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Acting U.S. CFTC head pleads with Congress for more money

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(GlobalPost/GlobalPost)

By Sarah N. Lynch

WASHINGTON (Reuters) - The acting head of the U.S. derivatives regulator pleaded with federal lawmakers on Thursday to give his agency more funding, saying a tight pocketbook has prevented staff from completing compliance exams and threatened to hobble enforcement.

"I do not intend the testimony that follows to sound alarmist... but I do want to be sure that Congress, and this committee in particular, have a clear picture of the potential risks posed by the continued state of funding for the agency," said Mark Wetjen, the normally mild-mannered acting head of the Commodity Futures Trading Commission, in prepared remarks before a House of Representatives appropriations panel.

"When not overseen properly, irregularities in these markets...can severely and negatively impact the economy as a whole and cause dramatic losses for individual participants. The stakes, therefore, are high."

Wetjen's testimony comes just two days after the White House unveiled its budget request for fiscal year 2015, which begins October 1.

The Obama administration proposed spending $280 million for the CFTC, which is more than its current $215 million budget, but considerably less than the $315 million the White House had sought last year.

The CFTC in 2010 won broad new powers from Congress to police the over-the-counter derivatives market, which broadened its oversight beyond just futures and options.

It is now the leading regulator in charge of inspecting and enforcing regulations for numerous swap dealers, clearinghouses, and swap trading platforms.

The president's budget is not expected to be enacted, and is only considered a political wish list.

The Republican-controlled House is expected to unveil its own more conservative budget later this year. The Democrat-controlled Senate, meanwhile, has said it has no plans to pass a budget this year.

That's because the House and Senate already struck a two-year budget deal in December to cover 2014 and 2015 budget levels.

Nevertheless, Wetjen urged the Republican-controlled appropriations panel to strongly consider the boost.

The CFTC over the last few years has faced a series of high-profile failures of firms it regulated, from MF Global's collapse to the 20-year fraud perpetrated by the now-jailed founder of Peregrine Financial Group.

Since then, the CFTC has worked to conduct risk-based examinations of futures brokerages to ensure customer money is safe.

Wetjen told lawmakers Thursday that because of budget constraints, the agency has been unable to meet its targets.

"The reality is that the agency has fallen far short of performance goals for its examinations activities, and it will continue to do so in the absence of additional funding from Congress," he said.

"The Commission failed to meet performance targets for system safeguard examinations and for conducting direct examinations" of futures brokerages and intermediaries, he added.

He also warned that the CFTC might be forced to scale back its enforcement efforts against law-breakers at a time when it has been bringing some of the largest cases in its history against banks accused of manipulating the Libor interest rate.

"It is not clear that we could maintain the current volume and types of cases, as well as ensure timely responses to market events," he said.

(Reporting by Sarah N. Lynch; Editing by Meredith Mazzilli)

http://www.globalpost.com/dispatch/news/thomson-reuters/140306/acting-us-cftc-head-pleads-congress-more-money