By Brandon Moseley
Alabama Political Reporter
Senator Richard Shelby (R) issued a written statement critical of the U.S. Commodities Futures Trading Commission (CFTC) and its Chairman Gary Gensler. Sen. Shelby’s remarks were made at a hearing of the Committee on Banking, Housing and Urban Affairs discussing derivatives reform. The senior Senator from Alabama is the ranking Republican member of the Senate Committee on Banking, Housing and Urban Affairs.
Sen. Shelby said, “As the American economy continues to struggle with high unemployment, sluggish growth and the fallout from the ongoing European crisis, the last thing we need are self-inflicted wounds. This includes those inflicted by Congress, regulators and, most recently, poorly conceived trading and hedging activities in one of our largest banks.” “Just last year, Chairman Gary Gensler oversaw the largest consumer protection failure in the history of the CFTC. Under Chairman Gensler’s watch, customers of MF Global had 1.6 billion dollars of funds improperly taken from their accounts.”
Sen. Shelby continued, ““The first and most basic responsibility of the CFTC is to ensure that customer funds are not misappropriated. Yet, despite all the new authorities conferred on the CFTC by Dodd-Frank, the CFTC was still unable to fulfill this primary responsibility to MF Global customers.” “The CFTC’s failure is especially troubling because the funds went missing during a time when it was well known that the firm was under severe financial stress and the risk of misappropriation was very high. Even more embarrassing for the CFTC is the fact that there were numerous CFTC officials onsite at the firm when the funds went missing.”
Sen. Shelby said, “The public deserves more from their financial regulators. We need regulators who are willing to explain their actions, rather than run for the hills. If there were regulatory failures, the responsible parties need to be held accountable for their actions. Chairman Gensler’s recusal has impeded Congress’s ability to examine every facet of the MF Global failure. I hope that today Chairman Gensler will be more forthcoming about his involvement with MF Global, so that Congress can finally begin to understand what role he played and how Congress should respond.”
Shelby said, “I also hope that Chairman Gensler will be more forthcoming about his management of the CFTC’s implementation of Dodd-Frank. Chairman Gary Gensler and SEC Chairman Mary Schapiro have jointly created widespread uncertainty about the regulation of derivatives.” “According to a recent report, regulators have met only one-third of their Dodd-Frank rule-making deadlines.” “Since the passage of the Dodd-Frank Act, its proponents have repeatedly claimed that both consumers and our financial markets will benefit from the new law. We now know that both of these claims are false.”
The CFTC was created in 1974 to regulate the futures market. At the time, most futures contracts involved agricultural commodities like corn, wheat, soybeans, pork bellies, and cattle futures. Since then that has expanded to gold, silver, oil, etc futures as well as options and foreign options. The Futures Trading Act of 1982, gave the CFTC jurisdiction over broad-based stock index futures and banned single-stock and narrow-based stock index futures. Later the CFTC gained authority to regulate derivatives. The derivative market played a large role in the 2008-2009 market meltdown which led to the Great Recession which our economy is still recovering from.
To read Senator Shelby’s statement in its entirety: