Bloomberg News

Obama Said to Trim Budget Request for Struggling Swaps Regulator

March 01, 2014

President Barack Obama is set to seek a $280 million budget for the U.S. Commodity Futures Trading Commission that, while more than the commission currently gets, is lower than his previous request for an agency that has said it lacks the resources to fully oversee markets, according to people with knowledge of the matter.

Obama’s request for the fiscal year beginning Oct. 1, a cut of more than 10 percent from the $315 million he sought in his previous proposal, would be a 30 percent increase from the current level of $215 million for the derivatives regulator, according to the people, who asked for anonymity because the budget request won’t be unveiled until March 4.

The White House will also call for user fees on the industry to fund the CFTC, according to an administration official. Congress has not advanced a proposal in recent years for such fees on futures, swaps and other derivatives amid opposition from some parts of the financial industry, including CME Group (CME:US) Inc. The CFTC request could still be changed before the budget is released.

The CFTC, which regulates derivatives trading by firms including Goldman Sachs Group (GS:US) Inc. and JPMorgan Chase (JPM:US) & Co., has warned during the past three years that it lacks the funding to fully oversee markets blamed for fueling the 2008 credit crisis. The agency has put in place more than 60 rules required by the 2010 Dodd-Frank Act to help oversee the $693 trillion global swaps market.

‘Resource-Constrained’

“We are resource-constrained at the CFTC,” Mark P. Wetjen, the agency’s acting chairman, said Feb. 5 at a House Financial Services Committee hearing. “We do need additional staff. We need additional technology investments to help decipher and make sense of the data that has been coming in for a number of years.”

White House spokesman Josh Earnest said on Feb. 20 that the president’s broader budget request will abide by the spending levels in a two-year budget agreement negotiated late last year by Representative Paul Ryan, a Wisconsin Republican and chairman of the House Budget Committee, and his Senate counterpart, Patty Murray, a Washington Democrat.

While requesting less for the CFTC than it did last year, the White House proposal represents an effort to stay within the budget agreement even as it raises the agency’s spending from the current level, the administration official said.

Regulatory Overreach

The CFTC and Obama administration have largely struggled over the past three years to persuade congressional lawmakers to increase the agency’s funding in line with the president’s requests. House Republicans have opposed large increases in the agency’s budget, citing failures during the collapse of MF Global Holdings Ltd. as well as broader desires to rein in regulatory overreach and government deficits.

To help close budget gaps last year, the CFTC had to furlough employees. The agency needed an emergency infusion of funds in January just to keep its doors open, four people with familiar with the matter said at the time.

The escalating budget crisis has spurred unrest within the 700-person agency and hampered its work, the people said. More than a dozen senior employees, many complaining of low pay, have quit for jobs on Wall Street or at law firms. Others at the CFTC’s Washington headquarters have discussed joining a labor union, said the people, who asked not to be identified because the friction isn’t public.

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net


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Companies Mentioned

  • CME
    (CME Group Inc/IL)
    • $76.75 USD
    • 0.20
    • 0.26%
  • GS
    (Goldman Sachs Group Inc/The)
    • $179.77 USD
    • 0.66
    • 0.37%
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