Senate ag leaders defend CFTC
Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., and Sen. John Boozman, R-Ark., on Wednesday defended the Commodity Futures Trading Commission at an oversight hearing. Both said the CFTC needs resources, but Boozman said they must not come from user fees.
In an opening statement, Stabenow noted that the last time the committee held a general CFTC oversight hearing was February 2018, when the agency was finalizing rules in response to the 2008 financial crisis.
Stabenow continued, “We have recently heard criticism that the CFTC is too small and does not have the resources to take on additional responsibilities as commodity markets evolve. I reject this thinking. The CFTC’s mission is too important.”
But Stabenow also noted that, while it’s the CFTC’s job to play its traditional role of protecting agricultural producers from abuse, the agency faces new challenges.
“Crypto assets promise everyday Americans an easy way to speculate in financial markets, but in reality, they are volatile and riddled with fraud, as we have seen,” Stabenow said. “The massive customer losses caused by this misconduct highlight exactly why we need federal oversight of the crypto industry, and I remain committed to working with my colleagues to hold crypto companies to the same rules as traditional financial firms.”
In his opening statement, Boozman said, “Through a pragmatic, principles-based approach, the CFTC has built and implemented constructive, workable regulatory frameworks for markets to function efficiently. One needs to look no further than to the futures market, which has proven to be the gold standard and one of the more resilient markets in times of market stress, largely due to the CFTC’s regulatory framework. We witnessed this during the pandemic — producers hedging their risk weathered market volatility and emerged relatively unscathed. The CFTC was the cop on the beat, monitoring the futures markets to ensure that even in times of unprecedented disruption, end users’ positions were safe.”
Boozman also said that “the CFTC deserves adequate funding in order to effectively regulate, and I am committed to that goal. However, increased funding must not come from user fees.
“User fees are passed down to agriculture end-users, and may cause market participants to exit markets, which reduces the liquidity necessary for farmers to hedge against pricing risk. Given the volatility of commodity markets, Congress should not impose another burden on agriculture’s ability to manage risk.”
Boozman added, “I am confident the CFTC is suitable for an expanded role in regulating the digital commodity spot market. I am committed to working with Chairwoman Stabenow and our colleagues to create the safeguards the market needs.”
In a seven-page testimony, CFTC Chairman Rostin Behnam pointed out that it has been almost 13 years since the Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the CFTC’s authority to resolutely address the weaknesses in the global regulatory system, and it has been roughly 10 years since the CFTC’s authorization expired.
The developments of the last decade “more than warrant a close look at the Commodity Exchange Act to determine whether and which additional authorities, guidelines, and resources will guarantee the CFTC remains the global standard of derivatives regulation,” Behnam said. “In addition, key programs and offices at the CFTC need to be supported and modernized, and these too would benefit from consideration of legislative amendments.”