It is a remarkable thing to watch the Chairman of an agency tasked by Congress under Dodd-Frank legislation to expand its oversight over market activity appear before Congressmen to ask for money to do his job, as he did on Wednesday, February 11 before the U.S. House Appropriations Committee, Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies, in Washington, DC. While the legislation itself is messy, it also doesn't help to have those regulators who are tasked with implementing the law not have sufficient resources to do so. If, for example, the law requires a regulator to write rules that require market participants to submit certain filings and information to the regulator, but the regulator does not have the resources to fully review these filings, the (tax payer) money that is being spent on regulation is arguably not being put to good use.
Chairman Massad appears to understand well how the markets work, so I imagine that it is a strange feeling for him when he gets support for more resources from Congressmen who don't have such market understanding, but does not get the needed support from the Congressmen who do have an understanding of the markets.
During the hearing, Congresswoman Rosa DeLauro's speaking through an over-amplified microphone was painful to listen to, not just because of the noise, but because of the laying of leading questions on to Chairman Massad (equally undesirable were the direct questions that essentially were tacked on to lengthy commentary from Congresswoman Rosa DeLauro about how she felt about an issue). How weird that she sounded like she was cross-examining an opposition's witness in a trial, when her line of questioning was part of her case for supporting granting more money to Chairman Massad's agency, e.g.:
Congresswoman DeLauro: You're a regulatory agency? Mr. Massad. Chairman Massad? OK?
Chairman Massad: Yes.
Congresswoman DeLauro: The responsibility, the responsibility is, open fair transparent markets, avoiding systemic risk, protect market users, consumers, protect the public from fraud manipulation and abusive practices related to commodities futures and swap markets, is that the mission?
Chairman Massad: Yes.
Congresswoman DeLauro: Is it true that, that the expansion of what Dodd-Frank did, expanded what the effort is to 400 trillion dollars in the domestic swaps market?
Chairman Massad: Correct.
Congresswoman DeLauro: That’s what the scope of the jurisdiction is.
Chairman Massad: Yes.
Congresswoman DeLauro: This is a committee that has often times consumed itself with the issues of fraud and error rates, whether it is in a SNAP program, by the way, lower error rates than any other federal agency, so my hope would be that we would see folks on this committee be as concerned now [looking at Chairman Massad and pointing at him with both pointer fingers] with the fraud and abuse that goes unchecked in the swaps futures and commodities market. I will also point out that this is a small agency. Huge responsibility. Gets a fraction of what we spend on oversight for other agencies including Medicare social security, a point at which looking at what banks are doing you asked, you talked about I.T. before? Collecting the data that you needed in order to move forward. For 2016, 63, 63 million dollars. That's what it says here. Citibank! Citibank. 250 to 300 million dollars a year to take a look at information security with regard to the, cyber-attacks . What are we speaking about here? 72 million dollars. I defy you to go to any other agency and take a look at what they are spending in a whole variety of efforts. Tell me how much money you brought back from what you uncovered last year. [finally a direct question] How many? How much money?
Chairman Massad: This year alone, 1.5 billion in fines and penalties. Between 2009 and 2014, it was over 2 billion.
It should be noted that earlier on in the hearing, Congressman Sam Farr stated an amount of penalties collected by the CFTC go to the US Treasury. This would be one of the reasons why the CFTC needs to ask for money.
When Congressman David Young addressed Chairman Massad, he asked about a lease in Kansas City, where apparently the CFTC had 25 employees working in a space that could hold 80 employees. The Congressman mentioned a report that estimated $3.6 million was wasted over the course of the lease. When asked what Chairman Massad planned to do about such waste, he responded that shortly after he was sworn in in June 2014, he went to the Kansas City office, and a decision was made to give up unneeded space. Chairman Massad mentioned that if he could sublease the space out, he would, but that he didn't have the statutory authority to do so. He indicated that the issue was with the landlord to whom a request was made to reduce the leased space and the rent, but the landlord had not yet agreed. As a taxpayer, I found this to be useful information to come out of actual discourse between a member of the panel and the witness.
Not all of the Congressmen shared the same mood, e.g.,:
Congressman Andy Harris: ...The other one is, you said you fly coach. Does that imply your predecessors didn't?
Chairman Massad: No, not at all.
Congressman Andy Harris: Yeah, good, because I hope that..
Chairman Massad: Let me clarify, I meant that...
Congressman Andy Harris: I have 5 minutes I've got to move on
Chairman Massad: I meant that when I go overseas...
Congressman Andy Harris: Chairman, I only have 5 minutes. I got it. I have to move on. I just want to know if that it is a distinction from predecessors.
Chairman Massad: Sorry
At several points during the hearing there were comments from a couple of the Congressman who did not like the use of the term "cuts" to imply that funds were being reduced instead of a request for funds being denied. Congressman Harris suggested that such interpretation occurred "only in Washington", and Congressman Yoder stated to Chairman Massad that "Most Americans understand that a cut to a request is not a cut." Interestingly, some whispered comments about cuts were picked up from about 31:56 in the webcast when Congressman Farr's microphone appeared to be off, but someone else's was on, e.g.:
32:16
"What is a cut from a request?"
32:40
"It’s just a silly argument."
32:46
"Its Washington jargon."
It’s interesting to note how the notifications from the CFTC about the hearing are sent out. I received the CFTC email after the hearing at 12:24pm with a link to Chairman Massad's testimony, but the tweet from the CFTC came in at 9:03am before the hearing advising of the upcoming webcast. I guess the early bird (or the one who gets tweets) gets the worm--actually, the late bird gets the worm too, as the replay is available here.