The Commodity Futures Trading Commission (CFTC), tasked with monitoring the complex derivatives that catalyzed the 2008 financial crisis, is now being forced to shrink its headcount due to lack of funding. The CFTC is reportedly offering some of its employees buyouts and early retirements after it has been refused years of requests for increased funding. The agency reportedly has over 700 employees.
The CFTC started to inform some workers last month that it would be giving them as much as $25,000 to leave. These email communications were reported by Bloomberg. The agency is also trying to encourage some employees to consider an early retirement which would, in some cases, allow employees to keep their benefits.
Prior to the 2008 collapse, the CFTC was widely held to be somewhat of an afterthought. Back then, it was only primarily in charge of regulating agricultural futures. This changed after Congress bestowed upon the agency the responsibility of overseeing the swaps market after a global economic near-meltdown made it clear how dangerous these derivatives could be. The government likely felt like it had to do - well, something - to help justify almost $1 trillion in bailouts.
The CFTC's $249 million budget, however, hasn’t grown in size proportion what what the agency is responsible for today. For instance, the agency is now also tasked with regulating cryptocurrency derivatives after CME and CBOE both started to offer bitcoin futures last December. The head of the agency, Chairman J. Christopher Giancarlo, who was put into his position by President Trump, hasn’t been able to successfully lobby for more money since he started last year.
Erica Elliott Richardson, the CFTC’s director of public affairs, told Reuters back in May:
"We are absolutely astounded by the decrease in the CFTC’s budget. Chairman Giancarlo takes this budget decrease incredibly personally, and is currently meeting with our finance team to figure out a path forward for the agency."
That path forward seems to now be forcing employees out the door. According to Bloomberg, agency buyouts are only eligible for those who have had three years of continuous service in the federal government. Early retirement can be qualified for by having at least 20 years of government experience and being at least 50 years old. Additionally, any worker with 25 years of government service is eligible, regardless of age.
Back in July of this year, we reported on the CFTC's award of $30 million to a J.P. Morgan whistleblower who pointed out information proving that the bank neglected to inform its wealthy asset-management clients about conflicts of interest involving the bank's investment recommendations.
Once again, the Achilles heel of over-regulation rears its head: everything costs money. Theoretically, the more the government chooses to police the markets, the less effective and less cost efficient they may become. The CFTC making staff cuts with arguably the most responsibility its ever had is just another soon-to-be-forgotten brick in the wall of examples.