Reasonable people will wonder why something as important as merging CFTC and SEC is so difficult to implement. The reason for the inaction is simple. The Congressional committees that oversee the futures industry do not want to lose power. The politicians who sit on those committees, and need money to get re-elected, do not want to forgo campaign contributions from Wall Street, futures exchanges, and trading firms.
Merging CFTC and SEC would change Congress’ power structure. CFTC is regulated by the House and Senate agricultural committees. SEC is regulated by the Senate Banking Committee and House Financial Services Committee. The agricultural committee members would lose a valuable source of campaign contributions if they lost oversight of futures exchanges and commodity trading firms. Meanwhile, membership on the banking and financial services committees is a source of almost unlimited campaign contributions.
Wall Street is not bothered by this lack of action. Wall Street loves gridlock in Congress, and among regulators, because it means the banks can do whatever they want while Washington fiddles and argues. In truth, many Wall Street firms and exchanges like the existing regulatory schism. CFTC is thought to be easier to deal with, and more pro-business than the SEC. Because financial products are increasingly alike, if the SEC says no, CFTC often says yes. But it is time for Washington to better balance the protection of investors with need for flexibility wanted ...