House Republicans accuse CFTC of putting politics ahead of mission

By Peter Schroeder - 10/10/12 05:20 PM ET

Four of the highest-ranking Republicans on the House Financial Services Committee are concerned the Commodity Futures Trading Commission (CFTC) is spending its time and money in pursuit of "ideological and political goals" instead of fulfilling the agency's mission.

In a letter sent to CFTC Chairman Gary Gensler, the lawmakers suggested the financial regulator has spent its time since the Dodd-Frank Wall Street reform law was enacted tackling problems not central to the financial crisis, nor to the agency's mission or Congress's intent.

The letter was signed by House Financial Services Committee Chairman Spencer Bachus (Ala.), Vice Chairman Jeb Hensarling (Texas) and two subcommittee chairs, Reps. Scott Garrett (N.J.) and Randy Neugebauer (Texas). Hensarling is widely believed to be the next head of the committee in 2013, after Bachus hits his term limit at the position.

The quartet keys in on a recent court decision that blocked the CFTC from implementing rules aimed at curbing speculation in the derivatives marketplace. The CFTC rules would have set a limit on the number of positions a firm could hold in particular commodities. The regulator argued setting those limits would help prevent Wall Street firms from speculating on a financial tool initially intended to help companies guard against financial fluctuations, but faced fierce pushback, and a legal challenge, from financial industry groups.

The judge hearing that case pushed the rules back to the CFTC, after he determined the regulator failed to determine if the rules were necessary before writing them. The CFTC is mulling an appeal.

The Republican lawmakers saw that court case as an indication the agency was diverting valuable resources to efforts they believe are unnecessary, taking away from its core mission.

The regulator's "inability to adhere to the law" was evident in the loss in court, they argued.

"We are very concerned, in the wake of the financial crisis, that CFTC staff are using limited resources to pursue ideological and political goals rather than using the resources allocated by Congress to carry out the direct requirements of the agency," they wrote.

Gensler has maintained the regulator is trying to implement Dodd-Frank by establishing position limits in a bid to curb speculation. After the court ruling, he called the rules "critically important."

The letter also continues an ongoing battle between House Republicans and the CFTC over the agency's budget. The president's fiscal 2013 budget request included a substantial boost to the CFTC's funds, to allow it to handle its increased workload after Dodd-Frank. But Republicans controlling the House have actually sought to trim the CFTC's budget from existing levels.

The lawmakers behind the letter accused the CFTC of "serious mismanagement" of its existing funds in pursuing such rules and defending them in court. They asked for details on how much staff time was spent drafting and defending the position limit rules.