Commissioner questions CFTC approach to "sweeping economic reform"
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WASHINGTON, March 23, 2012- The Commodity Futures Trading Commission (CFTC) is not taking enough responsibility for completing cost-benefit analyses of its actions and explaining its rationale behind some of the rulemakings under the Dodd-Frank Act, said CFTC Commissioner Scott O'Malia at the Eighth Annual Energy Trading Conference today in Houston. He also said the Commission “must do a better job in consulting with the public as it develops sweeping economic reform.”
In implementing Dodd-Frank, the Commission must ensure the results of the regulations are not so “burdensome and complex that the costs of compliance and implementation immobilize the markets (and the regulators), causing far greater harm to commodity prices and the economy as a whole than the events that led us to this point.”
His concern regarding the Commission's cost-benefit analyses earned him the label “rogue commissioner,” by some in the media, he said. O'Malia wrote a letter to the Office of Management and Budget (“OMB”) requesting that it conduct an independent review of the Commission's most recent cost-benefit analysis to gauge compliance with OMB best practices.
“It is through cost-benefit analysis that agencies are able to engage affected stakeholders, explore options, and make informed decisions based on facts,” O'Malia said. “Cost-benefit analysis is not just a box to check.”
CFTC Commissioner Bart Chilton spoke before the Exchequer Club in Washington, DC earlier this week and said an increasingly complex trading market makes passing the provisions of the Dodd-Frank Act necessary to repair the “monstrous economic mess.”
He said the 2008 economic disaster was created due to weak or non-existent oversight and regulation as well as Wall Street creativity and “a penchant for the exotic” that created overly complex financial products.
“If we implement all of these Dodd-Frank rules expeditiously-the way Congress intended-it will ensure that the largest financial players are held accountable to the public,” Chilton said. “As the financial crisis and the decade of deregulation that led up to it showed, large financial players, with a conscience that in many cases seems to extend only to the next fiscal quarter, cannot be trusted to totally self-govern.”
The Commission has more than 20 Dodd-Frank rules to finalize, with 29 completed. Of the 29, O'Malia said 10 are designated as “Major Rules,” meaning in part that it would have an annual effect of $100 million or more on the economy.
“The interesting point about this is that the Commission has produced little to no specific data to justify its calculations in any of these rules,” O'Malia said. He added that the independent agencies combined finalized just 17 Major Rules last year, so the Commission is now “moving at a breakneck pace.”
Although Chilton acknowledged in his remarks that impressive innovations took place in the unregulated environment, he said Dodd-Frank Act can bring basic rules back to the evolved “market madness.”
“As the economic crisis of the last few years has shown, large financial players' irresponsibility can have a devastating impact on the American consumer and American businesses,” Chilton said.
Chilton said the majority of Dodd-Frank rules should be finalized by April and estimated that the Commission will meet its Congressional mandate by the end of September.
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