NEWS RELEASE
Committee on Energy and Commerce Democrats
Congressman John D. Dingell, Ranking Member

KEY LAWMAKERS REQUEST GAO REPORT ON
CREDIT DERIVATIVES MARKET
INFORMATION TECHNOLOGY WOES

Washington, D.C. – Rep. John D. Dingell (D-MI), Ranking Member of the House Committee on Energy and Commerce, today released a letter to David M. Walker, Comptroller General, U.S. Government Accountability Office (GAO), asking GAO to expand its financial market preparedness follow-up work to include the technology woes plaguing the credit derivatives market. The letter, dated June 6, 2006, was also signed by Rep. Joe Barton, Chairman, Committee on Energy and Commerce; Rep. Fred Upton, Chairman, Subcommittee on Telecommunications and the Internet; Rep. Edward J. Markey, Ranking Member, Subcommittee on Telecommunications and the Internet; Rep. Cliff Stearns, Chairman, Subcommittee on Commerce, Trade, and Consumer Protection; and Rep. Jan Schakowsky, Ranking Member, Subcommittee on Commerce, Trade, and Consumer Protection.

Credit derivatives, which are used to shift credit risk from one party to another, can be beneficial, such as when a mutual fund reduces the risk of holding a corporation’s bonds by entering into a credit default swap with a financial institution, and thus protecting fund shareholders from losses. The market for credit derivatives has reportedly grown so fast (estimated at over $12 trillion) that it has overwhelmed the legal, technological and paperwork-handling infrastructure. Regulators worry that financial markets might be thrust into turmoil if some large companies fail and these contracts cannot be settled.

The Committee on Energy and Commerce has jurisdiction over the interstate and foreign communications networks relied upon by financial markets and other strategic industries.

“I am hopeful that these serious infrastructure problems can be effectively addressed before the end of the current credit boom visits us with some prodigious scandal,” said Ranking Member Dingell.

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