CFTC’s Powers Need Adjustments, Says House Agriculture Chairman

By: Ellen Ferguson
July 19, 2011

The House Agriculture chairman told a business group Tuesday that the panel will act soon on legislation “designed to ensure that regulators don’t keep rushing forward without regard for America’s farmers, ranchers and Main Street businesses.”

Rep. Frank D. Lucas, R-Okla., said the committee will focus “in the coming weeks” on the Commodity Futures Trading Commission, which falls under the panel’s jurisdiction.

He repeated his concerns that the agency’s expanded authority to set the terms for the trading of over-the-counter derivatives could make it too costly for commercial end users such as agricultural cooperatives to use the financial instruments to balance their business risks.

“Many end users — and even community and farm credit banks that played no part in the financial crisis — could be subject to significant new regulations that were designed for the largest financial institutions,” he said, referring to the law known as Dodd-Frank (PL 111-203).

Lucas, in an appearance at the U.S. Chamber of Commerce Center for Capital Markets Competitiveness, said Congress must update the law to provide guidance to federal financial regulatory agencies. The law targets derivatives because excessive speculation in the market is blamed for contributing to the 2008 U.S. financial crisis.

Lucas accused the Obama administration and supporters of Dodd-Frank of unfairly labeling efforts to slow rulemaking by the CFTC and the Securities and Exchange Commission as attempts to repeal or weaken the law. The House Agriculture and Financial Services committees reported out legislation (HR 1573) in May to give the two agencies an additional 18 months to issue final regulations on derivatives.

The CFTC, which had said it could not meet deadlines in the law, recently, approved extended timelines for finishing regulations.

“I am not here to tell you that we need to repeal Dodd-Frank,” Lucas said. “But I am here to tell you that need to make some changes.”

He noted that former Sen. Christopher J. Dodd, the law’s co-author and the head of the Motion Picture Association of America, has said regulatory efforts could benefit from additional congressional hearings and input from the private sector.

In recent months, there’s been bipartisan concern raised about a proposed regulation that would implement part of the law. The congressional delegation from New York, home to Wall Street, sent a bipartisan letter in May to regulatory agencies citing concerns about a proposed rule the lawmakers said could require U.S. firms to put more money than foreign firms to guarantee their derivative trades. Sen. Charles E. Schumer, D-N.Y., a member of the Senate Banking Committee, led the letter-writing effort.

Lucas said he also worries that proposed rules could put U.S. firms at a competitive disadvantage. He said the CFTC, which falls under his committee’s jurisdiction, should be required to consider financial costs to businesses and the effects on the general economy.

Lucas’s speech followed a July 14 letter that he and K. Michael Conaway, chairman of the Agriculture Subcommittee on General Farm Commodities and Risk Management, sent to CFTC Chairman Gary Gensler proposing eight steps the agency should take “to improve the rule-making process and facilitate a more orderly implementation of Dodd-Frank.”

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