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May 7, 2009

The Honorable Daniel K. Inouye
Chairman
Committee on Appropriations
United States Senate
S-128 Capitol Building
Washington, D. C. 20510

The Honorable David R. Obey
Chairman
Committee on Appropriations
United States House of Representatives
H-218 Capitol Building
Washington, D. C. 20515

Dear Chairman Inouye and Chairman Obey:

I am pleased to transmit to you the Commodity Futures Trading Commission’s (CFTC) Budget and Performance Estimate for FY 2010. This budget requests an appropriation of $160,600,000 and 610 staff-years, an increase of approximately $14,600,000 and 38 staff-years over the recently enacted FY 2009 appropriation of $146,000,000 and 572 staff-years. With a current on-board staff of only 500, the funds appropriated for FY 2009, and requested for FY 2010, are critical incremental increases toward providing the CFTC with the resources required to ensure that the Nation’s futures markets operate without disruption. Compared to the FY 2009 appropriation, key changes in the FY 2010 President’s Budget are:

• $7.4 million to provide for increased compensation and benefit costs for a staff of 572 FTEs;
• $0.2 million (net increase) to provide for increased operating costs for information technology modernization, lease of office space, and all other services; and
• $7.0 million to provide for salary and expenses of 38 additional full-time equivalent staff-years (FTEs).
  

The CFTC was created in 1974 to ensure fair practice and honest dealings on the commodity exchanges of the Nation’s $500 billion futures industry. At that time, approximately 500 employees were tasked with this responsibility. Thirty-five years later, the Nation’s futures market is a $22 trillion industry that bears little resemblance to the early market with respect to volume, complexity, technology, products, platforms, instruments, strategies, and globalization. The increases provided for FY 2009 and requested for FY 2010 recognize that the Commission cannot continue to oversee properly an increasingly complex, opaque and global marketplace with resources deemed adequate four decades ago when the modern futures markets were in their nascence. The Commission requires additional resources to hire and retain highly trained professionals and equip them with information technologies that are as sophisticated as the markets they are charged with overseeing.

Notwithstanding the important work of industry self-regulatory bodies, the Commission’s role is unique and if it is not properly performed, there is no adequate secondary safety net. It is important not to risk the moral hazard of assuming that adequate oversight is being performed by others when it is not. The Commission is the only entity with regulatory oversight across all jurisdictions and across all markets. If the Commission is unable to regulate effectively because of insufficient resources, other authorities will not be available to step in and fill the void. Self-regulatory organizations can take action only against their own members, and their sanctions cannot affect conduct outside their jurisdiction or markets, and other Federal regulators and state regulators have limited jurisdiction and expertise in handling futures-related matters and misconduct. And while criminal prosecutions by the Department of Justice are an important adjunct to effective oversight and enforcement, cooperative enforcement still requires the active use of Commission staff to assist criminal authorities in the prosecutions.

Strong support of the CFTC, with its principle-based regulatory regime, will also serve to reassure concerned American taxpayers and investors. Most Americans have a direct stake in futures markets through personal investments in stocks, mutual funds, or pension funds tied to these markets—and all Americans have an indirect stake, since these markets are critical in establishing prices from WalMart to Wall Street.

I am available to discuss this budget request and to answer any questions you may have.

 

cc:

The Honorable Tom Harkin Chairman Committee on Agriculture, Nutrition, and Forestry U.S. Senate SR-328A Russell Senate Office Building Washington, D. C. 20510-6000

The Honorable Collin C. Peterson Chairman Committee on Agriculture U.S. House of Representatives 1301 Longworth House Office Building Washington, D. C. 20515-6001

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