May 16th, 2014 by Nick Railton-Edwards
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Speaking before the Senate Appropriations Subcommittee on Financial Services and General Government, CFTC acting-Chairman Mark Wetjen used the rare tactic of honesty in his appeal for extra funding in 2015.

“The unfortunate reality is that, at current funding levels, the Commission is unable to adequately fulfill the mission given to it by Congress.”

The bulk of his speech consisted of the familiar mantra that increased market size and activity, requires increased supervisory funding.

“By almost any measure, in fact, the portfolio of entities that the Commission is charged with overseeing has expanded dramatically in size and risk over the last half decade.”

He made an interesting and refreshingly blunt departure from the superseded Gensler script, by referring to Clearing Houses as potential sources of systemic risk.

“A clearinghouse’s failure to adhere to rigorous risk management practices established by the Commission’s regulations, now more than ever, could have significant economic consequences.”

His predecessor’s evangelical belief in CCPs as universal risk-mitigants, refused to countenance the heresy that central clearing may at best merely transfer credit risk, and may actually result in concentration of and increase in systemic risk. Fundamentalism should have no place in regulation, especially the more fundamental reforms; Wetjen’s implied recognition that a central pillar of the Dodd-Frank reforms is open for objective discussion, represents an important and consequential change in the Agency’s culture and governance.

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