WASHINGTON - U.S. Sen. Dick Lugar, today delivered the following opening statement this morning at a Senate Agriculture, Nutrition and Forestry Committee hearing on the President's Working Group Report on Over-the-Counter (OTC) Derivatives:
 

Today the Senate Agriculture Committee holds its first hearing of the year on the reauthorization of the Commodity Exchange Act. This hearing, with its distinguished list of witnesses, will discuss the unanimous findings of the President's Working Group regarding the proper treatment of the over-the-counter derivatives market.
 

In late 1998, House Agriculture Committee Chairman Bob Smith and I wrote Treasury Secretary Rubin requesting that the President's Working Group study and make recommendations to Congress regarding these instruments. Our request came on the heels of an economically turbulent period, which witnessed a Russian default of its debts, the devaluing of the ruble and the near-collapse of Long-Term Capital Management Hedge Fund. In addition, the CFTC was making overtures through its concept release on over-the-counter derivatives that it may seek to unilaterally regulate these instruments. In requesting this report, we sought to bring certainty to these markets and to build a broad consensus on the government's role, if any, in regulating them.
 

I have long stated that one of my goals for Commodity Exchange Act reauthorization is to provide legal and regulatory certainty to the over-the-counter market. With its recommendations on the legal certainty of swaps, the Treasury Amendment and electronic trading, I am confident that this unanimous report will provide Congress with the guidance it needs for achieving this important goal.
 

But the Working Group's recommendations cannot exist in a vacuum. Another important goal of reauthorization is providing regulatory relief for those entities that fall within the Commodity Exchange Act. The Working Group recognized that its recommendations regarding the over-the-counter market must be implemented simultaneously with the lessening of regulation for the futures exchanges. Along with other Members from the House and Senate Agriculture Committees, I have requested that the CFTC make its recommendations on regulatory relief by February 14th. I understand that Chairman Rainer will meet this deadline and intends to brief Members on this proposal shortly.
 

Addressing the Shad-Johnson Accord also is a priority. The President's Working Group agreed that the current prohibition on single stock futures can be repealed if issues regarding the integrity of the underlying securities market and regulatory disparities can be resolved. Senate Banking Committee Chairman Phil Gramm and I have written SEC Chairman Levitt and CFTC Chairman Rainer requesting that the Agencies study this issue and make recommendations by February 21st. Senator Gramm and I have pledged to work together throughout this process, including the possibility of holding joint hearings, to ensure that both over-the-counter and on-exchange instruments are appropriately and consistently treated under our laws. Although it would be premature today to discuss in detail the reform of the Shad-Johnson Accord without the benefit of the Agencies' input, I would emphasize that this issue remains a priority with the Committee.
 

This Committee is faced with the daunting task of drafting this complicated legislation in a year drastically shortened by a full Congressional calendar and a Presidential election. In my view, Congress has a three month period of time to pass this bill or resign itself to the fact that it will not get done until next year.
 

However, the ramifications of waiting are considerable. Given the fact that we will have a new Administration, a new Congress, and even possibly a new Chairman of this Committee, the present time appears to be the most opportune for Congress and the industry to achieve consensus on comprehensive reauthorization legislation, and I intend to actively promote its passage this year.
 

Turning towards today's discussion, our first witness this morning will be Treasury Secretary Laurence Summers, head of the President's Working Group, who will outline the Report's unanimous findings.

Our second distinguished panel will consist of the other members of the Working Group: Chairman Alan Greenspan of the Federal Reserve; Chairman Bill Rainer of the CFTC; and Ms. Annette Nazareth, Director of Market Regulation at the SEC.
 

Our final panel contains members from the private sector, including representatives from the futures exchanges and the over-the-counter derivatives community.

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