Brady Proposes Removing Some Power From CFTC
Treasury Secretary Nicholas F. Brady on Thursday proposed ending a bitter two-year turf battle over regulating a new breed of equities products by stripping the Commodity Futures Trading Commission of some or all of its power.
“What’s important is that we get something done and get it done now,” said Brady in a speech before the National Newspaper Assn.
His comments added sudden urgency to an issue that until now the Bush Administration has handled with great delicacy.
Brady’s outspokenness will likely propel legislation, viewed as wishful thinking several weeks ago, to hand the Securities and Exchange Commission control of all financial instruments based on stocks, congressional aides said.
“It is clear the CFTC does not have the political support (that) people once thought it had,” said one Senate staffer.
The CFTC claims jurisdiction over any instruments that are like futures contracts.
A federal court in Chicago has given control of new stock index baskets to the CFTC. The baskets resemble both stocks and futures contracts.
The CFTC already controls all futures contracts linked to stocks, which means the SEC has no authority over financial instruments that can cause wild swings in the stock markets it regulates.
Such market volatility increasingly worries politicians.
In his speech, Brady outlined three options: merge the CFTC and SEC into a new super-regulatory agency, shift all financial instruments to the SEC--leaving the CFTC tangible commodities--or hand only stock-index products to the SEC.
Brady stopped short of endorsing any one proposal.
That is the role of a working group, composed of the Federal Reserve Board, Treasury Department, SEC and CFTC, studying the issue. But he stressed that the United States can no longer afford debilitating turf battles.
“Fights between the SEC and CFTC for jurisdiction over newly invented instruments stand in the way of innovation, the lifeblood of our markets’ competitiveness,” Brady said.
Removing barriers to U.S. competitiveness in today’s global marketplace is a favorite theme of the Bush Administration.
Congress was waiting for the presidential working group to forge a solution between the warring agencies. But events now are running ahead of that strategy.
