Read our letter here.
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February 28, 2012
U.S. House Committee on Agriculture
1301 Longworth House Office Building
Washington D.C. 20515
Dear Representative:
On behalf of Americans for Financial Reform, we are writing to urge you to support the full funding level of $308 million for the Commodity Futures Trading Commission in the President’s proposed 2013 budget. Americans for Financial Reform is an unprecedented coalition of over 250 national, state and local groups who have come together to reform the financial industry. Members of our coalition include consumer, civil rights, investor, retiree, community, labor, faith based and business groups.
The CFTC role in oversight of financial markets is vital to businesses who use commodity markets to hedge bona fide business risks, vital to the economic well-being of American families who rely on affordable prices for products like gasoline and food, and vital to the stability of our overall financial system. In response to the devastating financial crisis of 2008, Congress has greatly expanded the CFTC’s derivatives market oversight responsibilities. The Dodd Frank Act charges the CFTC with responsibility for approximately $300 trillion in previously unregulated domestic swaps markets — an 8-fold increase in the notional value of the market the CFTC must supervise. Regulating swaps is a key step in preventing future financial market catastrophes. In addition, the Act charges the CFTC with setting position limits on ownership of commodity contracts to prevent excessive speculation, price distortion, and possible manipulation that costs consumer and industrial users of commodities many billions of dollars a year.
Despite the enormous increase in the scope of the CFTC’s supervisory authority, last year the Congress effectively froze CFTC funding at a current services level of $205 million. This funding level is not sufficient to effectively oversee the commodities markets and protect our financial system. Indeed, in light of the failure of oversight at MF Global, it is questionable whether this funding level is even sufficient to properly enforce even pre-Dodd Frank law in the commodity and futures markets. At its current funding level, the CFTC is only 10 percent larger than its peak size in the 1990s, but the futures market alone has grown five-fold since that time. This is completely apart from the CFTC’s new responsibility to oversee swaps markets.
The President’s request of $308 million is miniscule in comparison with the nearly $340 trillion in notional value of markets that are supervised by the CFTC. It is even smaller in comparison to the costs of financial crises. These markets are central to our financial system. Failing to provide an additional $102 million to enable proper supervision of hundreds of trillions of dollars in derivatives and commodity markets would have nothing to do with saving money. It would instead protect a broken and dangerous status quo and undermine effective oversight of our financial markets. After the enormous damage created by the financial crisis of 2008, it is no longer possible to deny the importance of such oversight.
The President has suggested that CFTC funding could be provided by a small fee on CFTC-supervised markets. Every other major financial regulatory agency is funded by such industry fees, instead of by general taxpayer funding. Raising the full $308 million request from CFTC-supervised markets would require a fee of less than one penny per ten thousand dollars in notional trading value, while raising the incremental $102 million would require a fee of less than one penny per thirty thousand dollars in notional value. It is hard to believe that such a fee would impose any real burden on market participants.
But regardless of how CFTC funding is provided, full funding for the agency is a necessity for effective financial market oversight. We strongly urge Congress to provide such funding at the President’s requested level of $308 million.
Sincerely,
Americans for Financial Reform