Key House Lawmakers Introduce Bipartisan Legislation to Update CFTC Cost-Benefit Analysis
Washington, DC – Today, U.S. Representatives Mike Conaway (R-TX), Leonard Boswell (D-IA), Patrick McHenry (R-NC), Mike Quigley (D-IL), and Randy Neugebauer (R-TX) introduced legislation (H.R. 1840), to improve the Commodity Futures Trading Commission’s (CFTC) existing cost-benefit analysis (CBA) of its regulations and orders. H.R. 1840 would more align the Commission’s CBA to reflect the President’s Executive Order, issued in January. The CFTC is an independent agency; therefore, they are currently excluded from the President’s Executive Order.
Rep. Mike Conaway, Chairman of the House Committee on Agriculture’s Subcommittee on General Farm Commodities and Risk Management:
“The American people deserve to know the implications of new regulations impacting the futures industry. Just as President Obama’s Executive Order directed government agencies to evaluate the cost of regulations on jobs and the economy, this bipartisan legislation will ensure the CFTC conducts a comprehensive qualitative and quantitative analysis of their proposed regulations.
“I look forward to working with both my Republican and Democratic colleagues to ensure that any future regulations put forward by the Commission work towards providing certainty within the marketplace in a manner that will not artificially drive up the cost of conducting business and interfere with the proper functioning of our domestic financial system”
Rep. Leonard Boswell, Ranking Member of the House Committee on Agriculture’s Subcommittee on General Farm Commodities and Risk Management:
“This legislation brings the CFTC in line with President Obama’s executive order requiring agencies to show evidence that the benefits of each regulation considered outweigh the costs of enforcing it. While the CFTC operates as an independent agency, it should be subject to the same scrutiny as other government agencies to prevent burdensome regulation and ensure that CFTC rules support goals of economic growth, job creation, or competitiveness. As we begin to enforce regulations to protect consumers from the recklessness of Wall Street, we must ensure that our government agencies are held to the same high standards.”
Rep. Patrick McHenry, Chairman of the House Committee on Oversight and Government Reform’s Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs:
“The staggering number of new regulations from CFTC will have serious effects on job creation in this country. It's clear to everyone, except, apparently, the CFTC. It is imperative that economists conduct adequate cost-benefit analysis before regulations are unleashed on our economy.”
Rep. Mike Quigley, Ranking Member of the House Committee on Oversight and Government Reform’s Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs:
“Regulations are vital to protecting Americans, but we must ensure that they are carefully considered,” said Rep. Quigley. “This bill ensures the CFTC’s cost-benefit analysis is in line with other agencies affected by President Obama’s executive order.”
Rep. Randy Neugebauer, Chairman of the House Financial Services’ Subcommittee on Oversight and Investigations and Member of the House Committee on Agriculture’s Subcommittee on General Farm Commodities and Risk Management:
“The CFTC is tasked with implementing over 60 rules related to Dodd-Frank Act. These decisions impact trillion dollar markets, yet the CFTC’s boilerplate cost benefit analyses do not quantify costs or determine whether the benefits of each rule outweigh the costs. It should go without saying—government ought not to act unless the benefits of action outweigh the costs. “
About the Bill:
Currently, the Commodity Exchange Act (CEA), the CFTC’s authorizing legislation, includes a vague provision (Section 15(a)) that directs the CFTC to “consider” costs and benefits when it engages in rulemaking. However, existing statute does not require the CFTC to quantify costs and benefits in order to determine whether the benefits outweigh the costs, and the CFTC’s approach to complying with 15(a) appears to be the minimum required by the statute and reflects a “one size fits all” approach to section 15(a) compliance. In fact, in its rule proposals, the CFTC includes this notation about the limitations of the cost-benefit analysis required by 15(a):
“By its terms, Section 15(a) does not require the CFTC to quantify the costs and benefits of a rule or to determine whether the benefits of the rulemaking outweigh its costs; rather, it requires that the CFTC “consider” the costs and benefits of its actions...”
As a result, many of the indications of costs associated with a proposed rule have been vague, such as “the proposed requirements could impose significant compliance costs,” without any further description. Alternatively, in the event the CFTC has attempted to quantify costs, their calculations have been far less than calculations performed by stakeholders affected by the rule.
The legislation introduced today would require the Commission to quantify the costs and benefits of future regulations and orders, including the impact on market liquidity rather than simply ‘considering’ costs. The bill would also update the Commission’s existing requirements to examine the impacts on the previously unregulated swaps markets in addition to the futures markets in light of new authority given to the CFTC because of Dodd-Frank. Further, the legislation reflects recommendations made by the Commission’s own Inspector General that any cost-benefit analysis should involve the Chief Economist. This bill would only affect future rule proposals and does not require retroactive analysis of any pending proposals.