Tuesday, July 10, 2012

A Brief Note on CFTC Funding and Libor

The Administration has threatened a veto of a bill passed by the House Appropriations Committee on agricultural matters. Among other issues the Administration raises about the legislation, the bill would cut the funding of the Commodity Futures Trading Commission, which for historical reasons is funded under the agricultural appropriation legislation. The bill's consideration by the House has been delayed. The CFTC, which wants increased funding, can point to its role in the Barclays Libor case to highlight why it needs more funds to police adequately the OTC derivatives market. The Financial Times recently published an article quoting an unnamed lobbyist who said that part of the reason the CFTC is not getting the funding it wants has to do with CFTC Chairman Gary Gensler's relationships with some House members. While the article is otherwise generally flattering of Mr. Gensler, at the end it quotes the lobbyist as saying: "My view is the reason that the House keeps cutting his budget is about him [Gensler]… He makes a point to be right and tell them them they're wrong." Given the growing Libor scandal, though, it may be more difficult for Republicans to oppose increased funding for this small agency, but we'll see. It seems to be a current Republican talking point that the Dodd-Frank legislation and associated regulations are costing the economy jobs.

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