Retiring US lawmaker Barney Frank seeks SEC-CFTC merger

From Reuters
By Sarah N. Lynch
November 30, 2012

U.S. House Democrat Barney Frank is making one final push to revamp the financial regulatory structure with his retirement just weeks away, revisiting an idea to merge two agencies that has had little traction with fellow lawmakers in the past.

On Thursday, Frank and fellow Massachusetts Democrat Michael Capuano introduced a bill that would combine the Securities and Exchange Commission and Commodity Futures Trading Commission, which already overlap in overseeing derivatives and some other kinds of exchange-traded products.

Republican House members earlier this month also suggested such a merger could help to avoid regulatory lapses that contributed to the failure of commodities brokerage MF Global, but congressional turf battles have kept such a measure from advancing…

The Dodd-Frank law made sweeping changes, such as empowering the SEC and CFTC for the first time to regulate over-the-counter derivatives, created a Consumer Financial Protection Bureau, and gave the U.S. government authority to wind down large financial firms that may pose risks to the broader marketplace.

The bill succeeded in doing away with one financial regulator, the Office of Thrift Supervision, which was heavily criticized for its lax oversight of taxpayer-rescued insurer American International Group and failed lender Washington Mutual.

But one thing lawmakers could not agree on was a proposed merger of the CFTC and SEC, in large part because of jurisdictional disagreements between committees overseeing financial services and those responsible for agriculture, the latter having a long history of overseeing the CFTC…

The idea of merging the two financial regulators was broached in a report released this month by the House Financial Services oversight panel, which scrutinized the collapse of futures brokerage MF Global.

The report heaped criticism on the SEC, CFTC and New York Federal Reserve Bank for failing to recognize the growing threat that the firm had become.

The report also scolded the SEC and CFTC for poorly communicating with each other during MF Global’s death spiral. It also called for exploring a merger of the two agencies…

If the bill is passed, it would arguably have the biggest impact on the implementation of the over-the-counter derivatives rules and the funding of the combined agency.

A combined CFTC and SEC would reduce the financial industry’s influence over the committees overseeing financial services and the futures industry, said Cornelius Hurley, a former Federal Reserve lawyer and professor of banking law at Boston University

“One benefit is it takes a small amount of the industry‚Äôs money off the table as there will be fewer politicians to grease,” Hurley said. CFTC Chairman Gary Gensler would make an ideal leader of a combined agency, he said.

“He is a more assertive regulator. He understands the shadow system better than anyone on the scene.”

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