The Commodity Futures Trading Commission (CFTC), a small agency with the herculean task of regulating the derivatives and futures markets, could face severe budget cuts that would prevent it from implementing many of the reforms proposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act, said Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) last Wednesday.
“With so many critical issues before the agency, I…want to acknowledge the serious budget constraints that the CFTC is experiencing, including the uncertainty of sequestration. I continue to be concerned that if the agency doesn’t have the tools it needs to implement reform and oversee these markets, we are asking for a repeat of the [2008 financial meltdown] that cost us so many jobs,” she said during a committee hearing. Forced budget cuts of $85 billion for the federal government went into effect Friday.
In what was a partisan process, Congress last year approved approximately $308 million for the agency through Sept. 30 of this year. This reflected a 50% increase to accommodate the agency’s “significantly expanded responsibilities” under Dodd-Frank.
Stabenow and Sen. Thad Cochran of Mississippi, the ranking Republican on the committee, plan to begin the process of reauthorizing the CFTC. “Reauthorization is an opportunity to critically examine these markets and weigh policy changes that would help protect markets and the public…We must have markets that allow farmers and business owners to manage risk without fear. That also means our ‘cops on the beat’ must have the [financial] resources they need to do their jobs,” Stabenow said.
She further called for the agency to finalize implementation of the Wall Street reform law, citing the collapses of MF Global Holdings Ltd. and the Peregrine Financial Group (PFG), as well as the possibility of a repeat of the 2008 financial crisis that led to the loss of nearly eight million jobs (see NGI, Nov. 7, 2011, July 23, 2012).
“While the CFTC is further ahead than other agency in implementing [the Dodd-Frank] law, there are still many outstanding issues to address, including a final rule on swaps execution facilities, cross-border guidance and compliance with the law.”
She said she and Cochran plan to release a joint letter in the coming days that will invite input on reauthorization, a process in which the public may comment on spending and policy issues.
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