CFTC Meeting

I, along with counsel for ISDA and counsel for the Coalition of Banks and
Investment Banks, met with Chairman Rainer and CFTC staff this morning. As
you are aware, Senator Lugar and Congressman Ewing asked us to work with the
CFTC to resolve our disagreement over how energy and other nonfinancial
commodities should be regulated. This dispute and the even more significant
dispute over SEC-CFTC jurisdiction (the Accord) are the most significant
remaining issues with the legislation. In that context, you may be aware
that the CFTC and SEC reported to Congress yesterday that they have not been
able to work out the Accord issues. We were informed prior to our meeting
this morning that the House and Senate bills on CFTC reauthorization are
likely to be introduced today. I will transmit copies as soon as I get
them. It is my understanding that both bills do a good job for us with
respect to legal certainty for energy and other nonfinancial commodities.

In this light, we met with the CFTC and reviewed with them the attached
two-page legislative proposal. The most significant problem that we have is
the CFTC's discomfort at providing an exclusion for bilateral, nonfinancial
transactions. In essence, the CFTC does not want to go beyond the
recommendations of the President's Working Group. We have continued to
insist that nonfinancial bilateral transactions be treated like financial
bilateral transactions and be carved out of CFTC jurisdiction. Our meeting
was very cordial and the CFTC said that they would be taking our comments
into consideration. Unfortunately, inability to get passed the bilateral
issue effectively forecloses resolution of the other issues in our outline.

Separately, we understand the CFTC is moving forward with its regulatory
relief package which they hope to publish sometime next week. We understand
that it will be published with a 45-day comment period.

Further updates to follow.

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- Proposed Legislation.doc