Go your own way: departures pose new challenges for CFTC

Risk.net

Breaking up, as the song goes, is hard to do. And when the relationship in question is crucial for the smooth issuance of derivatives regulations, the estrangement is harder still.

This month, Risk.net examined the current state of the Commodity Futures Trading Commission (CFTC) and drew attention to what our sources – including 12 current and former officials and commissioners – described as an agency paralysed by a divided majority.

The divisions are between chairman Rostin Behnam and his fellow Democratic commissioners, Christy Goldsmith Romero and Kristin Johnson. The resulting frictions may help explain why the pace of rulemaking and routine business at the CFTC have slowed in recent years.

Last week, US President Joe Biden announced his intention to appoint the two dissenters to new positions: Goldsmith Romero as chair of the Federal Deposit Insurance Corporation (FDIC) and Johnson as assistant secretary for financial institutions at the Department of the Treasury. 

However, it is not clear that suitably screened replacements are waiting in the wings to take over from them at the CFTC.

In March, Behnam set himself the goal of holding votes on all outstanding rule proposals. The developments of recent weeks therefore have the potential to create deadlock ahead of November’s general election. Republicans on the commission would have an effective veto over the chairman’s agenda if Goldsmith Romero and Johnson were confirmed in their new posts while their seats on the CFTC remained unfilled. If there were a 2-2 split on the committee, the chairman’s proposals would not be adopted.

Every now and then we fall apart

The best scenario for Behnam would be for Goldsmith Romero, Johnson and their replacements on the CFTC to be confirmed as a single package. That way, the new commissioners would be able to take over immediately and business could continue with a revitalised Democratic majority.

Yet it is by no means certain that the departing commissioners will be swiftly confirmed in their new roles. If their nominations are presented at a July hearing of the US Senate, proceedings would need to move quickly for them to be confirmed before the Democratic-controlled upper house goes into recess the following month.