CFTC Commissioner Chilton Reflects on Changing Nature of Financial Industry

CFTC Commissioner Bart Chilton delivered a speech, on October 9 before the National Association of Credit Management, which focused on the changing environment of the financial sector and places where improvements should be made. 

Commissioner Chilton spoke about the the financial sector’s “unfortunate state of affairs,” discussing many banks that have violated trading laws in recent years, such as the London Whale case and the LIBOR manipulation cases.  To address these negative developments, Commissioner Chilton suggested updating the penalty regime by imposing greater monetary fines and sending violators to jail, as well as initiating a cultural shift in the financial sector.  Chilton stated that, because it is difficult to regulate business ethics, firms must adopt a more independent culture which promotes transparency, accountability, and customer protection.  To do this, Chilton recommended, credit and risk managers must be incentivized through greater recruitment and better rewards. 

Chilton went on to discuss how the government shutdown impacted the CFTC, pointing out that they were one of the few federal financial regulators that were forced to close.  According to Chilton, the CFTC had the funds to remain open; however, Congress had never approved amendments that allowed the CFTC to access those funds, therefore forcing the CFTC to shut down.

Lofchie Comment:  Commissioner Chilton’s calls for greater regulatory authority to impose sanctions seems disconnected from reports of massive fines, including those imposed by the CFTC.  In many instances where the government imposes a sanction, it is not even clear that a law was broken.  Commissioner Chilton is now advocating for authority to impose a fine that is sufficient to put an alleged wrongdoer out of business for any violation.   That way, the regulator may enter into any “settlement” negotiation with a massive advantage: the ability to offer the accused the choice either of settling or becoming subject to fines that would make them insolvent.

See: Commissioner Chilton’s Speech.
See also: YouTube Video.