Good afternoon Chairman Durbin, Ranking Member Moran and members of the Subcommittee. Thank you for inviting me here to speak about the CFTC’s funding request for 2013.
The CFTC is a good investment of taxpayer dollars because it supports the farmers, ranchers, producers and commercial companies in your states that rely on the futures and swaps markets to lock in a price and lower their risk.
As it is these commercial end-users in the real economy – the non-financial side – that provide 94 percent of private sector jobs, it’s all the more important that these markets work for them.
The futures and swaps markets are where commercial end-users meet financial firms and speculators. But the producers and merchants make up a small slice – 15-20 percent of the energy futures markets and up to 30 percent of the wheat and corn futures markets.
Non-financial firms make up just under10 percent of the worldwide swaps marketplace. The remaining interests in these markets are financial actors and speculators.
The CFTC’s role is to ensure these markets are transparent and competitive and work for all market participants, but most importantly for the end-users who are hedging risk and investing in our economy.
These markets are important to another group of your constituents, the Americans who rely on pension funds, mutual funds, community banks and insurance companies, which use futures and swaps markets to hedge risk and enhance investment returns.
It is crucial that the CFTC is well funded to ensure that Wall Street doesn’t have an information advantage over the farmers, ranchers, producers and commercial companies in your communities.
It is crucial that the CFTC is well funded to lower the risk that Wall Street’s problems will travel to your states and become your constituents’ problems, as we saw so clearly happen during the 2008 financial crisis.
Though the CFTC is not a price-setting agency, rising energy prices once again remind us why it’s crucial that the CFTC is well funded so it can be an effective cop on the beat to protect against fraud, manipulation and other abuses in these markets.
Let me put our funding request in context. We currently oversee the $37 trillion futures market with 710 people. This hardworking staff is just 10 percent more than what we had in the 1990s though the futures market has grown fivefold.
The CFTC also will soon be responsible for the $300 trillion swaps market – eight times bigger and far more complex than the markets we have historically overseen.
It is as if all of a sudden the NFL expanded eight times to play more than 100 football games in a weekend. I think we’d all agree that the same number of referees could not possibly monitor all those games.
And referees on the field do more than call penalties and watch for violations of the rules. They protect the players, promote fair competition and ultimately ensure the integrity of the game.
We are not requesting eight times the referees, but I will share a couple of startling numbers with you. We are estimating that the number of registered clearinghouses, trading platforms and data platforms we oversee will triple from 32 to about 100. We are estimating that the 130-140 futures commission merchants and retail foreign exchange dealers we oversee will be joined by a similar number of swap dealers.
The CFTC’s 2013 request of $308 million – a 50 percent increase – represents a 56 percent increase in IT and a 43 percent increase in staff, which strikes a proper balance between important investments in technology and human capital.
I know this $103 million increase might seem bold. But is it really bold in comparison to the eight million jobs lost as a result of the financial crisis?
Furthermore, picture the NFL expanding eightfold, leaving just one referee per game, and, in some cases, no referee. Imagine the mayhem on the field, the resulting injuries to players, and the loss of confidence fans would have in the integrity of the game.
In 2012, the CFTC will finish the Dodd-Frank rules. The 2013 request isn’t a question about funding Dodd-Frank. This increase is about trying to avert another financial crisis. And it’s about protecting farmers, ranchers, producers and commercial companies in your states that use the futures and swaps markets to grow their businesses, hire people and invest in our country.
Last Updated: March 29, 2012