"The place is a Titanic: it's a disaster," a former policy-level staff member said recently of one of the youngest, and most controversial, agencies in Washington.
He was echoing the criticisms of scores of others in his description of the Commodity Futures Trading Commission. While the two-year-old agency is little known outside the highly specialized futures industry and Congress' agricultural committees, it has been the target of such disparate critics as Sen. Walter Huddleston (D-Ky.), Chicago Board of Trade president Warren LeBeck and flamboyant Texas oilman Nelson Bunker Hunt.
Many of the caustic attacks have been aimed at the administrative weaknesses of the commission, its rampant politicization, its numerous personnel problems, alleged conflicts of interest and ethics violations in industry dealings, the style of its chairman, William T. Bagley, and a number of questionably handled industry issues which have won wide press coverage, such as:
The Maine potato futures default in May 1976.
Alleged price manipulation in the coffee future market.
The Hunt family soybean case.
Continuing scandals in London commodity options sales.
Blatant illegal trading for tax purposes in many markets, especially in silver futures.
It's not easy to find, much less to count, its defenders - outside the commission itself. But a number of Capitol Hill aides to some of the CFTC's most vociferous challengers voiced unexpectedly measured assessments of the agency in recent interviews.
These fresh notes of reason may provide the agency a more even-handed evaluation than it has indicated it expects when a year-long review of its operations is released by the General Accounting Office to Congress next February and in public congressional hearings into its reauthorization, which are slated to begin in March.
"A lot of the criticism fails to take into consideration the newness of the agency and the political climate of its origin and of the appointments of the commissioners," noted William Motes, legislative assistant to Sen. Richard Clark (D-Iowa). Clark is a member of the agriculture committee which oversees the agency.
"It was born in a very hostile environment and that hasn't helped it any. And you have to remember, all new agencies are slow starting up. They have to find out who they are and where they're going in a very short time in order to get any substantial work done."
As Motes and others pointed out, the CFTC has managed in a very brief time to write an elaborate and extremely complex code for regulation of what to most people is an arcane industry.
It has undertaken the registration of more than 25,000 brokers, traders, and other industry personnel, has been engaged in a number of landmark legal battles, has initiated the first operations reviews of the nation's 10 commodity exchanges, and has begun surveillance of trading on the exchange floors, and dozens of other specialized operations.
As commission personnel like to point out, the CFTC regulates an industry which has quadrupled in size since the legislation creating it was written in 1974, with a staff of just under 500 and an annual budget of $13.1 million.
For the first nine months of 1977, commissions were paid on $1.104 trillion of commodity contracts traded in the U.S., according to agency statistics cited by chairman Bagley.This contrasts with $148 billion traded in 1970 and $676 billion in 1976. The CFTC's annual report for 1976 notes that the latter figure represents more than four times the value of stocks traded on the New York and American stock exchanges last year.
By contrast, the Securities and Exchange Commission has a staff of 1,922 and an annual budget of $49.3 million to regulate the approximately $160 billion annual securities markets.
Commissioner John V. Rainbolt II, one of two Democrats in the commission, was associate counsel to the House Agriculture Committee which drafted the legislation creating the agency.
"It was a hard-fought battle to get the legislation approved," he recalled. "It passed by one vote. But as it was being drafted no one knew how big the industry would become and how fast it would grow. If they had, the need for the commission would have been more apparent."
Since 1922, the futures industry - which then was primarily concerned with the agricultural grain and live-stock markets traded in Chicago - has come under the jurisdiction of the Commodity Exchange Act.
The CEA was a weak document, providing the government with supervisory, but little enforcement, authority. A single person, within the Agriculture Department and reporting to the Secretary, was charged with over-seeing the markets.
The CFTC Act of 1974 dramatically overhauled the CEA and replaced the administrator with a five-member commission. The new CFTC was given one of the broadest and most powerful mandates a regulatory commission has ever been granted by Congress to write and enforce futures industry regulations.
"Its powers go far beyond that given the SEC," said Thomas Russo, former director of trading and markets and the primary legal draftsman for the CFTC. "We were extremely careful to use that authority well, to take many SEC regulations as models and draft much better - I think - regulations."
"There are many things the agency can be faulted for," he said, "but it's done a lot. It has drafted one of the most thorough regulatory codes in existence. It has won key cases in (federal) appeals courts. The critics are ignoring the substantive work that has done in a very short time."
With the Carter administration planning to unveil a massive federal reorganization program next spring and the CFTC's own reauthorization review falling due simultaneously, many staffers on the Hill and at the agency itself believe that the CFTC should be preparing to fight for its very life.
NEXT: Chairman William T. Bagley, the focus of much criticism.