Eugene Grygo, Chief Content Editor, FTF News
Would it really be such a bad idea for the CFTC to charge a user’s fee?
That issue may wind up being a spinoff from a bill put forth late last month by the Wall Street lightning rod U.S. Senator Elizabeth Warren (D-Mass.) with the support of Mark Warner (D-Va.), and Congressman Elijah Cummings (D-Md.). They say the proposed legislation would essentially be Derivatives Reform II: The Sequel to Dodd-Frank. They are arguing that the CFTC is too weak and that the Republicans have undermined the original reforms. (Please check out my story here.)
It’s doubtful that this trio of Democrats will even get a hearing of this bill given the toxic political environment and Warren’s highly controversial status. The major media barely covered the proposal and probably slated another stupid story about the idiotic campaign of Donald Trump.
Regardless of where people stand politically, it would be great if rational minds could stop for a moment and take on the derivatives loopholes since Dodd-Frank landed like a bomb. It’s also time to think about strengthening the CFTC’s power, and dealing with netting, clearing and other tedious but important issues. Derivatives trading has not gone away. In fact, no one has yet had the courage to discuss banning these highly complex and thus highly destructive trading instruments. They were the instruments of mass destruction that W and his gang never found until it was too late.
And, for that matter, Congress should give a fair hearing to the proposals that the Republican chairman of the House Financial Services Committee, Texas Congressman Jeb Hensarling, unveiled recently.
While essentially gutting Dodd-Frank, Hensarling’s plan is a lot more positive than just saying no to everything, the motto of the G.O.P. (Hensarling has even suggested merging the SEC and the CFTC.)
But sadly we are not in a time of rationality. Madness is ruling the day and there will likely not be a constructive review of either plan because Congress is polarized and paralyzed.
But, Warren’s bill has one piece that rings true.
Love or hate the Dodd-Frank law, it has increased the workload for the CFTC (and the SEC) but the endless act hasn’t exactly spelled out how the regulator was going to all this new work minus adequate staffing. To fix this situation, Warren and company want their new law to authorize the CFTC to collect user fees from financial services firms, which would add to the CFTC budget, and presumably bolster its enforcement capabilities.
Industry observers such as Mary Kopczynski, CEO and founder of 8of9, a financial services regulatory consulting firm, argue that a fee would be self-defeating because it would likely be borne by the customers of securities firms working in derivatives. “So, while you are ‘helping’ the taxpayer, you are also costing the taxpayer more in his or her investment, as part of investing includes compliance costs,” Kopczynski says.
Thus the question for our beloved politicians is whether taxpayers/investors would be willing to pay more for stronger regulators be it via the potential fee or via greater federal funding.
In order for it all to work, investors would have to trust that markets would be cleaner and safer, and taxpayers would have to believe that it’s worth the investment.
Need a Reprint?
