With passage of the Consumer Protection and End User Relief Act (H.R. 4413) on Tuesday (June 24), the House has authorized the Commodity Futures Trading Commission through 2018. Forty-six Democrats joined with 219 Republicans to pass the legislation.
The Senate is yet to introduce companion legislation.
"I am pleased to have the support of my colleagues on a bill that touches nearly every part of the economy,” said Oklahoma Rep. Frank Lucas, chairman of the House Agriculture Committee, after the vote. “This legislation reauthorizes the Commodity Futures Trading Commission through 2018 and ensures that the agency is working in the most efficient and effective way. It also cements key protections into law for futures customers, such as our nation’s farmers and ranchers, and reduces the regulatory load on end-users who represent 94 percent of American job creators. I am hopeful that the Senate will take up this wide-ranging, bipartisan bill in a timely fashion so market participants have the certainty they deserve.”
Citing fears that the House approach would tamp down oversight of huge market players and lead to a replay of the 2008 economic nosedive, not all were as excited about the legislation. Prior to the vote the White House warned the House legislation would keep the CFTC from performing its duties properly.
“I’m pleased to see the House bill includes measures related to customer protections as well as important considerations for end users like farmers, ranchers and small businesses who rely on the markets to hedge risk,” said Michigan Sen. Debbie Stabenow, chairwoman of the Senate Agriculture Committee. “These are areas where we can certainly work together.
“However, we have 21st century markets and we need a 21st century regulator to match. We must make sure the agency responsible for protecting these markets has the resources, authority, staff and technology it needs to be effective -- especially in the wake of the 2008 global financial collapse which left eight million Americans without jobs and devastated hard working families across the country. It is disappointing that the bill provides no additional funding mechanism and adds new layers of administrative burdens, hindering the agency’s ability to do its job and effectively regulate these markets.
“As I’ve said before, the Senate will examine lessons from the past and consider ongoing challenges to the system as we write our bill. We have an important opportunity for market reform, to restore faith in the markets and help ensure they are transparent and functioning as intended -- and we intend on doing that in a collaborative and bipartisan way.”
In the days leading up to the House vote, The National Grain and Feed Association (NGFA) – along with over 30 other organizations – urged “aye” votes. The legislation, the groups said:
- Enhances reporting, transparency and accountability in futures markets.
- Allows customers to "claw back" assets from a parent firm in the event of a shortfall of customer funds if there is a futures commission merchant (FCM) insolvency.
- Creates a clear roadmap for meaningful cost-benefit analysis to be performed by the Commodity Futures Trading Commission (CFTC) before proposing major rules.
- Provides a solution to the "residual interest" rule approved last fall by CFTC, which would force customers to pre-margin hedge accounts -- thereby putting perhaps twice as much customer money at risk -- dramatically increasing hedging costs, and likely driving farmers, ranchers and small hedgers out of the futures market.
- Offers relief from technologically infeasible recordkeeping requirements in the cash commodity markets.
On the House floor, Minnesota Rep. Collin Peterson, ranking member of the House Agriculture Committee, admitted he was not thrilled with the bill. However, it “provides some much-needed clarity to end-users, agriculture and energy producers who actually use the derivatives market to hedge against risk and did not cause the financial collapse. Congress never intended for these end-users to be regulated in the same manner as financial entities and H.R. 4413 makes that clear.”