WASHINGTON, Oct. 12, 2012- Several Republican members of Congress took issue with the Commodity Futures Trading Commission’s (CFTC) implementation of the “swaps definitions” rules last week, while the CFTC issued several notices exempting certain entities from registering as swap dealers.
Senator Pat Roberts (R-Kan.), Ranking Member of the Senate Committee on Agriculture, Nutrition and Forestry, released a scathing assessment of CFTC Chairman Gary Gensler’s actions throughout the Dodd-Frank rulemaking process.
“The CFTC Chairman’s regulations-looking-for-a-problem method of rule writing is creating confusion and costing businesses a fortune in compliance costs,” Roberts said.
Also, House Representatives Spencer Bachus, R-Ala.; Scott Garrett, R-N.J.; Jeb Hansarling, R-Texas; and Randy Neugebauer, R-Texas, sent a letter to Gensler last week arguing that the positions limits rule and similar legislation under Dodd-Frank are “unrelated to the financial crisis and not required by Congress, which are draining its resources.” CFTC intended the position limits rule to limit speculation by capping futures holdings for 28 commodities.
A federal judge rejected the rule on Sept. 28 and remanded it to the CFTC, ruling that the agency had “fundamentally misunderstood and failed to recognize the ambiguities in the statute.”
In his public statement, Roberts insisted Gensler expanded the regulatory scope of the CFTC beyond what Congress intended “using Dodd-Frank as cover” and that the federal court ruling on position limits proves his concerns are justified.
In his statement, Roberts recommended that the Senate Agriculture Committee hold a hearing to examine CFTC when Congress returns in November.
“Most distressing is that while Mr. Gensler has tried to create his regulatory agenda, he and the CFTC have miserably failed in their oversight of existing regulations and market participants,” he said. “First they missed MF Global and less than a year later we had the Peregrine debacle.”
Roberts said the implementation of new swaps definitions will require between 150 and 300 entities, including energy companies, municipalities, and farm cooperatives, to register as swap dealers.
“Dodd-Frank was supposed to provide regulators at the CFTC with a bigger and brighter flashlight to bring transparency to derivatives markets. In this case, as chairman, it’s Mr. Gensler who gets to control where the flashlight shines,” he said.
CFTC issued several no action notices on Friday, which exempt different entities that expressed concern from being required to register as swap dealers under the law. According to CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO), a no-action letter provides relief from registration for various swaps intermediaries until December 31, 2012. Without the delay, certain entities would have to be registered immediately.
“When confronted about the problems, the Chairman’s office responds by issuing ‘no action’ letters, without input from other commissioners,” Roberts persisted. “Was this the plan all along…create dozens of new regulations merely to exempt most of the entities they would affect?”
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