U.S. House Passes Bill to Cut Funding for Derivatives Regulator

The budget of the Commodity Futures Trading Commission would be cut by 15 percent, or $30 million, under a measure passed by the U.S. House.

The Republican spending bill approved today would reduce the agency’s budget to $172 million from its current level of $202 million. The CFTC is responsible for writing most of the new rules to govern derivatives trades made by banks including Goldman Sachs Group Inc. (GS) and Morgan Stanley. (MS)

“I understand that those in the Big Government circles of Washington love more regulations, more government growth, but to say to the taxpayers that funding CFTC at a higher, unprecedented level is going to avoid the need for bailouts is ridiculous,” Representative Jack Kingston of Georgia, the chairman of the Appropriations subcommittee on agriculture said June 14 on the House floor.

The budget measure passed by a party-line vote of 217-203.

Representative Scott Garrett, a New Jersey Republican, successfully attached an amendment to delay for at least a year rules governing how large trades would be transacted in the swaps market.

The amendment is designed to require regulators to have rules for data collection in place for at least a year before the CFTC can complete regulations for large, so-called block trades.

“I do this because numerous market participants of all shapes and sizes have sent to us public comment letters warning of the dangers of getting block trades and real-time rules wrong,” Garrett said on the House floor.

Dodd-Frank

The CFTC and Securities and Exchange Commission are writing regulations, mandated by the Dodd-Frank Act, for the $601 trillion swaps market after largely unregulated transactions helped fuel the 2008 credit crisis. The CFTC voted June 14 to propose a delay of many rules until as late as the end of 2011 in order to complete its duties under the law.

The cuts to the agency’s funding would “significantly curtail the timely, effective implementation” of the new derivatives rules, the Obama administration said in a statement.

“The bill’s funding level basically takes the cops off the beat,” Representative Marcy Kaptur, an Ohio Democrat, said. “It takes the watchdogs away and one might say, the bill gives a green light for Wall Street to harm America again.”

To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net; Silla Brush in Washington at sbrush@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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