U.S. Senator Durbin Wonders Whether Smaller Budget Can Satisfy the Commodity Futures Trading Commission’s Urgent Needs

At a hearing discussing the budgetary needs of the Commodity Futures Trading Commission, Senator Richard Durbin voiced concerns that President Bush’s 2008 budget request for the CFTC would not be enough to meet the regulatory agency’s key needs to allow it to function effectively. Durbin, the chairman of the Senate Appropriations Financial Services and General Government Subcommittee, also said that he was worried that staffing problems and older computer systems at the CFTC could negatively affect is ability to supervise the surging derivates industry.

At the hearing, Durbin addressed CFTC Chairman Richard Jeffrey, telling him that he had observed agency’s problems with developing technology to keep up with market changes and its struggles with staffing levels. Durbin said that he believed the agency needed the right tools to enforce the laws.

Jeffrey has complained that agency’s staff size had dropped over the past several years and its computers had become out of date, even as trade volume has increased. He said the $116 million request by President Bush-18 million more than what Congress had allotted to the agency for fiscal year 2007-would help “modestly increase our capabilities in certain areas,” but that this amount of financial support needed to be seen as a beginning, not the end attempt, to addressing certain problems the agency had been experiencing.

Jeffrey attributed employee retirement, attrition, and paying for pay parity as reasons for the staff decrease. The CFTC is required to pay staff the same as other federal financial oversight agencies but is now only paying 70-75% of what peer agencies pay their staffers. He also pointed out that the agency’s trade practices and market oversight-two of three critical surveillance technology systems-could become “antiquated.” He said that $17 million of the budget request will be allotted to technology upgrades, but that this would not be enough to modernize current systems.

CFTC figures say that the agency had 546 staffers overseeing trading volume of 500 million contracts each year in 2000. The volume had grown five times in 2006 to about 2.5 billion contracts ($5 trillion in trading each day) but staffing levels had decreased to 498. Staffing is expected to decrease further in 2007, while contract volume is expected to grow to $3 billion.

Durbin pointed out that although CFTC staffing levels continued to go down in the last 10 years, the number of employees at the SEC had grown by more than 70% during the same time period.

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Related Web Resources:

Concern grows over budget for CFTC regulation, MSNBC.com, March 11, 2007
Commodity Futures Trading Commission