Former Senator Blanche Lincoln and Mercatus Scholar Hester Peirce on Restraining the CFTC's Global Reach (with Lofchie Comment)

Former Senator Blanche Lincoln and former Congressional staffer Hester Peirce released articles titled, Filling the International Financial Reform Leadership Void, and Regulation without Representation, respectively, which urged CFTC Chairman Gensler to scale back his interpretation of the CFTC's authority to regulate non-U.S. swaps and swap dealers. Former Senator Lincoln generally praised CFTC Chairman Gensler, but also asserted that his expansive view of the CFTC's authority is not consistent with Congressional intent. In pertinent part, she states:

"Section 722(d) [of Dodd-Frank] states that the provisions within Title VII should only apply extra-territorially when they 'have a direct and significant connection with activities in, or effect on, commerce of the United States.' I realize some have interpreted the clause to be expansive. However, it was intended to be read consistently with the SEC's mutual recognition regime which, like the CFTC's substituted compliance system, has been in place and worked well for decades. That was at least my intention in the legislation and I believe should be the outcome of the Act's implementation."

Ms. Peirce, who is now a scholar at the Mercatus Institute, advances the same point, albeit from a policy perspective, rather than an interpretation of the words of the statute:

"Under the leadership of Chairman Gary Gensler, the Commodity Futures Trading Commission, which regulates the vast majority of swaps, has made these tough decisions [as to regulation of swaps] with little appreciation for practical reality or national borders. . . . Not surprisingly, the CFTC's 'we can regulate everything better' attitude has been an unwelcome distraction to foreign policymakers, who are busy crafting their own swaps regulations."

Lofchie Comment: In light of the CFTC's announcement of its Path Forward with the European Commission (as covered in today's news), it appears that Chairman Gensler is conceding that the CFTC must work with non-U.S. regulators.

See: Lincoln Article: "Filling the International Financial Reform Leadership Void"; Hester Peirce Article: "Regulation Without Representation".
See also: CFTC Commissioner Sommers Supports Wetjen, Democratic Senators Caution Gensler (with Lofchie Comment).