Cohen of Bloomberg News Blasts Rep. Kingston Over CFTC Cuts

December 3, 2011

William D. Cohen of Bloomberg News wrote a scathing op-ed piece earlier this week, lambasting what he described as the “stealthy efforts” of Congressman Jack Kingston to limit funding to the Commodity Futures Trading Commission (“CFTC”).  Rep. Kingston, a Republican from Georgia and influential member of the House Appropriations Committee, has successfully locked the CFTC’s 2012 budget at $205 million, despite President Obama’s call for over $100 million in increased funding to the CFTC.

This push for increased funding is justified by the extraordinary new pressures placed on the CFTC by the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), which prompted the CFTC to approve 18 new rules, proposed an additional 55, and has another 30 or so yet to write.  The new rules include ones governing the CFTC’s new whistleblower program, which, like the SEC program created by Dodd-Frank, mandates that the CFTC pay substantial monetary awards to whistleblowers who provide the Commission with tips regarding violations of commodity-futures trading regulations.

Instead of being able to hire new staff to accommodate this significant increase in responsibilities and oversight, the agency is being stretched even thinner – indeed, due to Kingston’s micromanagement, the CFTC will have less money to fund its non-IT operations than it did in 2010.  Cohen writes that as a result of what is in effect a budget shortfall, close to eight percent of the staff could lose their jobs.  This means that the agency must must do much more with less, and this in a sector that has already seen the devastating consequences resulting from failures of oversight.  Representative Barney Frank described this as a “terrible act of irresponsibility,” and equated it to “disarming America.”

Later in the article, Cohen, a former investment banker and the author of Money and Power: How Goldman Sachs Came to Rule the World, laid his cards on the table.  “Kingston’s power play makes no sense if he and fellow Republicans are of the mind to help the American people by bringing a modicum of transparency to the complex swaps and derivatives market,” said Cohen.  “On the other hand, their behavior makes perfect sense if they don’t want any ‘rules of the road’ in the financial market and have no interest in creating any traffic lights on the financial superhighway.”

We agree with Mr. Cohen.   The Dodd-Frank Act gave the CFTC the power to reward and protect whistleblowers.  Just a few months ago the Commission adopted new whistleblower rules modeled after the SEC whistleblower rules, granting monetary rewards and powerful protections to employee-whistleblowers.  It is important that the CFTC have a budget with which to actually put these new rules into effect.  Whistleblowers will come forward only to the extent the government is willing to reward them and protect them.  When Congress under-funds an agency like the CFTC, it makes it easier for dishonest companies to engage in illegal practices that harm their employees and the American people.

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