CFTC Commissioner Bart Chilton spoke before the Society of American Business Editors and Writers in New York City earlier this month. Apparently inspired by American singer-song writer Bruce Springsteen, Chilton discussed—through Springsteen song titles– some of the causes of the financial crises of 2008, what the CFTC and the government has to do to prevent a second occurrence, and what he feels needs to happen in the future.
Chilton says a main reason for the 2008 crash was the years of deregulation of the market that had occurred before hand, allowing institutions to make enormous and complicated trades that very few people actually understood. Chilton also placed blame on the removal of the Glass-Steagall Act, which allowed banks to make proprietary trades, leading to many of them betting against their own customers.
Chilton then goes on to talk about the CFTC and the Dodd-Frank Act, and how these new regulations have created a more transparent, safer market. He did however express concern with the Volker Rule, stating that in its current form, there are loopholes that will allow for banks to continue engaging in proprietary trading. Chilton also discusses his desire to significantly limit the banks power to own commodities, saying they have the potential to control markets by manipulating supply and demand.
Interestingly, Chilton goes on to explain that despite his criticisms, he is in fact a fan of the banks, saying that they fuel the economy, and thus, the democracy of the U.S. However, he seems rather disheartened over the amount of scandal within the banks, citing the now fourth major settlement over manipulation of the Libor rate.
In closing, Chilton mentions that the fines the CFTC enforces on these large institutions simply isn’t enough to discourage their behavior. Not even having to admit to any wrongdoing, these institutions can simply pay fines and chalk it up to the price of doing business. Chilton hopes to force an admission of guilt with settlements in the future, and urges reporters to continue to talk about these scandals, as he feels that forcing them to be accountable for their actions may be the only viable way of discouraging risky behavior.
The Full transcript can be read at CFTC.gov.