46 House Democrats Join GOP in Trying to Prevent the CFTC from Doing Its Job

Today, the House passed the Customer Protection and End User Relief Act by 265 to 144. 219 Republicans and 46 Democrats voted for it. 143 Democrats and 1 Republican voted against it.

The bill authorizes spending on the U.S. Commodity Futures Trading Commission (CFTC) through fiscal year 2018. However--unsurprisingly--it seeks to prevent the CFTC from doing its job. It requires the CFTC to conduct burdensome cost-benefit analyses of proposed regulations, which will cause further delays in rule-making and open up more opportunity for industry lobbying. It also restricts the CFTC’s ability to oversee the derivatives market.  It also continues the chronic problem of underfunding that has plagued the CFTC for years.

Here is the statement Americans for Financial Reform released on the bill:

The Commodity Futures Trading Commission (CFTC) has a huge role to play in protecting consumers and the economy against fraud, price manipulation, and reckless speculation. Originally created to oversee the commodity futures markets, the CFTC now also bears most of the responsibility for regulating over-the-counter derivatives or “swaps,” the complex financial instruments that helped bring on the financial and economic meltdown of 2008.

Unfortunately, HR 4413 would seriously interfere with the agency’s ability to fulfill its mission and defend our economic security. It would do this by saddling the Commission with onerous new “cost benefit” analysis and procedural requirements, creating fresh grounds for delay and legal challenge, and tilting the playing field still further in the direction of narrow industry special interests. (These problems remain, despite the approval of a cosmetic amendment that attempts to alter the standard of judicial review for CFTC cost-benefit analysis.)

HR 4413 would also dangerously undermine the new transparency and safety rules put in place for the derivatives markets by sharply restricting the CFTC’s ability to oversee derivatives transactions conducted through foreign subsidiaries of U.S. banks, even when such transactions have the clear potential to do grievous damage to the U.S. economy. We need look no further than the recent examples of the credit default swaps sold by AIG’s London-based financial products division, or JP Morgan’s ”London Whale” trades, to see how foreign derivatives activities can threaten the U.S. economy.

The legislation also fails to address a key existing threat to the CFTC’s work: totally inadequate funding. Alone among financial regulators, the CFTC is wholly dependent on the appropriations process, and therefore uniquely vulnerable to political pressure. In the wake of the financial crisis, Congress passed the Dodd-Frank Act, which vastly expanded the CFTC’s mission. Since that time, however, many lawmakers have paid far too much attention to the pleas of influential companies seeking to avoid the rules, and the agency has been chronically under-funded. What it now needs, more than anything, is a budget commensurate with its responsibilities. To get there, the CFTC needs what other financial regulatory agencies already have: some form of self-funding, such as a tiny fee on the markets it regulates.

While it is bad news that this legislation passed the House, it is important to note that a solid majority of House Democrats voted against it, while the Obama administration issued a strong statement of opposition. The misguided provisions of HR 4413 are unlikely to be taken up by the Senate.

The House CFTC reauthorization bill does contain a number of ideas that deserve debate on their own merits, including customer protection proposals aimed at preventing the kind of end-user losses seen in the MF Global case. But it is counter-productive to put such provisions into legislation that ignores the key issue of adequate funding and seems designed, at heart, more to undermine than to assist the CFTC in performing its critical functions.

Here are the 46 Democrats who voted for it: 

 

John Barrow (GA-12)
Ami Bera (CA-07)
Sanford Bishop (GA-02)
Julia Brownley (CA-26)
Cheri Bustos (IL-17)
G. K. Butterfield (NC-01)
Tony Cárdenas (CA-29)
Jim Cooper (TN-05)
Jim Costa (CA-16)
Henry Cuellar (TX-28)
John Delaney (MD-06)
Susan DelBene (WA-01)
Tammy Duckworth (IL-08)
Bill Enyart (IL-12)
Pete Gallego (TX-23)
John Garamendi (CA-03)
Joe Garcia (FL-26)
Ron Kind (WI-03)
Ann Kirkpatrick (AZ-01)
Annie Kuster (NH-02)
Rick Larsen (WA-02)
Daniel Lipinski (IL-03)
David Loebsack (IA-02)
Dan Maffei (NY-24)
Sean Maloney (NY-18)
Jim Matheson (UT-02)
Mike McIntyre (NC-07)
Grace Meng (NY-06)
Patrick Murphy (FL-18)
Gloria Negrette McLeod (CA-35)
Rick Nolan (MN-08)
Bill Owens (NY-21)
Gary Peters (MI-14)
Collin Peterson (MN-07)
Mike Quigley (IL-05)
Nick Rahall (WV-03)
Raul Ruiz (CA-36)
Dutch Ruppersberger (MD-02)
Brad Schneider (IL-10)
Kurt Schrader (OR-05)
David Scott (GA-13)
Krysten Sinema (AZ-09)
Juan Vargas (CA-51)
Marc Veasey (TX-33)
Filemon Vela (TX-34)
Tim Walz (MN-01)

The lone Republican opponent was Walter Jones (NC-03).