Are the fates of the Securities and Exchange Commission and the Commodities Futures Trading Commission inexorably bound? They may be; some old regulatory hands are suggesting the two agencies be merged.
Timothy Ryan, the president and chief executive officer of the Securities Industry and Financial Markets Association and former director of the Office of Thrift Supervision, suggested combining the two regulators during today´s House Financial Services Committee hearing. He was number two-last week, Arthur Levitt, a former SEC chairman, told the Senate Banking Committee that the two should be merged and should together take charge of regulating the derivatives market.
"I think that the two agencies should be merged. I think that, together they have the skills, the capability and the experience to deal with derivatives. There is no other agency that could do the job as well," Mr. Levitt said.
Earlier last week, a House Committee on Agriculture hearing revealed a struggle between the Federal Reserve and the SEC over who would have the authority, in the future, to oversee financial derivatives. The most common form, the credit-default swap, is currently not regulated, though calls for a central clearinghouse for trades in CDS contracts have been strong enough to move the debate away from whether they should be overseen to how. There are currently competing clearinghouse projects, one of which will be overseen by the Fed and the other by the CFTC. Mr. Levitt and others believe the CFTC has an advantage, having regulated derivatives on other traded entities for years already.
Rep. Barney Frank, D-Mass., confessed that he had, at one point, suggested that his Financial Services Committee get jurisdiction in the legislature over any derivatives being traded on non-edible commodities, "but that does not seem to be too persuasive to people," he said.
Mr. Levitt pointed out that the Fed has no experience regulating financial derivatives. "The CFTC has a running start," he said.
