Good morning, thank you Steve for that kind introduction. I’d also like to thank the International Swaps and Derivatives Association (ISDA) for inviting me to speak at your annual global derivatives conference on where we are internationally on swaps market reforms.
As you all know, with just the click of a mouse, risk can spread around the globe. We surely saw this as the financial system failed in 2008.
AIG Financial Products, though organized in Connecticut, was primarily run out of London. Sobering evidence, indeed, of the markets’ international interconnectedness.
Further, swaps – developed to help manage and lower risk for commercial companies – also concentrated and heightened risk in international financial institutions. When these entities began to fail, swaps quickly spread risk across borders and helped to nearly topple the U.S. economy. Taxpayers were asked to step in to support the financial system and to prevent our economy from going into free fall.
The ensuing financial crisis plunged the United States into the worst recession since the Great Depression with eight million Americans losing their jobs, millions of families losing their homes and thousands of small businesses closing their doors. The financial storms continue to reverberate with the debt crisis in Europe affecting the economic prospects of people around the globe.
Following the 2008 crisis, a new consensus formed internationally. Swaps, which were basically not regulated in Asia, Europe and the United States should now be brought into the light of regulation.
When President Obama brought together the G-20 leaders in Pittsburgh in 2009, they agreed that the swaps market needed to be reformed and that such reform should be completed by December 2012.
Despite different cultures, political systems and financial systems, we've made significant progress on a coordinated and harmonized international approach to reform. Of course, there will be some differences, but I would like to highlight the progress we’re making together.
In 2010, the U.S. Congress and the President came together and passed the historic Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). To date, the CFTC has completed 31 reforms to bring oversight to the unregulated swaps market. We are on track to complete the approximately 20 remaining reforms this year.