“As the Obama Administration budget was announced today, the Commodity Futures Trading Commission (CFTC) seems to be the agency left out in the cold at a time when regulating over the counter derivatives (OTC) has been identified as a key strategic economic concern. With between $400 and $600 trillion in previously unregulated derivatives, a significant market crash could literally wipe out the world economy, valued at just over $70 trillion.
“In the budget proposal, the Securities and Exchange Commission (SEC) was allocated $1.7 billion, representing a slight increase over what had been anticipated. By contrast the CFTC was allocated $280 million, down $35 million from what they had requested. While the Obama budget proposal is significant, it should be noted the real power to appropriate government spending lies in the Republican controlled House of Representatives.
“Amidst credible warnings of derivatives implosions, cutting CFTC budget could be a trigger point for next crash
“Dodd-Frank was passed in reaction to the 2008 economic collapse,” outgoing CFTC Democratic Commissioner Bart Chilton said. ”I wonder if some forget why the meltdown occurred and what is needed to secure solid footing. Even during a time of deficit, our country must do all it can to avoid a repeat of what led to the economic mess.”
“The White House must not wave the white flag of surrender on derivatives reform and abandon the financial regulators at their time of need, which is right now.” said Dennis Kelleher, President of Better Markets, a nonprofit organization that promotes the public interest in the financial markets. “Reports that the White House budget is going to slash its request for funding for the CFTC by more than 10%, from an already grossly inadequate $315 million to just $280 million for an agency with responsibility for markets larger than $400 trillion, is wrong by every measure and a disservice to the American people. It is bad policy, politics, economics and sends the wrong message.”
Read full Value Walk article here