Congressman Barney Frank today released the following statement about the necessity of adequate funding for the Commodity Futures Trading Commission (CFTC). The argument for adequate funding has been strengthened recently by the announcement of a settlement with Barclays Bank over allegations that the bank had manipulated interest rates, and by the revelation that losses at JPMorgan Chase from a series of derivatives transactions may grow to as much as $9 billion.
The persistence of opposition by Congressional Republicans to the sensible regulation of derivatives is a modern example of what was known in earlier times as "invincible ignorance," a theological concept describing people who are impervious to any argument. This mindset is the only possible explanation for the Republicans' continued insistence on reducing funding for the Commodity Futures Trading Commission below even this year's inadequate level; their insistence on pushing to exempt from any American regulation risky, highly-leveraged derivative transactions conducted by American banks -- insured by America's depositor insurance -- through their foreign branches; and their support for industry efforts to drag out the rulemaking process and to bring lawsuits when it is completed.
The CFTC's success in uncovering the outrageous manipulation of the Libor, and the consequent settlement which will bring to the U.S. Treasury hundreds of millions of dollars, demonstrates the value of that agency. The refusal by Republicans to meet the Obama administration's request for $308 million for the CFTC, when the agency has helped bring into the Treasury approximately that amount in one successful prosecution, demonstrates that the party is driven not by concern for the deficit but rather by ideological rigidity.
We recently learned that JPMorgan Chase may lose billions more than previously estimated on its derivative trading in London. The very fact that JPMorgan continually has had to upgrade the amount at issue is reminiscent of the problems with A.I.G., another example of derivatives being traded in London by an American institution. These situations demonstrate that the rules on derivative trading put in place by the 2010 financial reform law are an important protection not just for our economy, but for the institutions themselves. Yet Republicans want such transactions to be immune from any American regulation.
I am optimistic that while the right-wing elements in control of the Republican Party will maintain their "invincible ignorance" despite this further evidence of the importance of sensible regulations, the American people as a whole will understand the danger of weakening oversight of large financial institutions, and that we will succeed in getting adequate funding for the CFTC.