Financial regulators like the CFTC and SEC are all that stands between Wall Street’s reckless conduct and Main Street’s pockets. They are the cops on the Wall Street beat. Regrettably, in the 10 years leading up to the Wall Street-caused financial crisis in 2008, all the cops were taken off the beat. Not only was Wall Street deregulated, it was allowed to police itself. That resulted in the worst financial crash since 1929 and caused the worst economy since the Great Depression
As is clear from frequent headlines, Wall Street is and remains a high crime area that has been on a crime spree for years now. Financial reform is all about re-regulating Wall Street and putting the cops back on the street. But neither can happen if Congress does not fund the financial regulators.
No one can be for financial reform and for protecting Main Street from more bailouts of Wall Street unless they also support funding for the financial regulators and getting the cops back on the Wall Street beat.
One agency in particular, the CFTC, has been asked to oversee the market for complex derivatives like the ones that triggered the last financial crisis. But the agency doesn’t have enough money to do its job. And what money it does have is coming from the taxpayers’ pockets – which were already picked by Wall Street. A simpler, fairer, cost-effective alternative is to require the financial industry to fund the CFTC itself through a user fee. This approach is already used by many federal agencies including all other financial regulators.
Better Markets has done analysis on derivatives market data which shows that a CFTC user fee required to fully fund the CFTC would be extremely small. In fact, market participants would barely notice the difference. Yet for the taxpayer, the benefit would be huge: a properly funded Wall Street watchdog that could effectively monitor risky behavior and impose penalties for reckless behavior. Indeed, if the CFTC has the funds to do its job, then the risk of another financial crisis and more bailouts of Wall Street will be much lower.
Here is a summary of why a CFTC user fee is so desperately needed and how it can be done at a very low cost. Better Markets recently submitted this to the Senate Agriculture Committee, which is considering whether or not to propose such a fee. Better Markets has also testified on this subject and included it in recommendations to the Senate Agriculture Committee as part of the CEA reauthorization process.
Every day the CFTC has insufficient funding is yet another day the American people remain at the mercy of Wall Street. The time to fund the CFTC is now, before it’s too late and we face a repeat of 2008.
- Testimony of Dennis Kelleher, “Reauthorization of the Commodity Futures Trading Commission,” Senate Agriculture Committee, July 17, 2013
- Better Markets letter to Senate Agriculture Committee regarding CFTC reauthorization and funding, September 4, 2013
- Better Markets letter to Senate Agriculture leadership on CFTC and CEA reauthorization, May 2, 2013
- Reauthorization of the Commodity Futures Trading Commission, Senate Agriculture Committee hearing, July 17, 2013 (video)