Farr statement on Commodity Futures Trading Commission 2016 budget request

The Commodity Future Trading Commission is the quiet hero of America’s fiscal stability. Since 1974, the CFTC has regulated the US agricultural commodity and other futures and options markets. For 36 years the CFTC executed its responsibilities while protecting investors from fraud, on a tiny 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 $400 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. That risk spilled over to the real economy. Eight million jobs were lost, millions of families lost their homes and thousands of small businesses had to lock their doors.  

Something had to change. Dodd-Frank mandated that the CFTC now regulate the $400 trillion swaps market. So, it stands to reason that we should better resource the CFTC to carry out their new responsibilities. Unfortunately, that has not happened. 

From 2011-2015, CFTC appropriations were an average of 26% under the request. The CFTC is still being funded at $250 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 at least the Budget Request of $322 million.

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. Our constituents and our markets cannot withstand another economic tsunami. And they shouldn’t have to.

Plus, the CFTC more than earns its keep. From 2009 to 2014, the CFTC collected fines and penalties of approximately twice its cumulative budgets. This year, the fines and penalties collected are already over six times the CFTC’s budget. 

The bottom line is this:  The cost of fully funding the CFTC is minor but the cost of underfunding the CFTC is enormous.

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