House Ag Panel Approves Bills to Roll-Back CFTC Oversight of Energy Swaps
On January 26, 2012, the House Agriculture Committee approved bills that would ease Commodities Futures Trading Commission (“CFTC”) regulation of swaps (i.e., over-the-counter derivatives) by energy companies under 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Swaps were never regulated by CFTC prior to Dodd-Frank.
The Ag Committee markup included a number of bills to rationalize the CFTC’s implementation of Dodd-Frank. The bills had already been approved by the House Financial Services Committee. Unlike the U.S. Senate, the U.S. House utilizes sequential referrals of pending bills through various committees of jurisdiction.
“[The bills] are intended to restore the balance that I believe can exist between sound regulation and a healthy economy,” Agriculture Chairman Frank Lucas (R-Okla.) said at the markup held last week.
Although the bills voted out of the Ag Committee generally had bipartisan support, Ranking Member Collin Peterson (D-Minn.) expressed reservations about the roll-back of Dodd-Frank.
“The sad part of this exercise is that we may find out later it wasn’t even necessary,” Peterson said. “What is potentially even sadder is that even if we do find that any of these bills are necessary, they have no future. The majority of Senate Republicans and their leadership have dedicated themselves to the repeal of Dodd-Frank.”
“Swaps” are used by energy companies to hedge commodity risk. Swaps are contracts that are based on prices of commodities, credit and world currencies. Supporters of the Dodd-Frank roll-back effort argue that swap “end users” such as utilities should not be subject to stringent oversight for trades used to mitigate risk on an energy company’s own account.