GOP tension emerges over SEC, CFTC merger idea

By Peter Schroeder - 11/15/12 05:01 PM ET

Republican lawmakers at the top of Congress's agriculture committees are bristling over a recommendation from their GOP colleagues that would do away with a key financial regulator.

A new report issued by Republicans on the House Financial Services Committee on Thursday suggested that the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) streamline their operations, or potentially be combined into a single agency. The lawmakers behind the report, released Thursday, blasted the two regulators for failing to communicate before the collapse of the futures firm MF Global, previously headed by Jon Corzine.

That suggestion has sent top Republicans on the farming panels rushing to protect their turf, as any potential merging could mean they would lose jurisdiction over the CFTC, with much of the regulatory oversight falling to the banking panels.

"Instead of discussing a hypothetical merger of two longstanding agencies, a better use of everyone's time would be to ask why no one involved with the MF Global bankruptcy, specifically Jon Corzine, has yet to be held accountable," said House Agriculture Committee Chairman Frank Lucas (R-Okla.). "Customers are still waiting on their money to be returned and have no idea if they will ever be made whole."

Sen. Pat Roberts (R-Kan.), the ranking member of the Agriculture Committee, was also quick to knock down the suggestion, choosing to blame Corzine, a former New Jersey governor and senator, first and foremost for a bankruptcy that resulted in roughly $1.6 billion in customer funds going missing.

"It has been clear from the outset that Gov. Corzine was largely responsible for what happened at MF Global," he said in a statement. "I don’t see how merging two regulators who regulate different aspects of our economy would have made any difference in Gov. Corzine’s bad decisions or in preventing such a problem in the future.”

Republican lawmakers behind the report, released Thursday, made no indication they were planning to immediately take up the cause of merging the two regulators. Instead, the idea of combining the two watchdogs was one of a series of recommendations and findings in the 100-page report. Nonetheless, it was clear some GOP lawmakers believe the current arrangement is inefficient at best.

"The apparent inability of these agencies to coordinate their regulatory oversight efforts or to share vital information with one another … compel[s] the subcommittee to recommend that Congress explore whether customers and investors would be better served if the SEC and the CFTC streamline their operations or merge into a single financial regulatory agency," the report stated.

The idea of merging the two regulators is not a new one, and cropped up during the original debate on Wall Street reform that led to the Dodd-Frank financial reform law. The retiring Rep. Barney Frank (D-Mass.), a lead author on the law and the ranking member of the Financial Services Committee, has repeatedly said he would support the change.

However, he has also noted the political challenges surrounding such a change, since the current arrangement allows for both the financial and agriculture communities to have distinct regulators and accompanying oversight.

This post updated at 4:24 pm.