Friday, September 13, 2013

A Refreshing Admission from a CFTC Commissioner

Frank Pasquale

CFTC Commissioner Bart Chilton knows how to give a speech. Moreover, the substance is just as good as the style. Breaking from DC norms of decorum, he's willing to say that his agency has nowhere near the resources it needs to regulate markets:
There are more and more violations of the law occurring, and we aren’t equipped to deal. [B]ad norms in the financial sector seem to be commonplace. A recent study queried 250 financial service industry insiders and 23 percent said they had “observed or had firsthand knowledge of wrongdoing in the workplace.” ... To make matters worse, while enforcement officials are working hard ..., the resources don’t exist to keep pace. Enforcement efforts are under-funded. Congress hasn’t done its job of providing needed funds to ensure that those who do the crime do the time.
If Congress isn’t going to fund these efforts, here are two requests for what they can do: 1) Allow the CFTC to collect a transaction fee from speculators using commodity markets (both futures and swaps). 2) We have an out-of-date penalty regime. We can only fine ... $140,000 per violation. Congress should increase the penalty to $1 million per violation for individuals ... and $10 million for firms. Such penalties would serve as a needed deterrent.
Without reforms like these, we will continue to suffer from Potemkin financial regulation. Real enforcement demands a real budget---or the type of deputization HHS's anti-fraud teams now deploy. And let's hope the FTC is listening, too. Otherwise we're stuck with regulators on the bus, biding their time till they can make for the revolving door.