Wednesday, June 10, 2009

SEC - CFTC Merger Nixed

Though there has been much talk of merging the Securities and Exchange Commission and the Commodities Futures Trading Commission, CNN,  the Washington Post, and other sources are reporting that President Obama has decided to keep them separate agencies, while allowing their regulatory duties to overlap.  Though many experts believe that consolidating the SEC and CFTC would be more efficient and produce better oversight, combining the agencies would have, in the words of CNN reporter Jennifer Liberto, "created a power struggle between their congressional overseers, pitting farm state lawmakers who speak the language of pork bellies and corn bushels against East Coast senators who talk stocks and bonds."  The SEC is overseen by the House Financial Services Committee and the Senate Banking Committee, while the CFTC is overseen by the House and Senate agricultural committees.  These powerful committees would likely put up a fight against the merger of the two agencies, particularly the agricultural committees whose members would stand to lose power and campaign contributions. 

SEC Commissioner Mary Schapiro told Congress last week that she favors merging the two agencies, "there is a logic and an efficiency that can be achieved through the merger of the two agencies."  Though it seems now that regulatory reform of the markets will not contain such a merger, it is certain that the authority of the two agencies will be expanded to cover the kinds of unregulated derivatives and complex securities that have figured so prominently in the recent market downturn.