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CFTC Big To Treasury: Drop Dead

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Treasury Secretary Hank Paulson’s “blueprint” for revamping the financial regulatory system is already coming under fire from powerful agency heads. As early as Friday, even before the details of the plan were widely-known, the plan was lambasted by John Reich, the director of the Office of Thrift Supervision, which oversees the savings and loan industry. Immediately after Paulson’s speech this morning, Commodity Futures Trading Commission big shot Bart Chilton released a colorful and blisteringly critical statement describing the plan as “moving boxes around in Washington DC.”
Paulson’s plan would combine the Securities and Exchange Commission, which regulates equities and debt markets, with the Commodity Futures Trading Commission, which that regulates the exchanges trading commodities and financial futures. The two commissions have very different regulatory approaches, with the SEC favoring direct regulation and a rules-based approach and the CFTC favoring a principles based approach that relies heavily on self-regulation by commodities and futures exchanges. SEC head Chris Cox has been described as being disposed to supporting the plan.
After the jump, we delve into the dirty, metaphor-strewn past of the CFTC commissioner.

The thing you need to know about Chilton is that the man loves his metaphors. Last year, he described he commodities regulation in terms of highway safety. Politicians love these road metaphors—think about Al Gore with his information super-highway or Bill Clinton’s “bridge to tomorrow”—but Chilton really went the extra mile. "To continue with my traffic cop metaphor, it's like those commercials for drunk drivers: don't even try it, because the road blocks are set up, the sobriety check points are in place, and we'll make you walk the line. And if you stumble, we'll make you pay the price," he said.
This morning’s statement was no departure from form. This time it was a medical metaphor that fired up Chilton's prose.
“I think most Americans would prefer that government do our jobs, and that means doing everything possible to cauterize the subprime mess before performing major surgery on a regulatory system, parts of which are still very healthy,” Chilton said. “We shouldn't be about trying to cure what isn't sick. There is enough on the table, right now, that needs healing.”
So why the different reaction from Cox and Chilton? Part of it may be an anticipation of where the bureaucratic authority will shake-out. Despite media accounts describing the authority of the SEC perhaps being diminished by the plan, Cox may understand that the SEC apparatus will eventually dominate the regulation of all these markets. Clearly, its regulators have more respect and are regarded as more experienced than the CFTC. So this expectation might not be unfounded.
But the divergent reactions might also be a function of the different backgrounds of the two men. Cox is a creature of Republican party politics, with a long history of electoral experience and political ambitions to rise even further. He has been mentioned as a possible nominee to the Supreme Court, and may have his eye on a cabinet level position in a future Republican administration. He may even want to run for president himself. He may be ready to get on board with the blueprint because he wants to appear more reform-minded rather than a defender of bureaucratic turf.
Chilton, as far as we know, has never even run for dog-catcher. He’s been a long-term apparatchik, a member of the permanent regulatory class that dominates much of the administrative state from behind the scenes. He spent a the eighties and the early nineties as a legislative director to various congressmen, mostly those with farm-lobby connections. During the Clinton administration he served as deputy chief of staff to U.S. Secretary of Agriculture Dan Glickman. From there he went to Tom Daschle’s staff. Last year, he was sworn in as a CTFC commissioner. He has all the markings of a bureaucratic infighter tied to a lobby—the agricultural lobby—that might be worried it would lose influence under a new regulatory structure.

Statement of Commissioner Bart Chilton on Treasury Blueprint