WASHINGTON, April 14, 2016 - A Republican bill that would provide grain and energy companies with protection from some Dodd-Frank rules faces a dim future in the Senate after Democrats lost a bid to increase funding for the Commodity Futures Trading Commission.
The Senate Agriculture Committee approved the CFTC reauthorization bill along party lines Thursday, 11-9, after Republicans voted down a user fee proposed by the panel's ranking Democrat, Debbie Stabenow of Michigan.
Chairman Pat Roberts, R-Kan., said the bill offered "needed regulatory relief for our farmers, ranchers, and risk management service providers," but he had conceded even before the vote that it would be difficult to move the bill on the Senate floor. The solid Democratic opposition in committee means it would be virtually impossible to get the 60 votes necessary to bring the bill up for floor debate, but Stabenow said after the vote that Republicans may try to attach pieces of the legislation to a fiscal 2017 appropriations measure. The legislation contains provisions that would benefit grain elevators and traders as well as the energy industry. One provision would ensure that anticipatory hedging practices are exempt from speculative position limits, an issue on which the commission is currently working. Grain companies sometimes use such hedging to protect against potential movements when making bids on major trades. A second provision would block the CFTC from reducing the trading threshold for being required to register as a swap dealer until the commission completes a study that would show why the lower limit is justified. The “de minimis” limit for being regulated as a swap dealer, which raises transaction costs, is set to drop next year from $8 billion to $3 billion. Critics say it will sweep in utilities and others that are currently exempt from regulation. Roberts said that in a bid to win Democratic support he omitted from the bill several more controversial provisions that are in a House-passed bill (HR 2289), including language that would require the CFTC to conduct a cost-benefit analysis for all changes in regulations. The bill has significant support from commodity groups as well as the grain industry. "It accomplishes several important clarifications and tweaks that will help ensure that U.S. farmers, ranchers and agribusiness hedgers maintain access to the risk management tools they need,” said Todd Kemp, senior vice president of marketing for the National Grain and Feed Association. But Stabenow pressed the Obama administration’s longstanding concern that the CFTC lacks the resources necessary to regulate the derivatives market adequately. She said the House’s fiscal 2016 Agriculture appropriations bill, which funds CFTC, would freeze its budget for the third year in a row. She said that including the user fee would go a long way to winning Democratic support. Sen. Sherrod Brown, D-Ohio, charged that Wall Street was using farmers as cover to roll back critical regulations required by the Dodd-Frank law, passed in the wake of the 2008 financial crisis. “It’s clear this bill is about helping Wall Street traders and giant energy companies and other big corporations like Koch Industries under the guise of helping farmers,” said Brown, the ranking Democrat on the Senate Banking Committee. He said the exemption for anticipatory hedging “creates a loophole in the position limits rule that is meant to protect consumers from runaway prices for gas and electricity due to speculation in the energy markets.” But Roberts, as he did on the GMO labeling issue, said a vote against the bill was a vote against the interest of farmers. “Do you want to fight for the wheat farmer that is trying to lock in a favorable price for his crop with his local grain elevator? Do you want to stand up for those who put food on our table, affordable gas in our cars, and provide electricity and heat to our homes? Or do you support unnecessary and over burdensome regulation? That’s a pretty simple answer, folks.” CFTC Chairman Timothy Massad issued a statement saying he had concerns with the bill, which he didn’t specify, and endorsing the user fee. “I am committed to continuing to work with Congress throughout this process, particularly on making sure end-users like agricultural producers can continue to safely and affordably use the derivatives markets, while ensuring these markets do not generate excessive risk to our financial system,” Massad said. #30