Two weeks ago we wrote about the growing call for an SEC-CFTC merger from both sides of the aisle (find the story here). Now, Barney Frank is making one last push for the merger before his upcoming retirement.
Barney Frank Spies Opportunity
It may be true that merger talks have gone nowhere in the past, but the last two weeks have seen the opening of a small pathway. After Obama’s election, House Republicans, looking for new ways to criticize government waste, issued a report criticizing the rift between the SEC and CFTC. The report cites a communication failure between two agencies during the months leading to MF Global’s bankruptcy. Apparently, the SEC left the CFTC in the lurch about the firm’s troubles. It wasn’t until August 25 that the CFTC became involved, when MF Global reported a “capital deficiency.” Likewise, the CFTC failed to notify the SEC about the method used by MF Global to calculate its obligation to customers.
Their recommendation was to merge the the SEC and CFTC
“We didn’t need additional regulation. We needed regulators actually doing their job,” said Representative Randy Neugebauer, chairman of the oversight panel.
From the NY Times
A day earlier, though, Jesse Eisinger of the NYT’s Dealbook made the same argument from the opposite perspective. In order for Obama’s regulatory maneuvers to work, Eisinger insisted, the two agencies must be merged with increased funding.
The structural issues go deeper. The Commodity Futures Trading Commission and the Securities and Exchange Commission still exist as two separate agencies, a huge missed opportunity for Dodd-Frank and one borne of politics. The C.F.T.C. is protected (and bashed) by the Senate Agriculture Committee, the S.E.C. by the Senate Banking Committee. Merging the agencies would mean that one of those committees would lose power, so forget about that. Gary Gensler, the head of the commodities commission, has been tough, but has been limited by his agency’s paltry resources. And, anyway, these agencies are still run by commissions, not single heads, and they rely on Congress for their financing. It’s little surprise that such a structure creates plodding impotence.
Eisinger knows that such a merger would give a GOP controlled Congress – or any Congress, for that matter – less control over funding for the super-agency that would result.
So did the GOP. Hours after the report was issued, GOP members, especially those on committees with ties to agriculture, scrambled to speak out against the merger.
Barney Frank Takes Advantage
Frank stepped in almost immediately, suggesting that the concerns of House Republicans who opposed the merger are more cultural than financial or economic.
“The agriculture people get suspicious,” said Frank. “It’s a very illogical thing and it should be just one body.”
Yesterday, Frank and Massachusetts Democrat Michael Capuano made good on a promise to introduce a bill that would combine the Securities and Exchange Commission and the Commodity Futures Trading Commission.
“The existence of a separate SEC and CFTC is the single largest structural defect in our regulatory system,” Barney Frank said in a statement.