Last week, it was widely reported that the Obama administration will unveil its plan for reforming financial regulation during the week of June 17. One of the really common sense proposals that’s been mentioned is merging the Securities and Exchange Commission (SEC) with the Commodity Futures Trading Commission (CFTC).
The two agencies have begun stepping on each other’s toes in recent years, as more and more companies started using derivatives — financial instruments used to mitigate economic risks. Once confined to the agricultural world (and thus regulated by the CFTC), they now fuel business for banks (regulated by the SEC) to the tune of hundreds of trillions of dollars. (See chart after the jump.)
SEC member Elisse Walter said that the two agencies have become “increasingly indistinguishable,” while SEC Chairman Mary Schapiro said that she believes “logic and efficiency” can be achieved with a merger. And yet, the Obama administration is reportedly scuttling a merger plan.
Why? Because congressional members of the agriculture committees (which have jurisdiction over the CFTC) don’t want to lose out on the money that they receive from banking interests. CNN Money reports:
Most veteran congressional watchers say a merger would give the banking committees more power, while the agricultural committees would lose power. The agricultural panels don’t like that idea much…In addition, lawmakers who lose jurisdiction over the CFTC could lose lucrative campaign contributions from banks and investment firms.
“Lucrative” is indeed the word to use, considering that “during the 2008 election cycle, House agricultural committee members collected $8.6 million and Senate agricultural committee members collected $28.4 million from the financial services sector.”
CFTC Chairman Gary Gensler has also come out against a merger, even though the CFTC, by its own admission, was created to deal with trading in the agricultural sector. It makes very little sense for the CFTC to be regulating the instruments wielded by Wall Street behemoths. Effectively reforming financial regulation is going to be a difficult nut to crack as it is, and this kind of inter-committee and inter-agency sparring seems to play to the advantage of the industries that are looking to blunt the regulatory push.
Source: Congressional Quarterly