Congressional sunset hearings are usually a ritualistic gauntlet that federal agencies must endure every few years so Congress can claim it has done something useful by voting this bureaucracy or that one a new charter.
Not this year's reauthorization review of the Commodity Futures Trading Commission; this time the sun actually might set on the CFTC.
Rarely has the routine process of renewing a regulatory agency's mandate produced such widespread doubts about the agency's ability and so many demands for revamping its operations.
After a litany of CFTC shortcomings was recited during eight congressional hearing sessions in a single week, Sen. William Roth Jr. (R-Del.) suggested the unthinkable: putting the commodity commission out of business.
"I wonder why it might not make some sense to consolidate this commission with the Securities and Exchange Commission," asked Roth after his Senate permanent subcommittee on investigations heard three days' worth of witnesses describing a $200-million-a-year scandal in commodity fraud.
Starting the very day that CFTC reauthorization hearings began before the House Agriculture subcommittee headed by Ed Jones (D-Tenn.), the Senate fraud hearings embarrassed the CFTC and irritated congressional agriculture committees who consider commodities their business.
House Agriculture Committee Chairman Kika de la Garza (D-Tex.) denounced the "sensational leaks" of a General Accounting Office report criticizing the CFTC and reminded outsiders that his committee was still in charge of CFTC reauthorization.
A decade ago, when Congress was beginning to set up the present futures regulation system, 12.4 million futures contracts were traded, and 90 percent of them were for farm products, primarily corn, wheat and soybeans.
By 1981, the business had multiplied eight times over. More than half of the 101 million futures contracts traded were financial futures, contracts for government bonds, mortgages and the like. The Chicago Board of Trade did more business in Treasury bond futures than in corn or soybeans.
With the beginning of trading in stock index futures last Wednesday, the commodity markets moved another step closer to Wall Street, forcing Congress to face a delicate jurisdictional question: Can agriculture committees dominated by farm-oriented legislators adequately oversee financial markets?
The agriculture committees are reluctant to give up jurisdiction over commodity markets, because the futures industry is a generous contributor to farm state congressmen.
Even the usually protective agriculture committees, however, are growing critical of the commodity commission. Jones' House subcommittee, which oversees the CFTC, last week put out the most damning report yet of the commodity agency's handling of the silver market collapse two years ago.
"The 1979-1980 silver futures markets and the events associated with them indicate that the CFTC had not developed the necessary programs, procedures or policies to prevent market manipulations and conflicts of interest," concluded a committee consultant.
Another subcommittee headed by Benjamin Rosenthal (D-N.Y.) already had said pretty much the same thing, but for Jones' committee to say the CFTC can't keep the commodity markets honest is criticism close to home.
One of Jones' committee members, Thomas Harkin (D-Iowa), questioned the integrity of the cattle futures market at hearings in his district last Friday. An official of the Iowa Cattlemen's Association complained that "wide swings in feeder and fed cattle futures prices raise our suspicions about power plays between large speculators"--the same thing congressional investigators think caused the silver market to collapse.
The parallel problems of the cattle and silver markets illustrate one half of the CFTC's regulatory responsibility--overseeing the organized futures markets that trade contracts for future delivery of all kinds of commodities. The futures markets are supposed to be self-regulating, with the CFTC looking over their shoulder to be sure everything is kosher. Both the Jones committee silver report and the GAO audit said the CFTC does such a poor job that it's unable to assure that the markets are honest.
The CFTC contends its real problems are in the other hemisphere of its world--off-exchange commodity transactions, the subject of the Roth hearings.
The CFTC proposes to deal with commodity swindlers by letting states go after outright fraud, but the commission wants to keep exclusive federal jurisdiction over commodity exchanges and federally registered brokers. Neither state regulators nor some members of the Roth and Jones committees will buy that; they suggest cutting back the CFTC's authority and practicing "a little new federalism" to give the states more power.
After surviving "pick on the CFTC week," the commodity industry fled to Florida this week to try to get its act together at the annual Futures Industry Association convention.
The industry and the agency had better come up with some new answers, otherwise Congress is going to continue to dwell on the same old question: Why should the CFTC exist?