The problems of the Commodity Futures Trading Commission are both of style and of substance its critics note.
While the substantive issues are the more serious ones, the impressions created by the style of the agency and its outspoken chairman. William T. Bagley, are the ones cited most frequently as clouding the young agency's reputation.
Bagley, a liberal Republican who was a state legislator in California for 14 years, is a gregarious proponent of the sunshine law who freely discusses nearly everything, that passes before the commission.
His off-the-cuff remarks and accessibility to the press quickly removed him from the good graces of the executive branch and of Congress following his appointment in 1975. It also stirred the wrath of the disparate groups involved in futures trading, a traditionally exclusionary and close-mounthed sector.
Some of his most memorable comments have been devastatingly on target, such as the one made in a speech before industry representatives in Chicago which noted that most futures traders are "pale and male." The speech exhorted the major brokerages and trading firms to open the ranks to minority group members and women, but it was met with stony silence from the predominately white, male audience.
His generalizations about individuals marketing London commodity options in the U.S., at a time when such highly respected brokerages such as E.F. Hutton and Merrill Lynch, Pierce Fener & Smith also traded them, rubbed many the wrong way.
Bagley's references to fly-by-night profiteers and bucket shop operators hit home to scores of undercapitalized telephone solicitation firms, however. The proliferation of the latter and the halting of London options trading by the large brokerages again proved the painful accuracy of his point.
Congressional sources said they find most irritating his breezy casualness and apparent lack of interest in taking a firm regulatory hand with futures traders.
"I'm sure he's a great guy to go drinking with; certainly the California delegation thinks so," an aide to a Senate agriculture committee member said. "But he doesn't do his homework and he doesn't seem to take his job seriously."
The aide cited a recurring theme in Bagley's speeches and articles over the past two years to make his point. "He say a regulatory agency can't play rulemaker, plaintiff, judge and jury and that it shouldn't be an agency's job to rule on a case that the agency's staff has developed against a firm," the aide said. "Well, that's what a regulatory agency is supposed to do. Appeals do go to separate (civil) courts. Due process is carried out in the administrative area."
Rep. Fred Richmond (D-N.Y.), who has clashed with Bagley repeatedly over that Richmond considers the agency's failure to prevent manipulation of the coffee market, said, "Certainly his major desire in life seems to be liked by everybody. His job isn't to be liked, it's to get on with the day-to-day tough regulation of an industry."
Futures brokers and officials of the nations's ten exchange, on the other hand, criticize the agency for over regulation and for disregarding the "gentlemen's rules" associated with trading on private exchanges.
Bagley's unprecedented release in April of the private positions held by seven members of the wealthy Hunt family of Texas and a Hunt corporation at a press conference announcing the CFTC's initiation of a lawsuit against the Hunts appalled the business community.
"Quite simply, he breached the ethics of his position and violated the confidentiality of the exchange and clearing association," one New York brokerage official said.
Bagley concedes that "We've got a problem on the Hill."
But he defends his style and frequent comments to the press as necessary for an openly operated government body. "I'm a great believer in the sunshine law," he said. "I worked for it in California and we've used it here at the commission sicne day one. Government shouldn't operate in secrecy."
He said that the criticism of the five commissioners of the agency both at their confirmation hearings and at two subcommittee hearings held during the past year were aimed at their "lack of knowledge of the industry" before their appointments.
"Knowledge of the industry is a code phrase for 'bedded down with industry' many times," he said in a recent interview. "We aren't, which is why I think we've gotten a lot accomplished and many things changed. The best type of commission appointment is of a person with no affinity with, even no knowledge of, the industry being regulated," he continued, "but of a person who understands the concerns of the industry and has the public interest at heart as the job is underway."
He defended his view of the function of a regulatory agency. "We are playing judge and jury and we shouldn't be allowed to do that," he said. "I think the judicial function should be severed from regulatory agencies. A separate regulatory court should be created, using the administrative law judges now assigned to the agencies."
Many of the high-level staff members who worked most closely with Bagley left the agency because of their frustration with what some have termed "chaotic conditions" there.
One attorney who left to pursue a private practice said, "He's a very, very hard person to evaluate fairly because he's so much of an extremist in so many things. There are so many good things about him and his ideas and so many bad things."
The best concepts of the chairman, the attorney said, were his desire to "fight the SEC (Securities and Exchange Commission) mentality of closing things up and to make the agency an open one, easily accessible to everyone with an interest in futures." He added that Bagley's concern for individuals was expressed in his "supportiveness of the staff and of programs that weren't necessarily easy for the industry to accept. He's a very warm person with a great sense of fairness."
But the attorney said, Bagley's weaknesses frequently overpower his strengths. "He has no concept of what being chairman means in terms of leadership. He constantly deferred, especially on administrative responsibilities, but he deferred to people who didn't know how to administer. I don't think he has the respect of the other commissioners . . . He traveled a good deal, primarily to make a name for himself. Still and all, a lot of us like him personally very much."
Bagley, who was appointed to a five-year term on the commission by then President Gerald Ford in 1975, made some major changes in his operation of the agency after several key staffers left this summer.
"When critics say we're disorganized and morale is poor and the work is bottlenecked, they're talking about the old CFTC," he said.
"A year ago that may have been true, but it's not anymore."
He instituted weekly high-level staff meetings in August and developed both a monthly and a long-term calendar of cases and regulations under consideration in order to set priorities and case the flow of paper work.
But as another commissioner noted, "We asked him to do these things time and time again. He did some hard thinking this summer and finally realized himself that something had to be done about the situation here or we'd all go down the tubes."
Bagley confirmed to The Post that when Michael Stewart, former deputy director of enforcement, resigned to return to the SEC in August, Bagley offered to step aside as chairman if Stewart would remain with the agency.
"I offered him every high level job we have," Bagley said, "and, this was in front of witnesses mind you, and I also put it in writing, that if Mike would stay I would resign and let John (vice chairmand John V. Rainbolt II) take over my job."
Another commissioner said recently that the offer wasn't really to Mike . . . in fact, Bill has said that the offer no longer stands. But Bill had seen his best people leave and realized that things were slipping out of control. Now he's sorted everything out and has established a structure here that is working very well. The CFTC will survive and will be a lot stronger for all of this."
Aides to key congressmen say that the agency and Bagley in particular will face grueling questioning during the reauthorization hearings which are scheduled to begin next March.
Members of the oversight committees for the agency plan to amend the enabling legislation of the CFTC to change the chairman's appointment from a full, five-year term to one "at the pleasure of the President," giving President Carter the right to name a new chairman during 1978.
"He (Bagley) will still be on the commission for five years, but you can be very sure he won't be chairman through 1980," one congressman said recently.
Bagley, has told Hill and CFTC staffers that he would like to return to California if he wins an appointment as a state circuit judge from Gov. Jerry Brown. Such an appointment of a Republican by the Democratic governor would be a political tradeoff, sources note, and if it is made at all, it will not be until after the 1978 congressional elections.
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