The administration recommended to Congress yesterday that it abolish the five-member Commodity Future Trading Commission and create instead a subcabinet agency headed by a single administrator.
The surprise move stunned some House and Senate agriculture committee staffers and was ignored by others because it came on the eve of the Senate markup of the CFTC's reauthorization bill. A Senate Agriculture subcommittee recommended Friday that the CFTC be reauthorized for six years.
Office of Management and Budget Director James McIntyre notified Congress of the administration's view by letter late yesterday, OMB sources said. The White House personnel office reportedly has been directed to start a search for an experienced, well-regarded professional to head up the new agency should Congress approve its creation. The OMB proposal calls for the agency to be structured like the Environmental Protection Agency.
Hill sources, however, said it is higly unlikely that the administration will be able to find support for its proposal at this late date in the reauthorization process. Congress must act on the CFTC's authority by May 15 in order to continue regulation of the burgeoning futures markets beyond the CFTC's current Sept. 30 expiration date.
"They (OMB) may have missed the boat a bit on this one," one Senate aide said. "I don't think that the recommendation will prevail." The aide said OMB appeared to be ignoring the intent of the law which created the intent of the law which created the agency to regulate futures in 1974 as well as the nature of regulation.
"They are using management theory that says you have greater accountability, efficiency and effectiveness with one person in charge instead of several, but management theory is not the sole criteria in government regulation," he said.
Both the Senate and House markups of FCTC legislation are expected to focus on the developing turf fights among the CFTC, the Securities and Exchange Commission and the Treasury Department. Both the SEC and Treasury have asked Congress for some concurrent authority with the CFTC over financial futures and other markets.
In an unexpected reversal of its earlier position, the General Accounting Office recently told Congress that the SEC should have full authority over futures based on stocks and stock indexes and concurrent authority with the CFTC on financial instrument futures such as Treasury bonds and bills and mortgage-backed certificates.
After a long delay, Treasury told Congress Friday that it does not want day-to-day regulatory authority over financial futures. But it asked for contract, to disapprove delivery dates and to have final veto power on contract market designation. OMB supports Treasury's request, administration sources said.
But Hill sources said Agriculture Committee members are leaning toward rejecting Treasury's plea but giving the SEC at least part of the concurrent jurisdiction it is seeking.