Paul Wallison Dissent to the FCIC Report

Peter Wallison dissented from the majority report of the Financial Crisis Inquiry Commission.  A copy of the dissent is linked here.  The Summary section begins with this statement:  “In this report I note that, although there were many contributing factors, the housing bubble of 1997-2007 would not have reached its dizzying heights or lasted as long, nor would the financial crisis of 2008 have ensued, but for the role played by the housing policies of the U.S. government over the course of two administrations.”   The following topics, among others, are covered:

• Pg 1: Why a dissent?
• Pg 11: Government policies that caused the crisis
• Pg 15: The 1997-2007 housing bubble; its causes and effects
• Pg 28: The cigarette butt and the gasoline truck
• Pg 31: How 27 million subprime and other risky loans brought down the financial system
• Pg 47: HUD’s role
• Pg 50: The decline of mortgage underwriting standards
• Pg 93: Policy implications

CFTC Update

Commodity Futures Trading Commission’s Technology Advisory Committee Meeting Postponed
Wed, 26 Jan 2011 11:31:00 -0600

The Commodity Futures Trading Commission’s Technology Advisory Committee Meeting scheduled for Thursday, January 27, 2011, has been postponed.

U.S. Chamber Responds to Release of Financial Crisis Inquiry Commission Report

See below, the release of the Chamber’s response to the Financial Crisis Inquiry Commission final report on the causes of the financial crisis. The main concerns with the report are articulated below in statements by David Hirschmann and Lisa Rickard.  To view the final report, you can click here.

Three members of the Commission, Bill Thomas, Keith Hennessey, and Douglas Holtz-Eakin; have put out a statement of dissent articulating why they cannot support the findings in the final report. To read their piece in the Wall Street Journal, click here.

CMC wants US CFTC to slow down Dodd-Frank rulemaking

Washington (Platts)–14Jan2011

The Commodity Markets Council claims the US Commodity Futures Trading Commission is running through its financial regulatory reform rulemaking at a pace that industry cannot keep up with and using reform as an excuse to implement new rules outside the scope intended by law.

In a letter Friday to US Representative Darrell Issa, a California Republican and chairman of the House Committee on Oversight and Government Reform, CMC President Christine Cochran wrote that while it is difficult to quantify the impact of financial reform, the CFTC is moving too fast to implement the mandates under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Cochran wrote that CMC “is concerned that the adoption of unnecessary rules or the adoption of rules without sufficient deliberation will result in policies that hamper market efficiency, tie up capital and constrain job growth.”

The letter was in response to a letter Issa sent out last month to more than 150 companies, trade groups and research organizations seeking input on government regulations that were negatively impacting US business.

Issa is one of the four co-sponsors of legislation US Representative Michele Bachmann introduced on January 5 to repeal Dodd-Frank, which requires, among other mandates, the CFTC to regulate the over-the-counter derivatives market.

In their letter, however, CMC wrote that the timeframe for the CFTC to implement these reforms “is so tight, the quantity of rules so large and the subject matter so complex, the industry is simply overwhelmed.”

“With this kind of volume and speed, the industry and the regulatory agency are so overwhelmed and simply not capable of providing the thoughtful comments the CFTC needs to implement sound public policy,” CMC wrote.

CMC also claimed the CFTC is using the rulemaking process to implement regulations that are “overly prescriptive” and go beyond Dodd-Frank requirements and pointed to the imposition of position limits in commodity and swaps markets without evidence proving their necessary.

CMC accused the CFTC of using the rulemaking “as an opportunity to propose unnecessary and extremely prescriptive regulations on already regulated derivatives markets.”

“These markets were not the cause of the 2008 financial crisis,” CMC wrote.

–Brian Scheid, brian_scheid@platts.com

CFTC Updates

Open Meeting on Twelfth Series of Proposed Rules under the Dodd-Frank Act
The Commodity Futures Trading Commission (CFTC) will hold a public meeting to consider the issuance of proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Event Date – 02/11/2011

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Open Meeting on Thirteenth Series of Proposed Rules under the Dodd-Frank Act
The Commodity Futures Trading Commission (CFTC) will hold a public meeting to consider the issuance of proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Event Date – 02/24/2011

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CFTC, USDA Economic Research Service and Farm Foundation NFP to Host Workshop on Carbon Market Design: Issues and Opportunities
The Commodity Futures Trading Commission, U.S. Department of Agriculture Economic Research Service and Farm Foundation NFP will co-host a workshop on carbon market design from January 31 to February 1, 2011.

Food-Price Rise Puts Focus on Speculators

By SAMEER MOHINDRU, WSJ

SINGAPORE—The run-up in global commodity prices is stirring debate in a number of countries over the role of financial speculators, a prospect that could fuel a regulatory backlash by governments keen to control food prices.

An Indian vendor taking money from customer at a market in Mumbai. European Pressphoto Agency

The prices of many commodities undoubtedly would have risen anyway in response to recent supply disruptions and rising demand. But some political leaders are raising questions about how much investors such as commodities traders and hedge funds might be contributing to the run-up. That could leader to anger among consumers and draw yet more fire from politicians on the dangers of derivatives trading.

Budget choices imperil US CFTC data storage-O’Malia

 

Tue Jan 25, 2011 4:30pm EST

* CFTC could run out of room to store data by Oct

* O’Malia-CFTC has chosen more staff over technology

* Says Gensler playing “chicken” with Congress on funding

NEW YORK, Jan 25 (Reuters) – The U.S. futures regulator is poised to run out of room to store data by October, just as it takes on oversight of the vast over-the-counter swaps market, because of cutbacks to its technology budget, a top Republican official at the agency said on Tuesday.

The Commodity Futures Trading Commission, like all government departments and agencies, has had its funding for fiscal 2011 frozen at 2010 levels.  The CFTC has said it needs a massive funding boost to carry out its share of the Dodd-Frank financial reform law, but lack of congressional action on the budget and Republican threats to cut spending have forced the CFTC to prioritize spending.

Scott O’Malia, a Republican commissioner, criticized CFTC Chairman Gary Gensler for hiring more staff to carry out new regulations, while letting automated policing systems languish.

“In my opinion, the chairman is playing a game of ‘chicken’ with Congress over the CFTC technology budget, and that is not a game where anyone wins,” O’Malia said in prepared remarks to a derivatives industry conference held by the Tabb Group, a financial markets advisory firm.

“Drastic cutbacks in technology will reduce our investment in data storage to the point where the commission is estimated to run out of data storage by October of this year,” he said.

O’Malia did not detail in his prepared remarks what would happen if the CFTC ran out of room to store data.

The CFTC will cut more than $11 million from its technology budget this year, O’Malia said. Its total budget is $169 million, but it wanted at least a 50 percent hike for the current year.

O’Malia called the budget limitations “self-imposed,” and noted that the CFTC has hired more than 75 employees this year, swelling its ranks to 682 people and its payroll by $15 million.

Read more here.

Panel Blames All for Meltdown

By JOHN D. MCKINNON And MAYA JACKSON-RANDALL

The 2008 financial crisis was “avoidable” and brought on by the actions of government officials and private-sector players, according to a blue-ribbon panel’s draft report that spreads blame broadly for the meltdown.

The Financial Crisis Inquiry Commission’s draft report singles out federal banking regulators for particularly sharp criticism, saying that “the prime example” of the system’s shortcomings was “the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages” over the past decade. But the report also has harsh words for both “captains of finance” and Main Street lenders.

The final version of the 10-member commission’s report is set to be released Thursday. While its scope is expansive—the panel interviewed hundreds of witnesses over its year-long investigation and collected millions of pages of documents—partisan divisions that emerged during its drafting likely will detract from its long-term impact on policy.

Congress passed a broad rewrite of federal banking laws last year. Lawmakers are expected to consider overhauling the nation’s housing-finance system, particularly the government-chartered mortgage giants Fannie Mae and Freddie Mac, an area in which the commission was particularly divided.

Frank Says Spending Cuts Could Undo Derivatives Rules

By Phil Mattingly – // Jan 25, 2011

Bloomberg

U.S. Representative Barney Frank. Photographer: Kelvin Ma/Bloomberg

Parts of the Dodd-Frank financial services overhaul face a “potential undoing” by Republican proposals to cut spending, senior House Democrats said.

Representative Barney Frank, the top Democrat on the House Financial Services Committee, said today that the Securities and Exchange Commission and Commodity Futures Trading Commission are underfunded already as they work on implementing the derivatives rules required in the financial services law.

House Republicans are proposing to cut $55 billion to $60 billion in non-defense spending in fiscal 2011. The cuts would bring spending levels close to fiscal 2008 levels. Frank, who said he had discussed the budget problems with CFTC Chairman Gary Gensler, said Democrats would push to increase appropriations to the two regulatory agencies.

“A dramatic spending increase to fund the SEC and CFTC, as envisioned by the authors of the Dodd-Frank legislation, would further the mindset that our nation’s problems can be solved with more spending, not more efficiency,” Representative Scott Garrett, chairman of the Financial Services subcommittee that oversees the SEC, said today in a statement.

Continue reading here.

Derivatives Executives Are Wary Of Electronic Swaps Trading

Derivatives Executives Are Wary Of Electronic Swaps Trading.