More authority for the CFTC, but not enough funding

By Sara Wyant

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WASHINGTON, Dec. 10, 2014 - Members of the Senate Committee on Agriculture, Nutrition and Forestry agreed that the Commodity Futures Trading Commission (CFTC) gained substantially more authority to oversee and regulate derivatives markets as part of the Dodd-Frank Act, but split along party lines over whether or not the agency has enough funding.

After CFTC Chairman Timothy Massad provided an update on the Commission's activities over the last six months, Democrats repeatedly made the point that the agency does not have sufficient resources to do its job and that a $35 million increase in the $1.1 trillion appropriations bill released Tuesday night would not be enough.

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“Let me be clear: Dodd-Frank Wall Street reform is being undermined every day that we underfund the agencies responsible for enforcing the law,” emphasized Chairwoman Debbie Stabenow, D-Mich. “And that is clearly happening with the omnibus bill announced in the House yesterday.
 
“Failing to properly fund the Commission leaves our families, farmers, and businesses vulnerable to bad actors,” she added. In addition, Stabenow said she was opposed to a policy rider in the appropriations bill, which would roll back a provision that required Wall Street firms to move their derivatives holdings out of their banking subsidiaries.

She said the funding increase “comes with conditions - handcuffs on the agency that Congress tasked with enforcing the law Congress passed - in such a way that it represents what looks to me like a very serious cut.”

Sen. Bob Casey, D-Penn., also expressed concern that the proposed CFTC funding level would be $30 million below the levels proposed by President Obama in his annual budget.

But Republicans pointed out that with a budget increased to $250 million for fiscal year 2015, CFTC is one of the few federal agencies to receive a substantial boost in funding. In fact, Congress has steadily increased appropriations for the agency. Funding has more than doubled over the last decade, from about $90 million in 2004.

Sen. Pat Roberts, R-Kansas noted that the CFTC is set to receive nearly 50 percent more in funds since 2010, including the "cromnibus" proposed by the House. Roberts said that despite the challenges facing the agency, its spending should not be allowed to continue to grow unchecked.

“The Commission's actions over the last several months have demonstrated that the previous commission and Chairman often took Dodd-Frank regulations much further than required by the law…and wouldn't stop to listen to feedback from stakeholders including market participants and Congress,” Roberts said.

The hearing came just one day after about 40 members of the Commodity Futures Trading Commission's Agricultural Advisory Committee met for the first time since July 2013. Many shared their concerns about new rules proposed by the CFTC.

Bryan Dierlam, Director of Government Affairs at Cargill, said the advisory meeting was a great opportunity to talk about the importance of bona fide hedging when the CFTC finalizes their position limits rule - likely at some point during 2015 - after more than four years of consideration. He represented the International Swaps and Derivatives Association, of which Cargill Risk Management is a member.

Dierlam said that many of the advisory committee members tried to articulate to the CFTC that “in an effort to limit speculation you don't limit the utility and the usefulness of these markets to commercial users that use these markets day in and day out on behalf of farmers and ranchers.”

“There's a lot of terminology that's been used the past couple of years whether it's irrevocable bids or offers or merchandizing hedges or anticipatory hedges and that's really how commercial users use these markets to facilitate transactions with farmers and ranchers,” he explained.

“If the CFTC doesn't adjust these definitions in this final ruling we could really impact the function of the cash market and we don't want to have that happen.”

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