Farr Statement at Hearing on Commodity Future Trading Commission

April 12, 2013
Press Release
Farr Statement at Hearing on Commodity Future Trading Commission

The Commodity Future Trading Commission is the unsung hero of America's fiscal stability.

The Commodity Future Trading Commission is the unsung hero of America's fiscal stability.

Since 1974, the CFTC has regulated the US agricultural commodity and other futures and options markets. And for 36 years the CFTC executed its responsibilities professionally while protecting investors from fraud, on a shoestring budget.

But with 2010 passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFTC's jurisdiction exploded nearly seven-fold from $37 trillion to nearly $300 trillion.

Make no mistake about it. That increased jurisdiction was absolutely essential.

The 2008 economic collapse was proof positive that our financial regulatory oversight failed Americans. The unregulated swaps market helped concentrate risk in the financial system. And that risk spilled over to the real economy.

8 million jobs were lost

Millions of families lost their homes

And thousands of small businesses had to lock their doors

Something had to change. And Dodd-Frank mandated that the CFTC now regulate the roughly $250 trillion swaps market in addition to the $37 trillion agricultural commodities and other futures market.

So, it stands to reason that we should better resource the CFTC to carry out their new responsibilities. Unfortunately, that has not happened.

The CFTC is still being funded at $207 million, which is barely enough to cover CFTC's old jurisdiction.

If American taxpayers expect the CFTC to fully carry out its oversight and regulatory responsibilities, we should be providing them with $315 million. And, to give that figure some perspective, $315 million is a tiny fraction -- just one-millionth – of the roughly $300 trillion markets they must regulate.

While I share the concern for our current economic predicament, our failure to adequately resource the CFTC so they can exercise prudent oversight over the swaps market, has far graver financial consequences for our national economy. It is worth repeating the price tag of mindful neglect:

8 million jobs lost

Millions of families losing their homes

And thousands of small businesses locking their doors

There is absolutely no way our constituents and our markets can withstand another economic tsunami. And they shouldn't have to.

But, unfortunately, those aren't the only costs to crippling CFTC's funding.

Continued underfunding means the CFTC won't be able to conduct enforcement investigations. And that costs the American taxpayer real money.

In January 2013 alone, CFTC brought in $1 billion in fines/penalties. That's $1 billion that goes into the US Treasury.

Put another way, the CFTC gave the American taxpayer an almost 4-fold return on their Fiscal Year 2013 investment.

And here's another cost to underfunding:

Since Dodd-Frank, CFTC has written 43 of 50 new swaps market rules. Understandably, Wall Street has questions about how to comply with these new rules.

But CFTC doesn't have the money to hire staff who can respond to these inquires.

And that understaffing stymies the pace of business just when we need to have robust, productive, transparent markets.

The bottom line is this:

The cost of fully funding the CFTC is minor.

The cost of underfunding the CFTC is enormous.

American taxpayers deserve this minor front-end investment in CFTC to yield enormous long-term returns.

Issues: 
113th Congress