Ag Policy Blog

The House on Thursday passed a bill to reauthorize the Commodity Futures Trading Commission that is also intended to protect end-users who are market participants.

The vote was 239 to 182, with only seven Democrats voting for it and one Republican against it.

“End-users are the businesses that provide Americans with food, clothing, transportation, electricity, heat, and much more. Yet it is more difficult and more expensive today than it was for them to manage their risks five years ago,” House Agriculture Committee Chairman Mike Conaway, R-Texas, said in a statement. “Some of these challenges are the result of ambiguities and oversights in the text of the Commodity Exchange Act, and some are the result of overzealous rulemakings by the commission itself.”

But House Agriculture Committee ranking member Collin Peterson, D-Minn., opposed the bill, which was also introduced in the last session.

In a floor speech that may give an idea of issues that Democrats will raise in the Senate, where the bill is likely to be different, Peterson said, “The bill went too far last Congress, and it goes too far now. The commission, in my opinion, just needs a simple reauthorization.

“Title II actually makes it more difficult for the commission to function,” he said. “I am also concerned that Title III’s cross-border rulemaking mandate will result in a race to the bottom for multinational banks in the swaps market, which is a global market.

“On top of all that, this bill caps the agency’s yearly budget at $250 million for the next five years, when every single witness before the Agriculture Committee last Congress told us that the agency needs more resources to do its work,” Peterson added. “Maybe that’s the whole point – this bill will lead to the agency doing nothing. That would be a mistake. We tried that once and found ourselves with a real mess.

“Since we last discussed reauthorization, the market situation has changed and the CFTC has addressed many of our concerns through rulemaking. Yet, the Agriculture Committee wasn’t given the chance to consider these issues before the bill was rushed to the floor. So we’re moving forward without regular order,” he concluded.

It should be noted that a similar bill in 2000, the Commodity Futures Modernization Act, deregulated over-the-counter derivatives that eventually helped lead to the 2008 market collapse because of derivatives such as credit-default swaps. Only after the fact did Congress grasp the impact of derivatives market that led to a bailout of Wall Street banks and the 2009 recession.

Senate Agriculture Committee ranking member Debbie Stabenow, D-Mich., said in a news release late Thursday that “the House bill misses the mark by failing to address the commission’s funding shortfall and imposing a woefully inadequate budget cap. The bill also takes direct aim at rolling back important protections required by Wall Street reform, including speculative position limits, a tool that ensures Americans are not paying too much for energy at home or for gas at the pump.”

Stabenow added, “The House bill irresponsibly handcuffs the CFTC with organizational and procedural changes that limit the commission’s ability to quickly and effectively address important market issues, including cyber-attacks and technology glitches. If we are serious about having a financial system that works for Main Street and not just Wall Street, we need a strong, effective cop on the beat. I will continue to work toward a CFTC reauthorization that focuses on these priorities for the American people.”

The Futures Industry Association supported the House bill.

“H.R. 238 contains prudent internal risk controls to safeguard market data and improve customer protections sought by the market participants who rely on derivatives to manage their risks,” FIA President and CEO Walt Lukken wrote. “These are examples of policy enhancements that have garnered tremendous favor in recent years, as evidenced by the bipartisan support they have received in previous congressional sessions.”

DTN Ag Policy Editor Chris Clayton contributed to this report.

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