The Senate Committee on Agriculture, Nutrition and Forestry held an important hearing on July 17, 2013 on the “Reauthorization of the Commodity Futures Trading Commission (CFTC)”. This is critical because the CFTC regulates derivatives, which Warren Buffett called “financial weapons of mass destruction” and which ignited and spread the financial crisis in 2008. Derivatives are why AIG and so many other big Wall Street firms failed, almost failed, or had to be bailed out by taxpayers.
Making sure that never happens again is the CFTC’s job and Better Markets’ CEO and President, Dennis Kelleher, testified at the hearing in support of the CFTC and increased funding while pushing back against industry attempts to gut, weaken, or kill financial reform.
Mr. Kelleher’s full opening statement and written testimony are below, but here are a few highlights:
Just 5 years ago, the U.S. suffered the worst financial crash since 1929 and the American people have been paying a high price for that ever since, including slow to no growth, persistently high unemployment, and massive deficits, among other things. This is why derivatives regulation is vital to effective financial reform which will protect the American people, taxpayers, the U.S. Treasury, and our financial system.
A strong CFTC is essential to ensuring that another financial crisis does not happen. With the passage of the Dodd-Frank Act, the responsibility of the CFTC was dramatically expanded from the $37 trillion notional futures market to include the $340 trillion notional U.S. swaps markets. The CFTC should be allowed time to implement the rules, see how they work, determine if changes must be made, and be given the opportunity to make those changes.
Unfortunately, because the CFTC is woefully underfunded, it simply cannot do the job Congress asked it to do and the markets and investors need it to do. An agency with $200 or even a $300 million annual budget cannot properly regulate or oversee the futures and swaps markets with almost $400 trillion in notional trading. Thus, the CFTC must have the authority to impose fees and be self-funding in whole or in substantial part.
Finally, industry calls for the CFTC to conduct cost-benefit analysis should be disregarded as they are a backdoor attempt to kill or gut financial reform. The CFTC has done economic analysis for decades as required by the Commodities Exchange Act. Tellingly, there were few if any complaints from Wall Street about CFTC regulations until the Commission began implementing financial reform. That tells everyone what is really going on here.
Read Mr. Kelleher’s full written testimony here
Read Mr. Kelleher’s full opening statement here
More information on the Senate Agriculture Committee hearing is available here