Wednesday, October 20, 2010

Regulatory Capture? -- A CFTC Administrative Law Judge Accuses

This morning there is a rather amazing article in the Washington Post about a retiring CFTC administrative law judge accusing the one other ALJ of bias against complainants. In a Notice and Order dated September 17, 2010, ALJ George H. Painter recommends that seven reparation cases currently before him not be reassigned to the other CFTC ALJ, Bruce Levine.

Regarding Levine, Painter writes: “On Judge Levine's first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant's favor. A review of his rulings will confirm that he has fulfilled his vow.”

Futures Magazine has posted the document online. It includes as an attachment a December 13, 2000 Wall Street Journal article by reporter Michael Schroeder about charges that Judge Levine was biased against complainants -- “If You've Got a Beef With a Futures Broker, This Judge Isn't for You -- In Eight Years at the CFTC, Levine Has Never Ruled In Favor of an Investor.”  (The Futures Magazine article on this can be found here.)

All this raises some questions. Why did Judge Painter take this long to come forward, or did he do so in the past, but this is the first time his accusation has become public? Why did the CFTC do nothing about the accusations of bias detailed in the WSJ article?

To be fair to the CFTC, ALJ's have some protections and insulation from the heads of the agency they work for, and I am not sure what the CFTC can do. The Commission apparently can seek to have Levine removed at a hearing before another ALJ working for the Merit System Protection Board, but that probably requires a high standard of proof.

In addition to deciding what to do about the seven cases currently assigned to Painter, one assumes the CFTC will determine that it needs to figure out how to restore the credibility of its reparation program.

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