Showdown Over Funding For Oil Speculation Reform Looms as Federal Budget Debate Heats Up
CFTC Chairman Gary Gensler (right) and his counterpart of the SEC Mary Schapiro (left) have asked Congress for additional funding, but will have to endure a political fight to get it. (image: Mark Wilson/Getty Images via money.cnn.com)
Last year’s midterm elections that handed control of the House of Representatives to Republicans set the stage for a political battle over regulating markets to help reign in oil prices. With the 2011 Federal Budget due for approval sometime in the next three weeks, that battle is about to begin.
CNN Money reported on Tuesday that House Republicans’ plan to slash the budget is on track to clash with funding required by financial regulatory agencies to fulfill their obligations under the Dodd-Frank financial reform bill. The reform bill included a directive to the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to create and enforce new rules to stop manipulation and curb volatility in stock and commodities markets. Both agencies would require a boost in funding to undertake the intensive tasks set before them by Dodd-Frank. In the case of the CFTC, more powerful technology and additional staff for data analysis are required to monitor trading activity by the market’s biggest speculators and set the position limits intended to reduce volatility and ease prices. Heating oil dealers and consumers (represented by advocacy groups like the Commodity Markets Oversight Coalition) have for years called for position limits and other market reforms to help limit large speculators’ influence on crude, heating oil, and other commodity prices.
Many Republicans opposed the Dodd-Frank bill before its passage and objected specifically to tighter market oversight as excessive restriction of free market activities that could drive traders to other world markets. Following a similar strategy that party leadership has already applied to the health care reform law, some Republicans now appear intent on stopping the CFTC and SEC’s market reform efforts before they start by slashing their funding. The most recent Republican budget proposal cuts the CFTC’s 2011 funding by $56.8 million, nearly a third of the agency’s current budget. If passed, the major funding cut would come after Gensler requested additional funding from Congress this year to take on the broad powers granted by Dodd-Frank. Faced with this serious cut, CFTC Chairman Gary Gensler made clear how it would affect his agency’s mission:
We’d have to have significant curtailment of our staff and resources. We would not be able to police … or ensure transparent markets in futures or swaps.
With its progress toward creating and implementing speculation rules already behind schedule, the budget showdown threatens to be the final nail in the coffin of the CFTC’s efforts to reign in market manipulation and ease oil prices this decade.
