June 7, 2017
Three Concerns About Acting CFTC Chair Giancarlo’s June 8 Testimony
Statement of Tyson Slocum, Director of Public Citizen’s Energy Program and Member of the CFTC’s Energy and Environmental Markets Advisory Committee
The June 8 congressional testimony of Acting Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo offers the first opportunity for members of the U.S. House of Representatives to ask questions of the acting chair on his leadership of the commission. Among its duties, the CFTC regulates markets to ensure that derivatives trading does not harm consumers; that banks, hedge funds, energy companies and other traders do not engage in market manipulation; and that derivatives do not pose systemic risk threats to the market. Giancarlo’s written testimony submitted in advance of the hearing raises at least three concerns from the perspective of consumer protection, and members of Congress should ask him to clarify his position on these issues:
• Giancarlo writes that “the CFTC should look to delegate” some of its regulatory “responsibility” to various private, for-profit corporations, such as CME Group and ICE. Delegating federal law enforcement and regulatory duties to companies is inappropriate, places consumers and the markets at risk, and creates significant financial conflict-of-interest concerns. Faith in Wall Street regulating itself is what led to the 2008 financial crash in the first place. We cannot allow our country to pay the price because Giancarlo is unwilling to effectively regulate Wall Street.
• Giancarlo writes: “The overly prescriptive regulation of American derivative markets is part and parcel of the over-regulation of the U.S. economy that thwarts the revival of American prosperity.” This statement is patently false. Unregulated derivatives were a cause of the world’s worst economic meltdown in 2008. Regulation of derivatives is essential to protect consumers and save the economy from systemic risk failures caused by unregulated over-the-counter derivatives. It is dangerous to the health of the economy and the protection of consumers for one of America’s top market regulators to blame regulation for the economy’s ills, when deregulation was a primary culprit.
• Giancarlo proposes that the CFTC serve a diminished market policy role when he proposes that the commission “defer to the civil and criminal capabilities of other federal and state regulators and enforcement agencies.” In many instances, the CFTC’s enforcement of the Commodity Exchange Act serves as the most effective and important protection for consumers and tool to prosecute market manipulation. Given Giancarlo’s admission that elements of CFTC-jurisdictional markets have increased in their “complexity,” the acting chairman should be promoting a greater enforcement role for the CFTC, not a reduced one.