Saturday, July 11, 2009

Two Regulators Better Than One? CFTC/SEC Merger Debate Cont'd

More about merging the S.E.C. and C.F.T.C. in a hearing before two Congressional panels about regulatory changes to the derivatives market. When the Obama administration chose the new chair of the S.E.C., there was speculation that, because she was previously head of the C.F.T.C., she would push to combine the two. Last month, the White House announced its plan to overhaul the nation’s financial regulatory regime, there was no mention of such a move;some lawmakers just can’t seem to let the topic go.

“We should merge the S.E.C. and the Commodities Futures Trading Commission,” Walt Minnick, Democrat from Idaho, said before the House Financial Services Committee and the House Agricultural Committee. “Financial derivatives, whether they originate in a commodity, a security, or neither, like weather futures, are functionally identical and must traded, cleared and settled subject to the same rules. Bifurcated responsibility might be made to work temporarily but is a poor long term solution and discourage bold acting when crises arise.” “Just for clarification, the gentleman spent a lot of time looking at this, but Mr. Frank and I, at least the two of us, have come to the conclusion, that we are not going to be merging the S.E.C. and the C.F.T.C.,” Collin Peterson, Democrat from Minnesota who leads the agricultural committee, said right after Minnick’s remarks.

Widely speculated that a turf war between the two committees has kept the two agencies from merging, Barney Frank, head of the financial services committee, disputed that theory. “I want to begin with an apology to our friends in the media,” he said. “There is no fight to cover between these two committees.”He praised colleagues on both committees, however, he acknowledged that the current system less than ideal.

“I will say that if we were starting from scratch, I don’t think we would have the current organizational structure. But we’re not starting from scratch, and I don’t think it is practical to talk about making major changes.” Hearing’s only witness, Treasury Secretary Geithner, seemed to agree with Frank. When asked about his thoughts, he said the administration was more concerned with “bringing statutes and laws into conformity” rather than merging the agencies.
Summary above courtesy NYT Dealbook where you can also see Video of Geithner speaking about Regulating Derivatives.

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