Last December during our Committee's hearing on over-the-counter
derivatives, I kicked-off the re-authorization debate by releasing a set of 48 questions relating to the Commodity Exchange Act.   These questions can be found on the Senate Agriculture Committee web page. I find this a useful exercise for Congress as it re-examines the policies that surround any given law.  I used a similar approach in late 1994 to begin a historic debate on farm support policy.  That debate ended in the current "Freedom to Farm" law.

I emphasize that these questions are not rhetorical.  I encourage
industry participants, government agencies, consumer groups and others to carefully review and answer these questions.  Along with the insights gained from this Roundtable, such answers will serve as legislative guideposts as our Committee seeks to reauthorize the Commodity Exchange Act.  Individuals commenting on these questions should provide their answers to the Senate Agriculture Committee by March 15th.   Our Committee will publish these comments shortly thereafter.

Today's Roundtable represents the first step in our process to
re-authorize the Commodity Exchange Act, which expires at the end of fiscal year 2000.  During the next two days, this panel will examine the policies, issues, and problems we will encounter during this journey.  When I first approached Bob Wilmouth and Phil Johnson about putting together this Roundtable, I asked them to help assemble a diverse group from the industry and academia who could think "outside the box" on these issues and help us find innovative legislative solutions to these difficult problems.  I commend them for accomplishing this goal with the group before us.

This is an invaluable opportunity for Members and staff to learn
the current regulatory treatment of the futures and derivatives industry and to study whether reform is necessary to take this industry into the new millennium.   I encourage you to use these panelists as a resource and to ask them questions throughout the discussion.

Another important part of today's exercise is to find common ground
among industry participants.  Without some consensus on these issues, we may not have the critical mass necessary to reform the Act. Although our Committee is prepared to do the heavy lifting necessary to make improvements to the Act, it is in the best interest of the various members of the industry to find consensus on these issues as Congress looks for legislative direction.

Last year witnessed unprecedented events relating to the regulation
of this industry.  Several federal agencies disagreed loudly and publicly about their jurisdiction over swaps.  The legal uncertainty interjected by this dispute caused Congress to pass a six-month moratorium on the CFTC's ability to regulate over-the-counter swaps. Despite reservations, I supported this legislation because it brought legal assurance to this skittish market and because it allowed the President's Working Group time to develop recommendations on the most appropriate legal treatment of swaps.  Our Committee will closely analyze the recommendations of the President's Working Group when it issues its findings in the late spring.

The near collapse of the Long Term Capital Management hedge fund
last October highlighted some potential regulatory gaps in this market.   Based on the testimony heard by this Committee in December, I believe that the LTCM situation suggests failures in prudential lending practices by banks.  Nevertheless, the systemic ramifications of the LTCM incident require this Committee and the Senate Banking Committee to work in tandem to determine whether legislative fixes are necessary.

Both of these events underscore the dilemma of the current law's
treatment of derivative instruments.  The laws must be flexible enough to allow the market to innovate without subjecting these instruments to excessive legal uncertainty.  But our laws also must ensure that systemic risk does not threaten the stability of the market and that some regulatory parity exists between competitors, both on-exchange and off.  Finding this balance will be our challenge over the next two years.

Our Committee plans to hold several hearings on CFTC
reauthorization during the 106th Congress.  We will call upon the CFTC, along with other regulators and market participants, to testify on how the Act can be improved. Our Committee also will explore ways that these instruments can be used to minimize the risks that are inherent in farm production.

I am thankful that the United States remains a safe harbor from the
turbulent economic seas of the world economy.  This largely reflects the strength of our financial marketplace.  But our global financial leadership should not be taken for granted.  Our laws must continue to foster the spirit of investing and risk-taking.   Any debate on reauthorization must factor in this fundamental proposition.

With that brief overview, I will turn the podium over to Chairman
Combest from the House Agriculture Committee.