WASHINGTON Key House Republicans said the U.S. futures regulator was sacrificing quality for speed as it raced to write dozens of regulations to implement its share of financial reforms.
In a pointed letter, Representatives Frank Lucas and Michael Conaway urged the Commodity Futures Trading Commission to slow down, reorganize its rule-making process, and make sure it knows how much it will cost businesses to comply with its regulations.
"By prioritizing speed over deliberation in writing rules, the CFTC has created an irrational sequence of rule proposals that prevents stakeholders and the public from providing meaningful comments," said Lucas, chairman of the House Agriculture Committee, and Conaway, head of a key subcommittee.
The Agriculture Committee has oversight of the CFTC, and the letter, sent on Wednesday, was a signal that it intends to pay close attention to the details of the system the CFTC is developing to police the over-the-counter derivatives market, worth $600 trillion globally.
The CFTC needs to slow down and make sure it understands how the rules it is writing to police the over-the-counter swaps market will affect businesses, the lawmakers said.
The rules will affect not only banks, which dominate the market, but companies from all sectors that use the derivative contracts to manage their financial risks, they said.
Republicans took control of the House after the November mid-term elections, and said they would try to stall the Dodd-Frank banking reforms.
That law gave the CFTC until July to finish its regulations. The agency has worked furiously to try to meet its deadlines, although it has missed several already.
FUNDING AN UPHILL BATTLE
CFTC Chairman Gary Gensler has said the chronically underfunded agency needs at least a 50 percent hike to its $169 million budget, so it can hire about 400 more people to police its new beat.
He faces an uphill battle getting more money from Republicans bent on cutting government spending and skeptical of the new rules.
"I'm just going to continue to make the case," Gensler told reporters on Wednesday.
An investigative panel on Thursday blamed under-regulation of derivatives for helping accelerate the financial crisis in 2007-2009.
"Short of getting more resources for people and technology, there's going to be numerous unmet challenges," Gensler said.
USER FEES AN OPTION-CHILTON
With its budget currently frozen at 2010 levels, CFTC commissioners have warned lawmakers they could be forced to prioritize which parts of Dodd-Frank derivatives reforms to implement, unless the agency gets more money.
Bart Chilton, a Democratic commissioner at the CFTC, said user fees may be an unpopular but necessary option if lawmakers continue to deny the funding boost.
"If we are faced, however, with the draconian option of no funding to implement the reform bill, putting us directly back where we were in 2007 and 2008, when the economic mess began to show its ugly head, then perhaps some type of user fee is the least onerous remedy," Chilton said in a speech in New York on Wednesday.
"Not having necessary and important market oversight certainly is not the way to go," he said.
Chilton said the CFTC already has some authority to impose fees, and could seek authority from Congress to impose more.
(Editing by John Picinich and Walter Bagley)