Commodity Futures Trading Commission member Michael V. Dunn said Wednesday that the regulator cannot fulfill its new duties under the Dodd-Frank Wall Street Reform Act unless it gets more funding.
“We lack the staff and resources necessary to both implement Dodd-Frank and continue to fulfill our pre-Dodd-Frank duties under the Commodity Exchange Act,’’ he said at a CFTC meeting on implementing the Dodd-Frank Act. “Without additional funding, the strain will only become worse in July, when much of Dodd-Frank goes into effect.’’
The CFTC, for instance, is responsible for overseeing the establishment and regulation of new exchanges and execution facilities for the trading of standardized credit default swaps. Such swaps, largely unregulated and almost entirely custom in nature, contributed in a fundamental way to the 2008 global financial crisis. The swaps were used to lay off risk on complex derivative securities to insurer American International Group, in particular, which consumed tens of billions of dollars in bailout money as the crisis erupted.
Earlier this month, the SEC issued a study that flatly told Congress it doesn’t have the resources to oversee advisors. The regulator said that lawmakers best option is to empower a self-regulatory organization such as FINRA to do the job.
Saturday, the SEC also issued a report that showed that the complexity of reviewing brokerage operations already has meant a drastic drop in the number of examinations each year, since 2008.
And Tuesday, CFTC Commissioner Scott O’Malia that new rules spawned by the Dodd-Frank Wall Street Reform Act could make it "too costly to clear" credit default and other swaps.
And he said budget cuts already contemplated would hurt its ability to keep track of what’s going on in commodities markets.
"Drastic cutbacks in technology will reduce our investment in data storage to the point where the commission is estimated to run out of data storage by October of this year,'' he said. "The decision has also been made to slow down the development of our automated trade surveillance system and automation of all forms, which is long overdue."
From the outset of this rulemaking process, I have expressed my concern that our budget crisis would move us from a principles based regulatory regime to a restrictive regime,’’ Dunn said Wednesday. “Without additional funding, we cannot acquire the human and technical resources for optimal regulatory oversight. I fear the result will be a restrictive regulatory regime that will have a negative impact on both the futures and swaps industries in the United States.