Regulators should be like the best referees at a sporting event. They are there to make sure that things are played by the rules, but they shouldn’t be noticed them during the game. They should also make sure that they don’t pick winners and losers, and let the flow of the game (re:market) do the picking.
Then the best players influence outcomes, not the zebras.
Gensler is trying to pick winners and losers with every line of policy the CFTC turns out. Instead of monitoring the industry and prosecuting wrong doing, they are going after legitimate businesses and making it tougher for them to operate.
Case and point: Jon Corzine. Nary a peep from the CFTC commissioner in the biggest fraud ever seen in the commodities business. No prosecution. In fact, protection from the Department of Justice. Protection from the Wall Street banks.
Yet, as the Wall Street Journal aptly writes today, the CFTC is trying to insert itself into all kinds of legitimate business dealings worldwide to the detriment of the industry.
Gensler has been on a one man mission since his appointment to wreck the commodities industry as we know it. He is no friend to the exchanges, or traders that use them. Ironically, he is cronies with the big US banks and has regulated to help assist them in their businesses. Dodd-Frank gave him a license to put the tentacles of government into every nook and cranny of business.
The result is less volume on established futures exchanges and less transparency. It comes as no surprise that foreign banks are beginning to choose not to do business inside US borders. Now all customers are forced to do business with US banks only. Predictably, since Gensler has begun creating an artificial monopoly, they are raising their fees.
This all gets passed on to consumers.
The lack of transparency the CFTC creates through position limits, limits as to who can trade, margin requirements and other means creates incentives for customers to use private markets that aren’t accessible to the public for risk management. That drive price discovery underground.
Transparent price is the most important data point in a marketplace.
Streetwise Professor has a litany of posts on how the CFTC has bullied for central party clearing and one size fits all, along with contemplating the potential economic damage that could result. I don’t know one industry person that prides themselves as a free market advocate that speaks highly of Gensler’s tenure.
The only people singing his praises are crony capitalists and career bureaucrats. That ought to tell you something.
Tip of the hat to Crossing Wall Street.