The Wall Street Journal) that, “Brooksley Born, former chairman of the Commodity Futures Trading Commission, endorsed the [financial overhaul] bill in an interview Tuesday. She called the legislation ‘an important step toward regulating the over-the-counter derivatives market.’
“Born was an early and vocal proponent for regulating derivatives in the 1990s, during the Clinton administration. But her efforts to act on those concerns were blocked by then-Federal Reserve Chairman Alan Greenspan and then-Treasury Secretary Robert Rubin.”
And a news release issued yesterday by the National Farmers Union noted in part that, “National Farmers Union (NFU) President Roger Johnson thanks the U.S. House of Representatives for passing the Restoring American Financial Stability Act of 2010 (H.R. 4173) and urges Members of the U.S. Senate to support immediate passage of this legislation.”
“The U.S. Senate is expected to vote on the bill after the Independence Day recess,” the NFU update said.
Farm Bill Issues- Nutrition, Conservation- Funding
DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Agriculture Secretary Tom Vilsack urged Congress on Thursday to reauthorize the child nutrition programs this year with a big increase in spending. He said a cut might be possible in the popular environmental quality incentives program and other USDA programs to pay for it.
“‘If we don’t do this this year, this is not going to get any easier,’ Vilsack told the House Education and Labor Committee. He added that he believes no other legislation is more important this year. Delaying the reauthorization until another year, Vilsack said, would only hurt poor children who should have easier access to meals and all children who should be served healthier food at school.”
Mr. Hagstrom explained that, “The committee is considering a bill that Education and Labor Chairman George Miller, D-Calif., has introduced to make it easier for low income children to qualify for free meals and to improve the quality of the meals. Both steps would cost more money, and the bill provides an additional $8 billion for school meal programs over 10 years, but Miller has not identified offsets to pay for the increased cost.
“The Senate Agriculture Committee has approved a similar bill, but it would only increase spending by $4.5 billion. The Senate bill cuts a food stamp education program, but the larger part of the offset — $2.8 billion over 10 years — would come from the Environmental Quality Incentives Program (EQIP), which farmers and ranchers use to pay for environmental cleanup.”
Yesterday’s DTN article noted that, “Vilsack said that cutting any USDA program is like asking him which of his children he likes more. But he said that an audit of USDA’s Natural Resources Conservation Service showing that spending has ‘outpaced the personnel at NRCS’ may indicate that a cut in conservation might be appropriate. But Vilsack also said he believes that there may be ‘other dollars’ at USDA and outside the department that could be cut. ‘If you give us a target, we will work with you to find that resource,’ he said.” [FarmPolicy.com Note: Related audio and background available in this update yesterday from USDA’s Daily Radio Newsline.]
Mr. Hagstrom added that, “NRCS Chief Dave White, who was testifying before a House Agriculture subcommittee on Thursday, winced when told that Vilsack had mentioned the audit, but said that Vilsack’s comment on personnel referred to the fact that NRCS’ budget has risen 376 percent since 2002 but its staff is the same size. White said the audit had shown NRCS had deficiencies in its accounting practices and found two cases of noncompliance with laws and regulations. He said the agency is trying to correct those problems.
“House Agriculture Committee Chairman Collin Peterson, D-Minn., said in an interview Thursday that the problem stems from Congress’ unwillingness to increase NRCS’s management staff. The result, Peterson said, is that NRCS technicians who are supposed to be providing technical assistance to farmers are also trying to manage the agency.”
In addition, at yesterday’s House Ag Subcommittee hearing, Rep. Jerry Moran (R-Kansas) also brought up the issue of EQIP funding and nutrition. Rep. Moran noted that in Kansas, EQIP money is “over prescribed,” meaning, “there are more applications than funds available.”
It was noted that USDA was on track to use all of the “appropriated” funds for EQIP in the Farm Bill (versus “authorized” funds). Rep. Moran then indicated that, “So the suggestion, at least by [a] Senator, that we can use EQIP funds to pay for food and nutrition programs because there is excess funds in EQIP—there are no excess funds is that true?”
NRCS Chief White replied, “Not at the appropriated amounts.”
To listen to this exchange between Rep. Moran and Mr. White from yesterday’s hearing, just click here (MP3-1:31).
Meanwhile, Allison Winter of Greenwire reported yesterday at The New York Times Online that, “A House spending panel yesterday approved a $23 billion Agriculture appropriations bill that keeps intact major spending boosts for energy and conservation that lawmakers set two years ago, rejecting significant cuts the White House proposed.
“The House Agriculture Appropriations Subcommittee unanimously approved the bill last night after hours of debate over Republican amendments. The panel rejected all of those amendments, including proposals that would have cut spending across the board, eliminated the Conservation Stewardship Program and tied the hands of agencies that could work on oil-spill pollution reporting requirements for dairy farmers.
“Democratic leaders said the future of the spending bill is unclear. Delayed by gridlock over the budget, lawmakers are behind schedule on the annual appropriations measures. The Agriculture spending bill has usually cleared the subcommittee, full committee and House floor at this point in the year.”
The article noted that, “The panel also allotted more than $1 billion in discretionary funding for the Natural Resources Conservation Service, the agency that oversees most farmland conservation programs. That sum is a $3 million boost over current spending levels and nearly $48 million more than the administration requested.”
In other Farm Bill related news, Philip Brasher reported yesterday at The Green Fields Blog (Des Moines Register) that, “Farm subsidies rose slightly last year both in the United States and in other developed countries as commodity prices slipped from their highs in 2008. However, the U.S. farmers remain among the least dependent on government support among the rich countries. Those findings are contained in the latest analysis of agricultural policies by the OECD, an organization that represents the developed economies.
“In the United States last year, government subsidies amounted to 10 percent of gross farm receipts, up from 8 percent in 2008. In the 27-member European Union, government support for farmers rose from 22 percent to 24 percent of gross receipts.”
Farm Bill Issues: Crop Insurance, Standard Reinsurance Agreement
A news release yesterday from National Crop Insurance Services stated that, “The crop insurance industry and the program will withstand the $6 billion reduction in funding handed to them by the USDA’s final Standard Reinsurance Agreement (SRA) contract released on June 29, 2010. Companies have until July 12th to sign the agreement.
“‘Our hands are tied,’ said Bob Parkerson, president of National Crop Insurance Services. ‘The companies have no choice but to sign this SRA because, if they don’t, they cease operating and the safety net that America’s farmers and ranchers rely on so heavily would be disrupted.’”
The release indicated that, “Although the industry feels the negotiation process was generally handled reasonably well by USDA, there were terms and conditions added to the agreement very late in the process that gave companies very little time to react and negotiate a contract that was fair to all parties. Constraints on legal recourse of companies and agents are particularly problematic.
“‘I think our definition of ‘negotiate’ was very different from USDA’s,’ said Parkerson. ‘They made a few concessions to some of the technical aspects of the agreement, but they didn’t budge on the $600 million a year cut in funding, despite the damage it will do to the financial foundation of the program.’”
Climate Change Issues
Coral Davenport reported yesterday at Politico that, “If brand-name senators like Barbara Boxer, John Kerry, Joe Lieberman and Lindsey Graham can’t get a climate bill through the Senate, does a quiet guy like Jeff Bingaman stand a chance?
“Proponents had better hope so.
“Boxer, Kerry and Lieberman haven’t been able to put together 60 votes for the carbon caps they’ve pushed. Graham gave up trying months ago. That leaves the bills Bingaman has shepherded through his Energy and Natural Resources Committee looking pretty good — and maybe like the only ones that have a real shot at passing.”
The article pointed out that, “Here’s what Bingaman does do: He slowly, carefully and methodically hammers out pragmatic, detailed energy legislation with Republican partners in long, dull markups that don’t draw attention but do produce solid pieces of legislation forged in the order of the committee process.
“And as Senate Majority Leader Harry Reid scrambles to get a comprehensive and contentious energy package to the floor in the heat of campaign season, with his caucus fracturing all around him and oil spill politics further inflaming the debate, Bingaman’s committee-approved energy bills have a certain appeal.”
Stephen Power reported yesterday at the Washington Wire Blog (The Wall Street Journal) that, “A hot idea circulating in Washington is that congressional Democrats might try to pass climate-change legislation in the lame-duck session after the November elections. The idea has gained currency as the Senate’s calendar has grown crowded.
“But a leading Senate Democrat said the approach won’t work.
“If an energy bill is to reach President Barack Obama’s desk this year, the Senate will have to pass a substantial bill before the August recess, said Sen. Jeff Bingaman in an interview to be broadcast Sunday on C-SPAN’s ‘Newsmakers.’ (the full ‘Newsmakers’ program is here.)”
Mr. Power pointed out that, “Bingaman, chairman of the Energy and Natural Resources Committee, warned his colleagues against assuming they can pass a bill before the election with popular items – such as incentives for wind and solar power and electric cars – and then add more controversial provisions, such as a cap on carbon emissions, in a conference committee with the House after the election.
“That approach, he said, has failed in the past.”