"(Reuters) - On a party-line vote, the House Appropriations Committee voted for a 12 percent cut in funding for the U.S. futures regulator on Tuesday, moving a step closer to a showdown with the Senate, where a large increase is proposed....Committee chairman Hal Rogers said the CFTC budget was up 80 percent from 2008 and the agency did not need more funding. "It just seems to me this is a big-time waste of money," said Rogers, Kentucky Republican, of proposals for more funding."
The dealer banks don't want derivatives to be forced onto exchanges as per Dodd-Frank. Since it does not look like the bank's allies in the House will be able to overturn Dodd-Frank the one thing they can still do is to defund the agency who will be responsible for enforcing the new policies. The CFTC is already underfunded. To add more responsibilities to their plate while cutting their funding is...well nearly criminal in itself.
The truth is that strong regulation helps the futures (and securities) industries remain viable. If end-users believe that there is potential for manipulation in a market then they will not want to trade in that market. The less people trade in a market the less liquidity there is and the higher are the costs. The two big advantages of the futures industry are (1) the large pool of liquidity (2) the central counter party and clearing credit model. Taking either of these away hurts the industry.
If the Tea Party and the Occupy Wall Street crowds really want to ensure that we the taxpayer do not end up bailing out the big banks again then the best things that they could do are (1) make sure there are strong laws in place to regulate the futures, securities, and banking industries and (2) make sure that the agencies in charge of regulating these industries are properly funded for the size of their task.
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