Alan Guebert: ‘Free markets’ aren’t free
June 29, 2012
If there’s no such thing as a free lunch – and there isn’t: even the U.S. Department of Agriculture’s “free” National School Lunch Program cost $10.8 billion in fiscal year 2010 – then it stands to reason that the free market might not be entirely free either.
For example, to ensure that your bank has your money when you need it the Federal Deposit Insurance Corp. collected part of its $19.2 billion in bank insurance premiums last year from, yep, your bank.
And let’s not forget the hundreds of billions of dollars the nation – that’s you and me – ponied up to keep the global financial market from imploding in the Great Bankster Caper of 2008. Free market? Not at 700 billion bucks.
Come to think of it, about the only thing free in that market is every one of those chiseling chuckleheads, not one of which ever went to jail.
Fact is most markets are not free. They are, however, fair because tough, transparent – and, not free – regulation and oversight keep them that way.
At least that’s the idea behind regulators like the Securities and Exchange Commission, USDA’s meat inspection service and the Commodities Futures Trading Commission (CFTC), the new favorite target of the anti-government crowd.
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CFTC slipped into the crosshairs because of the yet-to-be implemented Dodd-Frank law, the 2010 banking and securities reform bill meant to plug the financial loopholes that almost sank the global economy in 2008. Under Dodd-Frank, the CFTC will oversee the “swaps” market, the big, opaque cloud of unregulated trading that composes the bulk of any day’s 160 million financial transactions around the world.
In a speech to the OpRisk Europe meeting in London June 13, CFTC Commissioner Bart Chilton challenged some of the world’s financial whales, sharks and minnows to help “disinfect” what he called that “greatly grubby” market where $650 trillion of off-the-radar trading occurs yearly with “absolutely no government oversight” whatsoever.
In fact, Chilton told the Euro crowd, the CFTC “currently oversee(s) roughly $5 trillion in annualized trading volume,” or less than 0.8 percent of the global market.
Farmers and ranchers might view the CFTC’s growing role as important and necessary. After all, many, as former clients of MF Global, continue to wait for their commodity hedging accounts to be made whole after the firm’s Oct. 31 crack-up due, reportedly, to foolish bets on shaky Greek bonds. Also, JP Morgan’s current dance with debt began with similar, unreported financial bets in London.
Only the deeply divisive House of Representatives thinks the CFTC should be pared, not strengthened, for the task. On June 6, a House appropriations subcommittee voted to cut CFTC’s budget from $202 million now to $182 million in 2013.
“The result of the House bill,” noted CFTC Chairman Gary Gensler after the move, “is to effectively put the interests of Wall Street ahead of those of the American public…”
With implementation of Dodd-Frank looming, Gensler likened the cuts to the “NFL expanding eightfold without adding any more referees… Imagine the mayhem…”
Mayhem, indeed, but this is politics today: the House hopes to kill Dodd-Frank by starving CFTC of the money the agency needs to implement it.
On June 12, however, a Senate appropriations subcommittee voted to boost CFTC’s 2013 budget to $308 million, more in line with the White House request and what the CFTC claims is needed.
That means a showdown between House and Senate appropriators looms. The House claims the fight pits “free” markets against bigger government; the Senate believes the best markets are safe, transparent markets.
And you? Do you think $100 million more for the CFTC to implement Dodd-Frank is a good investment to guard against another $1 trillion financial meltdown or another MF Global mess? The answer is a no-brainer.
Then again, we’re talking about Congress here.
© 2012 ag comm