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| Next, the outgoing chair of the Commodity Futures Trading Commission, reflecting on his tenure over the last four years, ahead of the Trump administration's taking office. | ||
| He sat down for a conversation with former Treasury official Aaron Klein at the Brookings Institution. | ||
| Good morning. | ||
| My name is Erin Klein. | ||
| I'm the Miriam K. Karliner Chair and Senior Fellow in Economic Studies here at the Brookings Institution. | ||
| And on behalf of Brookings Center on Regulation and Markets within Economic Studies, let me welcome you here in Washington on a still snowy Wednesday morning, where we're here to talk about the future of financial regulation, particularly as it relates to commodities and futures. | ||
| And when you talk about the future of regulation for futures, you're really looking out in the forward. | ||
| And we're here joined by Chairman Benham, the 15th chairman of the Commodities Future Trading Commission. | ||
| I'm going to introduce him in a second, but I just want to underscore to folks that you may think of this as abstract financial regulation and its finest derivatives, futures, commodities. | ||
| On the one hand, you may say, this is stuff that moves markets in Wall Street, but doesn't affect my life, or is this stuff that we used to read about when you were looking at cotton futures and how farmers, when we were an agrarian society, dealt with that. | ||
| And that history is incredibly important to understanding why the CFTC exists, why it's an independent agency, why the United States alone, among major global powers in the world, separates our regulation of capital markets between commodities and futures and stocks and bonds. | ||
| Everybody else has one capital markets regulator. | ||
| We have two. | ||
| This comes from the unique role of agriculture in American society and its regulation. | ||
| But I want to say something a little different to you. | ||
| Everybody who flew home for Christmas or Thanksgiving flew in part because of a commodity in a future. | ||
| Businesses all around the world that we depend on that provide services need to understand their cost of goods in the future. | ||
| Markets need to understand pricing in the future, or at least the consensus best estimate of future pricing, to understand their business decisions. | ||
| Our economy depends upon information about what is going to happen in the future. | ||
| And those markets are incredibly important and translate into day-to-day activities, making our life better and more fulfilling, allowing us to buy that plane ticket and allowing the company to know how much their gas is going to cost when you hit the runway. | ||
| And those markets, while they're incredibly important, are easily overlooked. | ||
| And if they're not regulated well, they can be manipulated. | ||
| And I don't need to tell folks in this room or anybody who decided to tune in to spend their morning thinking about the future of financial markets and future regulation, the problems that occur in market manipulation and why we need tough and strong regulation. | ||
| And that's why Chairman Benham has done such a fantastic job as the 15th chairman of the CFTC. | ||
| I served as a commissioner since 2017. | ||
| He'll tell you quite a bit about his role, but I just want to highlight three things because in Washington, people are often policy as it comes to financial regulation. | ||
| And three things that the chairman prioritized during his tenure, he had the first ever heads of artificial intelligence, the first data scientist, and the first diversity officer, chief diversity officer, to give you an inkling into the concepts and thoughts as he's molded this organization to tackle the challenges that behold our markets and our society today and in the future. | ||
| He also had the privilege of serving as vice chairman of the International Organization of Securities Commissioners because markets are global. | ||
| And if you're not interacting on a global basis, you're missing the picture. | ||
| In addition, while he has fantastic and strong New Jersey roots, having worked in the state of New Jersey, a state I hold in great respect, he has seen the wisdom and beauty of Maryland and resides in the great state of Maryland in Baltimore with his wife and children. | ||
| So from one Marylander born and bred to another who's come here, let me say welcome you to the stage of Brookings and thank you for your service and we're excited to hear what's in store. | ||
| That's a hard act to follow. | ||
| I do want to thank everyone who's here. | ||
| I know that a lot of folks are listening virtually, but it is a cold and post-snowy day here in Washington in the mid-Atlantic. | ||
| We've been shut down for a couple days, so knew it would be a low attendance, but it's a good crowd here and looking forward to these remarks. | ||
| Thank you again, Aaron and Brookings, for hosting. | ||
| Today will, as Aaron mentioned, be my final remarks as the CFTC's chairman. | ||
| I think it's a little bit early to fully process and articulate in a salient way what the last seven years have meant for me. | ||
| I can say without hesitation that I approach every part of the job with the utmost focus and care. | ||
| I've always prioritized above all else our mission-critical oversight and enforcement duties aimed at protecting customers and supporting reliable and resilient markets. | ||
| Within our largely static budget, I've insisted that we build our expertise and support necessary investments in technology, infrastructure, and employee upskilling so that we can continue to proficiently fulfill all of our responsibilities. | ||
| By design, the exchange-traded and clear derivatives market structure has proven not only resilient, but a beacon through challenging times. | ||
| In 2010, the derivatives model provided a path forward from crisis and served as the blueprint for SWAPS market reform. | ||
| More than a decade later, Treasury Futures Clearing is following suit. | ||
| And looking back, the almost 15 years of organic growth in the historic markets, the introduction of new products, including the digital commodity asset class, and the significant expansion of market participants, both institutional and retail, through technology, have not been met with calls for wholesale or even moderate regulatory reform. | ||
| Rather, ongoing success has been achieved by those who recognize that we are stewards charged with building on solid foundations and not laying waste to what was never broken. | ||
| With that in mind as chairman, I've always made it my priority to always adjust the CFTC's regulatory and enforcement initiatives to meet the matter at hand. | ||
| In my seven years alone, we moved through a pandemic, weathered wars, made it through market disruptions, realized a technological revolution, welcomed in the rise of climate finance, migrated to the cloud, broken ground with DeFi and disintermediation, managed multiple crypto cycles, surfaced scandals, and exercise agency and opportunity towards improving governance, margin, and clearing. | ||
| We've accomplished a lot more, and there's still much more to do. | ||
| There's always more to do. | ||
| I'm going to resist the urge to reminisce too much. | ||
| However, I do want to take a moment to acknowledge and reflect on the issues and accomplishments that I believe benchmarked my time at the Commission and will continue their own trajectory in the years to come. | ||
| One of my earliest efforts as sponsor of the CFTC's Market Risk Advisory Committee focused on interest rate benchmark reform. | ||
| Encouraged by the broad market participation in global cooperative and consultative efforts towards transitioning away from LIBOR, the MRAC contributed through the work of the Interest Rate Benchmark Subcommittee, which promoted LIBOR transition through various initiatives. | ||
| The successful transition away from LIBOR has resulted in safer, more reliable, and stable financial markets. | ||
| The MRAC also addressed climate-related market subcommittee risk, which released a report in September of 2020 called Managing Climate Risk in the U.S. Financial System. | ||
| This was the first of its kind among a U.S. government entity. | ||
| Among the 53 recommendations to mitigate risk to financial markets posed by climate change, the climate risk report identified pricing carbon as a fundamental element for financial markets to efficiently allocate capital to reduce greenhouse gas emissions. | ||
| Encouraged by the tremendous support for the climate risk report and cognizant that the CFTC's focus on risk mitigation and price discovery put us on the front lines of the nexus between financial markets and decarbonization, I established the CFTC's Climate Risk Unit shortly after becoming chairman, which ultimately led to the Commission to finalizing guidance regarding the listing of voluntary carbon credit derivative contracts in September of 2024. | ||
| Since the first Bitcoin futures contract and binary options self-certified in 2017, I have urged for greater action to provide legal certainty with respect to rapidly developing fintech products like cryptocurrencies. | ||
| There have been a few targeted efforts, but overall, the digital asset market has continued to integrate into traditional financial institutions without comprehensive regulatory guardrails. | ||
| Concerns regarding customer protections, increasing instances of fraud and market abuse, broader market resiliency, and even financial stability are intensifying in the absence of federal legislation. | ||
| We've seen this before in our history, where we leave large swaths of finance outside of oversight and responsibility, and we have seen time and time again that it ends badly. | ||
| American investors, small and large, have demonstrated eagerness to incorporate digital assets into their portfolios. | ||
| It's our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place and that illegal and illicit conduct is swiftly addressed. | ||
| For the CFTC, whose role is yet to be determined, the crypto era has highlighted the need for our rule set to address the derivatives industry's current course. | ||
| As more entities seek to move away from the traditional and familiar models, which have evolved over decades and withstood countless shocks, towards structures that combine unique activities around increasingly novel products, new questions ultimately arise. | ||
| Issues regarding vertical integration, disintermediation, and decentralization raise important questions about conflicts of interest, the strength of capital, margin, and segregation requirements, and the role and responsibilities of self-regulatory organizations. | ||
| Building confidence, supporting integrity, promoting innovation, and fostering evolution all comes down to data. | ||
| Indeed, the single most important lesson we learned from the financial crisis and the foundational premises of the Dodd-Frank Act is that markets are interconnected. | ||
| The common language that ties and binds participants' practices and practicalities to all we endeavor to achieve is data. | ||
| Focusing on my time as chairman, the Division of Data was a relatively new division that had been created from the CFTC's IT department and parts of the Division of Market Oversight. | ||
| DOD had a couple dozen talented and hardworking staff, but with Dodd-Frank priorities wrapping up and a host of new opportunities, it lacked a strong vision to leverage its capabilities to benefit the agency's data analytics foundations. | ||
| We made several strategic DOD leadership hires to ignite the potential of the agency's analytics capabilities for years to come. | ||
| Soon after I brought in a new chief data officer and DOD director, we hired the CFTC's first chief data scientist, who leads the development of new analytics services and tools for use across the agency. | ||
| The chief data scientist's duties include upskilling staff to enhance their analytics and AI capabilities. | ||
| In the past year alone, 300 of our approximately 700 employees have taken a data science, programming, or cloud-based tools training. | ||
| We are laying the foundation for a sophisticated analytics program that staff from across the agency can leverage to inform policy, contribute to ongoing oversight, and enhance enforcement capabilities. | ||
| This work is targeting all the typical data pain points and optimizing opportunities along the data lifecycle. | ||
| The AI vision I often spoke about in 2023 is well on its way to realization. | ||
| Last month, CFTC staff issued an advisory on the use of AI by CFTC registered entities and registrants. | ||
| The advisory followed a months-long effort by the staff as a staff task force that I created to engage with market participants, AI technology providers, domestic and international regulators, and other stakeholders to understand existing and potential AI use cases and risks in the derivatives markets. | ||
| Turning to the more routine business-as-usual agency duties, in early 2023, I outlined a commission agenda for the years 23 and 24 to consider and vote on roughly 30 regulatory and policy matters in addition to any outstanding proposals from the prior year. | ||
| I bucketed the agenda into themes, enhancing risk management and resilience, strengthening customer protections, promoting efficiency and innovation, improving reporting and data policy, addressing duplicative regulatory requirements, and amplifying international comedy. | ||
| The themes reflected over a decade of testing the fitness of the post-crisis reforms as punctuated by the recent perfect storm that culminated in branding 2022 as a historically challenging year across all commodity complexes. | ||
| There was some more fine-tuning to do, and certainly we needed to address several of the stopgap measures in place that fell short of providing the binding assurance of Commission action. | ||
| And then there were a few issues that had emerged amid the storm clouds and innovative flares that required us to consider the need for regulatory intervention. | ||
| In all, we completed roughly two-thirds of the initial items on my list and made significant progress on the rest that should provide a strong foundation for future completion. | ||
| I don't think any chairman or commissioner ever has the time and the tailwinds to complete all their endeavors, and indeed, it is our nature as stewards to leave some business unfinished for our successors. | ||
| No remarks about the CFTC can be complete without a discussion of our enforcement program. | ||
| We accomplished our mission through a three-pillar system of effective self-regulation, direct oversight, and a strong enforcement program. | ||
| Early in my CFTC tenure, I shared my philosophy on enforcement and the relationships between the regulator and the regulated. | ||
| Highlighting recent enforcement trends, I focused on the needs to check in on one another, to build trust, and to work on relationships. | ||
| Cooperation and transparency would be key to ensuring that when newcomers enter the derivatives markets, we bring them into the regulatory fold and the community. | ||
| I was cautious because there were risks that the increasingly automated environment may be providing a false sense of supervision and monitoring for risky behaviors. | ||
| We needed to engage directly and work towards building regulatory structures that would absorb and buffer, limit and not amplify mistakes, reckless behavior, and outright misconduct, with enforcement as the consequence and not the instigator. | ||
| My philosophy remains the same, and I'm constantly reminded that as a regulator of the derivatives industry, relationships, cooperation, and coordination remain our highest priorities. | ||
| And though some may disagree, I believe that our enforcement program executes its mission with utmost commitment towards holding individuals and institutions accountable, deterring bad actors, and promoting confidence in U.S. derivatives markets, which continue to be the premier mechanism for global price discovery and risk management. | ||
| As I have said throughout my tenure at the Commission, the best principles-based rules in the world will not succeed absent clear guidance from regulators, adequate means to measure and ensure compliance, and willingness to enforce compliance and punish those who fail to ensure compliance with the rules. | ||
| As chairman, I kept to my word and did not push forth a proposal, policy, practice, procedure, or enforcement recommendation that did anything else. | ||
| I delivered my first prepared remarks as a commissioner in November of 2017 at Georgetown University. | ||
| I vividly remember walking through campus on that crisp autumn evening in Washington, feeling a bit nervous about my first speech, which focused on the importance of CFTC markets, the lingering impacts of the global financial crisis, and the critical role derivatives markets play in the global economy. | ||
| In many respects, not much has changed. | ||
| In other respects, so much has changed. | ||
| With globally traded commodities, investments, and all manner of transactions executed, cleared, and priced off CFTC regulated entities in U.S. dollars. | ||
| CFTC derivatives markets are critical to our nation's net economy and long-term national security. | ||
| This position cannot be taken for granted. | ||
| For those of us entrusted to support and safeguard this privilege beyond our tenancy for decades to come, we must act with an eye towards any one or anything that may undermine this supremacy. | ||
| Geopolitical stress is increasing our need to be vigilant and that macroeconomic waters remain choppy as inflation lingers as a threat. | ||
| And perhaps even more so is the influx of new entrants with a voracious desire to list contracts on anything and everything that may entice a growing cohort of speculators eager to participate and fearful of missing out. | ||
| Innovation has changed the modern methods of derivatives trading, and our regulated exchanges bear little resemblance to those that existed even 50 years ago when the Commission's first chairman accepted his appointment. | ||
| Their primary function as a means for hedging and price discovery remains paramount and continues to rely upon a fluctuating mix of speculators at the forefront of forecasting changes in the value of commodities and pure gamblers playing the odds for the thrill of a payout, their symbiotic relationship always in the crosshairs of legitimacy. | ||
| It's of no moment that the line between the two is increasingly indistinct. | ||
| What matters is the proposition that when derivatives trading occurs on an organized exchange subject to strictly enforced rules and oversight and with a system of effective self-regulation, there should be no mistaking the experience for gaming, gambling, or anything less than the bustling throes of commerce. | ||
| I say this now because there is much to distract the CFTC from what is important, from what we are charged with doing. | ||
| Today, technology is driving change in the financial markets faster than it ever has. | ||
| Products and structures are evolving not only to meet demand from a growing customer base that is diverse in terms of geography, sophistication, and objectives, but also to attract participants from the broader population whose interest is peaked by the promise of financial inclusion and prosperity made possible by the tech-driven ease of access to regulated markets. | ||
| To that end, we increasingly find ourselves poised to make decisions that blow past our historical roots in the agricultural markets and leave us at the threshold of the increasing expansion, transformation, and sometimes gamification of the derivatives markets. | ||
| Change continues to push markets and regulators into areas ripe for exploration. | ||
| It's exciting. | ||
| There are some changes in the rhythm, but familiar cycles, scenery, and people, keep us grounded as we advance towards creating greater efficiencies, heightening protections, improving risk management, and welcoming new players. | ||
| Also, designing new products and ultimately building new structures. | ||
| Of course, however swiftly we navigate, we can never do so without caution, deliberation, and maneuvering around a fair share of unseasonable conditions. | ||
| Fortunately, as we've seen time and time again, we have the wisdom of the past as we forge our future. | ||
| I'm stepping down as chairman at noon on January 20th, and I look forward to working with President Trump's team in supporting an orderly transition between now and inauguration. | ||
| And as I noted in a public statement yesterday, my final day at the CFTC will be shortly thereafter on Friday, February 7th. | ||
| Meeting demands for accuracy, legitimacy, and transparency require responding to market participants, and we cannot do that effectively if we are preoccupied with falling into a spiral of uncertainty or sealing the gates of government from fear of public engagement. | ||
| I hope my successors trust their instincts, trust one another, and trust the process, the cycles, the seasons, the eras as they bring us someplace new, But always with a nod to where we have been. | ||
| Thank you very much. | ||
| Well, Mr. Chairman, thank you for those remarks. | ||
| And it's an honor and a privilege to sit and reflect for a moment before we talk about the future on what you accomplished. | ||
| And you described having achieved two-thirds of your stated objectives, which I want to say is pretty impressive. | ||
| Because one thing that really has always stayed with me, when I was a young staffer in the Senate, where I know you spent some time as well, I worked for the Great Center for Maryland, Senator Paul Sarbanes, who had been the head Democrat, the ranking member on the banking committee for six years when I joined. | ||
| And the Senate was 50-50 at the time, and a lot of people were speculating, had Senator Strom Thurmond died, the party would, the control would change. | ||
| And we spent a whole brainstorming session for months coming up with our agenda. | ||
| And sure enough, the Senate flipped in May. | ||
| Senator Jim Jefferts switched, and we became chairman to what Congressional Quarterly called the largest ideological swing of any committee in the Senate from conservative Phil Graham to liberal Paul Sarbanes of Maryland. | ||
| And we had a 12-page thoughtful agenda. | ||
| Senator Sarbanes was a Rhodes scholar and a gentleman, and he had 12 pages of what he was going to accomplish in his chairmanship that he'd been waiting six years for. | ||
| You can Google search the document. | ||
| You will not find the word accounting, which is probably what Senator Sarbanes' chairmanship and the Sarbanes-Oxley Act is best known for. | ||
| Well, why? | ||
| Accounting wasn't one of the top issues expected to confront America in May of 2001. | ||
| You also won't find the word terrorism. | ||
| I worked on the Terrorism Risk Insurance Act, another major bill. | ||
| The unexpected comes. | ||
| So I want you to talk for a second about what it is on that two-third list that you did accomplish, that you were so proud that you were focused on, but also reflect for a second on the unexpected things that weren't on your list when you started. | ||
| But now you look back on it and say, wow, we rose to that challenge. | ||
| Yeah, thanks, Aaron. | ||
| And again, it's great to be here and to reflect a little bit on the past seven years, but really, you know, three and a half years as chair. | ||
| And the unique position I had, and I think this is fairly unique relative to other chairs, is, as you mentioned, I was a commissioner since 2017, appointed by Trump early on in that administration and then confirmed in September of 17. | ||
| So it was a minority commissioner for three plus years. | ||
| And then as you pointed out, also, I worked in the Senate as counsel for six and a half years with one of my responsibilities after Dodd-Frank to oversee the implementation of Title VII of that bill, which was the derivatives title. | ||
| So seeing the agency evolve over 15 critical years, if you think about today going back to 2010, 2008, and the changes that it went through, I mentioned this in my prepared remarks, how the futures model, the exchange traded, cleared model served, our structure served as a model for swaps reform. | ||
| And then as some of you know in the audience and probably listening to, that we're going through at the SEC and Treasury market reform to clear those products as well. | ||
| Again, the futures model serving as the basis for it. | ||
| And as I thought about what my agenda would be, I reflected on the agency and where it had been, where it was today, what it had been able to resist in terms of market volatility and challenges. | ||
| And this was certainly COVID and massive commodity price fluctuations in the spring of 2020, hitting obviously the physical commodities, but also the financial complexes like interest rates and FX and credit as well. | ||
| And seeing that resilience in the cleared space. | ||
| A year later, we saw the invasion of Ukraine by Russia, and again, a direct impact on commodity prices. | ||
| So, as I thought about the agenda, when I got confirmed as the permanent chair in 22, it was what do we need to do to strengthen our markets, but not also undermine what they've proven to be, which is quite resilient and quite effective. | ||
| So, we worked around, as I mentioned in my prepared remarks, enhancing customer protections, enhancing risk management, focusing on cyber and data policy and AI, focusing on governance issues and conflicts of interest. | ||
| Again, areas that I mentioned in the speech, which didn't necessarily require major market reforms or market structure reforms because the market structure is sound. | ||
| It was really just surveying my directors, my leadership team, and saying where can we tighten up the rules that are otherwise maybe slightly weaker than we want, and to strengthen markets and build consensus with both the commission and the stakeholder community so that we can get this done. | ||
| Now, this is my thought in 2022 when President Biden puts me as acting. | ||
| I was very cautious about being aggressive in that first 21 year because I was still trying to become the permanent chair, very difficult and dicey political position because you want to get that spot, but you've got to be careful. | ||
| It's a big difference between acting and confirmed. | ||
| Oh, yeah, it's big time. | ||
| And, you know, my staff is here, and they're hugely responsible for my success over the past couple years, but very much remember those first, you know, having the privilege and honor to be acting was a huge success on January 21st, 2021, and having that responsibility. | ||
| But ultimately, I was trying to get the permanent position, and I wasn't appointed until September of 2021. | ||
| So, quite a bit of time, a little bit longer than typical for a CFDC chair. | ||
| Better than the OCC. | ||
| Better than CC, that's true. | ||
| Sorry, Washington joke. | ||
| President Biden never confirmed a comptroller of the currency in his four years. | ||
| But we have a great acting comptroller, and we were lucky to have him. | ||
| But point being is, you know, you're in this position, and it is, in fact, acting, and you have to respect that, right? | ||
| You have to respect that title and understand that you are not in that position to necessarily push policy and make change because you truly are a steward, right? | ||
| We're always a steward permanent or acting, but when you're acting, you truly are a steward, and you got to be cautious. | ||
| So, I get the nod finally in September. | ||
| I get confirmed in late December of 21, sworn in the first, probably literally to the day, if not close to the day, three years ago, four years ago. | ||
| And we roll into 2022 and we start rolling out the agenda. | ||
| I start doing the rulemaking process, which we should talk about. | ||
| It's very laborious, it's very time-consuming, it's very resource-consuming, and you got to go through it. | ||
| And you have to do it very prescriptively and methodically because if you don't, you're violating the law. | ||
| Ultimately, as 2022 emerged, and this is the second part of your question, you knew crypto and digital assets were going to be an issue, right? | ||
| And we knew this at the CFTC going back a decade, essentially, when we brought our first enforcement case. | ||
| But when we had the futures contracts listed, which I mentioned in my prepared remarks in 2017, it really put the agency on the map in terms of the regulated federal market agency that was overseeing a crypto type of financial contract, albeit a futures contract, but still a regulated futures contract. | ||
| With that, and with the, and if you think about the ebbs and flows of the crypto cycle over the past 10 years, you know, as we got into 2017, you started to have a little bit of a price burst up to 20, 25,000. | ||
| And then you started to see an escalation close to 60, 70,000 in this Bitcoin. | ||
| Bitcoin, right? | ||
| Sorry to, yeah, yeah, to clarify that. | ||
| And ultimately, one of the unexpected things was, you know, dealing with the FTX implosion in late 2022. | ||
| And also, many folks don't know this, but they had an application before us as a regulated entity that was very, very novel in its market structure proposal, and we had to deal with it. | ||
| And we were very public and deliberative about it, asking for comment. | ||
| There was a congressional hearing called in the House. | ||
| So it consumed a lot of time. | ||
| And then the crypto market continued to grow. | ||
| We brought a lot of cases in 2022. | ||
| Obviously, FTX imploded, but in that same year, we had a number of failures in the hedge fund space and the crypto space. | ||
| So it started to really, you know, to your point, create an issue and a set of issues that you don't plan for. | ||
| And I ended up testifying a number of times over the past four years, specifically on crypto, crypto legislation. | ||
| And, you know, I enjoyed it. | ||
| It was a moment where you wanted to demonstrate to the larger public what the agency is capable of, what we were observing as a frontline regulator and cop on the beat. | ||
| And this is the enforcement cases I talk about. | ||
| But ultimately, you know, again, to answer your question, you have this agenda, you put it into a silo, you ask your staff to keep moving on it, to stay focused, even though if you read the daily news clips in the CFTC, as we discussed, you probably saw over the past 24 hours, everything tends to be about the hot, sexier issue, which in this case is crypto, some prediction markets, and other things. | ||
| So it is difficult. | ||
| You expect it. | ||
| I talked to my predecessors. | ||
| You get advice. | ||
| We all know it. | ||
| You and your former boss dealt with it 25 years ago. | ||
| But you can plan as much as you want, but ultimately you're going to deal with so many different crises and issues, whether it's geopolitical wars, COVID, returning to work, and some of the domestic things you have to deal with the agency. | ||
| But I do think the key way to succeed and to actually get the agenda done is to make sure you can essentially multitask, but keep everyone focused on the task at hand and do things in multiple streams. | ||
| And ultimately, I think getting that two-thirds number, crisis or none, is still an accomplishment because you always will deal with headwinds and barriers. | ||
| But we were able to deal with a lot of different issues, some expected, many not expected, and in the end, very proud of what we were able to come out with. | ||
| So let's dig into the digital asset situation because there's something that you said, and I want to quote to you from your prepared remarks. | ||
| You said that you stand with the CFTC to fill this gap. | ||
| There's a regulatory gap that's been created by digital assets and crypto, who, depending on which agency you are or what side you can argue, really don't fit nicely into this 20th century distinction between security and commodity, between future and asset. | ||
| And Washington has been a buzz about with different legislative proposals. | ||
| Outgoing, former chairman now, McHenry had a bill on stable coins. | ||
| The CFTC, the SEC, the Federal Reserve have all been involved in regulatory turf debates about who's in charge, who should be in charge, who is currently in charge, who should be in charge, who they can convince Congress to put in charge. | ||
| And you said in your prepared remarks, you think the CFTC should fill this gap and you're prepared both. | ||
| You said during your tenure and you said in there and after that you're going to be an advocate for the CFTC. | ||
| Why? | ||
| Why should the CFTC, which is generally viewed, you know, you can tell me I'm wrong in fact, but you can't tell me I'm wrong in stating the opinion that the CFTC is viewed as a smaller, more junior agency, certainly to the Federal Reserve and the SEC. | ||
| Why should the CFTC fill this gap? | ||
| So I want to address that first. | ||
| We're certainly smaller. | ||
| I mean, it's like quantitative. | ||
| It's just math. | ||
| Like we have a thousand people, but there's a reason we have a thousand people. | ||
| Appropriators, congressional appropriators, and authorizers, as any American taxpayer would expect, gives us the money that we need. | ||
| And that's the money. | ||
| We're largely within a 10% range of what I think my budget request is. | ||
| But like, you shouldn't expect Congress to give us any more money than we need. | ||
| We have a very large regulated market we oversee, but we have generally the right number of people, and it is concurrent with the number of registrants we have. | ||
| Junior, totally take issue with that characterization. | ||
| We have a responsibility. | ||
| We have a number of experts in the derivatives industry, which is arguably the most complex and complicated financial market among many financial markets. | ||
| And we have our role. | ||
| You said this in your remarks. | ||
| The U.S. is very unique. | ||
| We have a patchwork of regulators, and it is because of history going back with the CFDC in 1922, the Federal Reserve in 1913, the SEC in 3334, FDIC, CFPB, more recently, yada, yada, yada, right? | ||
| We all know the story. | ||
| But the bottom line is it is unique. | ||
| We have the biggest markets in the world, and each part or segment of the market has essentially a dedicated regulator. | ||
| I know this frustrates a lot of people. | ||
| There's been a lot of policy discussions about merging different agencies, even in the past couple of weeks, both on the prudential side and the market side. | ||
| Ultimately, I think it's a net positive. | ||
| I think we need dedicated regulators for markets that literally are exponentially bigger than any other market across the globe. | ||
| And as you pointed out in your remarks, so critical to everyday Americans, whether it's food on the table, fuel for homes and traveling, interest rates for student loans and mortgages, et cetera. | ||
| The idea that we would fold agencies within each other when they have such important mandates and responsibilities, I think is a little careless. | ||
| And we should think very hard about doing that before we even take action. | ||
| What should we do? | ||
| I mean, digital assets are exploding. | ||
| Okay, right? | ||
| Digital assets is in a unique situation where you have a legacy statute, both the Commodity Exchange Act, the Securities Act of 33 and 34, that address different parts of the market, securities and commodities. | ||
| These technologies, these assets have emerged, will focus on Bitcoin that is technically under current law defined as a commodity. | ||
| We are a derivatives regulator. | ||
| We only focus on a specific part of the financial markets, not the actual physical commodity itself, but a financial contract that sits on top of the commodity. | ||
| So we find ourselves over the past four years in a situation where between two market regulators, there's a gap. | ||
| And, you know, not a huge surprise when you have multiple regulators. | ||
| It's like arbitrage, but we have a gap. | ||
| And this is where and why I've been calling on Congress to fill this gap and to define the tokens in a way that one of the regulators, and I've called for us to be the regulator, to be able to have the authority to oversee and regulate this new financial asset. | ||
| Do you think there's specific parts of that filling the gap that need to be, that Congress, that your successors need to be focused on both in terms of fixing something or managing the world in which they haven't fixed something? | ||
| Because these current, these, you know, it's not like stocks that are just being randomly listed or going on. | ||
| I mean, you know, I'm getting text messages all the time from random people about FartCoin and Hawktua coin. | ||
| Yeah. | ||
| Right? | ||
| I mean, these sound like jokes until you look at the dollar amounts that get invested in these things, and they're real. | ||
| They're out there. | ||
| And people are today dealing with that. | ||
| What should we do? | ||
| And that's the point I think that I've tried to make over the past couple years, because in this four-year cycle of ebbs and flows and peaks and troughs, there have been moments where the naysayers and the cynics had said, oh, I was right. | ||
| You know, this stuff should just go away. | ||
| And the idea of legitimizing it through federal regulation is absolutely preposterous. | ||
| Why would you do that? | ||
| The imprater of a U.S. federal agency over fart coin. | ||
| I mean, come on, why would we do that? | ||
| But in essence, this market has persisted. | ||
| It is at its arguable peak right now. | ||
| There is large-scale adoption by traditional financial institutions and many retail investors. | ||
| And proof is in the enforcement actions both the CFTC and the SEC have been bringing for the better part of a decade. | ||
| And I think as a regulator and as chairman of the agency, in this binary choice, I say this often between legitimizing an asset class that is relatively new and perhaps questionable by some versus leaving U.S. and American investors vulnerable to fraud, manipulation, and losing their net worth. | ||
| I take legitimizing it and protecting U.S. investors all day long. | ||
| Because, one, I think that's what our responsibility, our core responsibility, is as a regulator and the government is, but also we've seen this too in history. | ||
| When you have regulation and you have, you can shine the light on something that's otherwise in the dark and opaque, the sort of cream will emerge and come to the top. | ||
| Everything else will kind of go away. | ||
| And I think among hundreds, if not thousands of tokens that probably exist, if there are going to be some or many that persist in time and are traded as commodities or securities, regulation will expose and prove that. | ||
| All right. | ||
| Well, let's talk a little more then about that theme because you discussed in your things about an allowable contract. | ||
| And I think the line, the quote that I had was: the line is increasingly indistinct between what ought to be allowable and what isn't. | ||
| And you talk about the gamification, and I'm old enough to remember that at one point we didn't have gambling other than in Atlantic City and Las Vegas. | ||
| And now we have it in our pocket. | ||
| You can be betting almost anything on your phone at any time. | ||
| And this gamification, these contracts have popped up. | ||
| I mean, you talked about the law says that you're not allowed to do anything that's quote gaming. | ||
| The CFTC is supposed to stop gaming and the public interest. | ||
| And quote, there was a contract out there about what was going to happen to one of the worst Marylanders I can think of, Luigi Mangioni, the person who allegedly assassinated the CEO. | ||
| People start speculating and writing contracts on his extradition. | ||
| I mean, is that, are we going to become a society where people are wagering on whatever horrific act occurs on the television? | ||
| And how is the CFTC going to stop that within the existing statute? | ||
| Or should they? | ||
| Or should we be in that situation where the public is betting on everything? | ||
| So, in addition to gaming and public interest, that sort of series of prohibited contracts or financial products includes war, assassination, terrorism, gaming, anything that's against the public interest, and also anything that's illegal at the federal or state law. | ||
| Paraphrasing a little bit, but that's generally onions. | ||
| Onions, yes. | ||
| And box office movie futures. | ||
| And those are more explicit because onions were tried to, someone tried to corner the onion market, I think, in the 60s. | ||
| And as you remember well, box office futures from Dodd-Frank. | ||
| And also olive oil, by the way. | ||
| Some of these things spill like specific carve-outs, and others feel like conceptual situations. | ||
| And how do you handle that? | ||
| So, how should they handle that? | ||
| Very difficult because what you're speaking of are derivatives called event contracts that are essentially payouts based on an event occurring or not occurring. | ||
| And there is utility to these markets, and they've been around for quite some time. | ||
| And you could be a commercial end user or someone who relies on power production or power consumption and need to know what the temperature is on any given day or over a period of months. | ||
| There are event contracts on what the Federal Reserve will do in terms of interest rates and the FOMC in terms of what it will do at its next meeting. | ||
| But as I said, and as you noted, the line is becoming increasingly blurred because the statute that we have identifies a series of events that are prohibited. | ||
| But we have, because of phones and because of access to markets, all things I mentioned in my remarks, we have a new cohort of market users who really want to bet on everything and anything. | ||
| So political elections is one thing that has come up. | ||
| I've spoken about that a lot. | ||
| We're in the middle of litigation, so I won't get too far into it. | ||
| But there was a district court decision in the DC district court in September that ruled against the CFDC and said that at this point, these contracts are permissible. | ||
| Fine, I'm going to respect that decision. | ||
| You fought against betting on the election hour, against contracts on election futures as being not in the public interest. | ||
| And this specific judge said, no, no, no. | ||
| You know, everybody wants to know who's going to win. | ||
| And, you know, seeing futures on who's going to win is permissible. | ||
| So more technical than your sort of synopsis of I'm an economist, not a lawyer, but essentially, you know, it's not gaming and these are permissible. | ||
| So you can now bet on elections on CFTC regulated markets. | ||
| You mentioned this contract about Mangioni and again, a step that the contract was listed for a while and then was pulled. | ||
| But my point is, as every day goes by, it is very important, I think, for my successor to think about the origins of the agency and the origins and the reasons for the products that exist. | ||
| And you mentioned this, you know, our markets date back to the 19th century, the 1850s in Chicago, Chicago Board of Trade, where you were trading agricultural futures so that farmers can manage risk. | ||
| That has obviously ballooned and expanded into a variety of commodities that are extremely important to everyday life, whether, again, it's interest rates, credit, FX, or any number of other financial instruments on top of agriculture, energy, metals, and other commodities. | ||
| It is fine, and I have no huge opposition to us moving into a different direction. | ||
| We need to innovate, we need to evolve. | ||
| This is my thesis on crypto. | ||
| But ultimately, there are social issues that we have to consider and contemplate as these contracts start to go into areas that are not clearly delineated in statute and would and could have a negative impact in terms of incentives and disincentives for market users. | ||
| One of my cases for the elections of why I oppose these is one, it's against the law. | ||
| I think my interpretation of the law is that it is gaming and it's against the public interest. | ||
| But I've also made a case that if we do have these contracts, as we do right now, if there's an allegation of fraud or manipulation in the contract or an election, the CFTC would have to be pulled into that allegation of fraud or manipulation, whether it's a voting box, whether it's social media, news about a candidate doing something or not doing something. | ||
| Because if there is an action at that sort of underlying level with the candidate, it's going to potentially impact the price on a CFTC market. | ||
| And we have an obligation to investigate that. | ||
| So you can think about extradition of a criminal allegation or any other thing around sports and gambling. | ||
| Again, we are of the same era where I remember driving down the Garden State Parkway to go to Atlantic City. | ||
| Now everything is accessible by phones. | ||
| And I think we have to rethink collectively as an executive branch, as Congress, and as a society, where do we want regulated markets to exist and what we want treated on them versus what do we want in the gambling sphere? | ||
| Look, when I ran for the Maryland House of Delegates, the first question people would say was, how do I know that you're serious? | ||
| How do I think you're going to win? | ||
| And if I could have spent a little bit of my fundraising money boostering a tiny traded contract to show me as a frontrunner, that would have been the best campaign finance decision I could have made in a pretty thin market and the public interest to me. | ||
| But you talked, this judge overruled you. | ||
| And I want to talk about the future of regulation because you regulated mostly in an era where the Supreme Court had a case called Chevron, which gave deference to agency regulators. | ||
| And very famously, this most recent Supreme Court overturned that precedent in a case called Loper Bright. | ||
| So I guess we're going to have to, it's now, we've moved from a post-chevron world to a Loper-Bright world. | ||
| And the CFTC in the future is going to have to adapt. | ||
| How do you think, what advice do you have for your successors for how to adapt in a world where the judiciary is going to feel a lot more empowered to define the public interest relative to the five commissioners appointed by the president, confirmed by the Senate with a thousand person regulatory body of deep experts in all this? | ||
| And instead, we're going to get a judge in whatever case, whatever place this has gotten. | ||
| What's that going to do? | ||
| You know, it makes me think about your first question. | ||
| And like, as I thought about my agenda, I'm an attorney by trade, spent time in Congress, as you said, as a counsel, and then came as a commissioner. | ||
| And you knew with the new alignment of judges in the Trump administration that Chevron and this 80 Supreme Court case would certainly be challenged and most likely overturned, which it was with Loeb-Bright. | ||
| And this really is giving less deference, is really the key word, to the executive branch and independent agencies to write rule if there is a sort of gap between what the statute prescriptively says and what an agency does from a conduct perspective. | ||
| So as I thought about my agenda, this was top of mind, right? | ||
| Whatever you do and however you do it, you have to realize there are risks on that sort of spectrum and that curve. | ||
| And one of the biggest risks is litigation risk. | ||
| And along that curve, as I said, you have all these resources you're expending to write rules, propose, get comments, finalize. | ||
| And the last thing you want to do is write this rule that you've spent years on, and then it gets challenged in court and you lose. | ||
| And then you're like, okay, what was that for? | ||
| Ultimately, I'll say this about financial markets and financial market regulators. | ||
| And specifically, I'll speak about the CFPC, obviously, given my role here. | ||
| But we are a principles-based regulator embedded within the statute, the Commodity Exchange Act. | ||
| And I testified in the Senate in July. | ||
| Senator Ernst has been a huge advocate for this case. | ||
| And I speak about that in a very positive way. | ||
| I think she's led a caucus on Lober Bright and asked very important and thoughtful questions. | ||
| And we did a fair amount of work at the agency to be responsive to her and other senators who wanted to know, what are you doing about this case and how is it affecting your agency and what have you done that might fly in the face of Lober Bright? | ||
| And in the end, we concluded that because we are a principles-based regulator and much of the statute is built around deference to the agency, Chevron deference has not actually come up on too many, if any, occasions. | ||
| So, on the one hand, I feel like we're in a generally safe position as an independent agency, as a financial market regulator that has a principles-based regulatory structure. | ||
| And I think that is extremely important because, as we're seeing with digital assets and other new products, markets evolve overnight. | ||
| They cannot, Congress and the agencies cannot keep up with markets at the clip they go. | ||
| It is so important for the agencies to have as much authority and deference to be able to adapt to evolving markets. | ||
| And this is a net positive not only for the agency, but also investors, customers, and then the market itself, right? | ||
| We need to be able to adapt as the market moves because they benefit from a strong comprehensive regulatory structure. | ||
| All that said, regardless of the deference and what I view as relative principle-based regulatory structure that gives us authority, I would certainly pass on to my successor. | ||
| As you think about your rule set, your agenda, everything should be thought about through the lens of Loperbright. | ||
| Because as much as I think there is an opportunity for the agency to take action independently, if a market participant, stakeholder, whoever it is, has issue with a rule, Loperbright will give that entity, institution, individual, a pretty strong standing to make a case that if it is not a direct byproduct, the rule is not a direct byproduct of the statute, the words, | ||
| the prescriptive words of the statute, it could be challenged. | ||
| And there's a decent chance there'll be success that the agency would be overturned. | ||
| So, let me ask you one question before turning to the audience here, because you talk about the future of the markets, and you've had this international background and this experience, and the dollar is so important, right? | ||
| One of the reasons the CFTC and the SEC and the U.S. markets are so important is dollar hegemony. | ||
| And the dollar's place is the world reserve currency. | ||
| And I think it's pretty well agreed that we need to protect that. | ||
| On the other hand, part of protecting that status is allowing for innovation. | ||
| And another part of that is protecting the integrity of our markets. | ||
| Remember, another former boss of mine, Senator Chris Dodd, Chairman Chris Dodd, would say to me, you know, Aaron, one of the reasons I believe that the dollar will always be the world hegemony is nobody's ever lost sleep thinking about that our markets are not being guired. | ||
| And the financial crisis rattled that. | ||
| And it's one reason why we needed to come back strong with Dodd-Frank to reassure the world that our markets were, in fact, the most protected while allowing for that innovation. | ||
| How do you handle that balance? | ||
| And what did you learn from your time? | ||
| And what do you think the future of regulation should be as this clip of innovation seems to be moving on an exponential curve? | ||
| So I couldn't agree more with Senator Dodd. | ||
| And I think that's absolutely right that markets, U.S. markets are the most liquid, transparent, deepest, and desired in the world because of regulation. | ||
| And there's always going to be issue around the margins of what's right, what's wrong, fixing the regulation here or there. | ||
| But ultimately, the comprehensive regulatory structure, perhaps the multi-regulatory landscape, is the reason that the U.S. markets are partly the best in the world and most desired in the world. | ||
| On the hegemony point, I have actually, you said this, right? | ||
| Commodity markets are priced in dollars. | ||
| This is oil. | ||
| This is WTI, right? | ||
| This is all our agricultural complexes, corn, beans, wheat, everything in between, the metals complexes as well. | ||
| This is extremely, extremely important. | ||
| And Bitcoin. | ||
| And Bitcoin. | ||
| The future and the past. | ||
| There's an argument to be made about the health of the treasury markets and the treasury department's ability to issue debt because of stable coins and them being tied to the U.S. dollar. | ||
| That's a separate conversation. | ||
| Tethered to the U.S. dollar? | ||
| Like that slip there. | ||
| Point being is over my four years with the pandemic and then the invasion of Ukraine by Russia and some Middle East obviously issues over the past couple years, we've seen some transactions, and this should not be a surprise, of energy products, oil in non-U.S. fiat, right? | ||
| And I think about evolving and developing futures markets across the globe, some adversaries, some allies, and what does that mean for the fact that we have the largest derivatives exchanges that price these core commodities that are essential to the U.S. economy? | ||
| And what if these core commodities start to be priced in non-U.S. fiat? | ||
| That changes leverage for trade. | ||
| That changes leverage from a national security perspective, as I said in my prepared remarks. | ||
| And this is not something that's going to happen anytime soon, right? | ||
| But I have definitely thought about it with some of my staff as well as we look out deep out the curve, right? | ||
| Because we have to think about that, I think, as policymakers, as citizens, as regulators. | ||
| What is going to happen in 20, 30, 40, 50 years if this shift actually does happen, and what does it mean for U.S. dominance, I think, from an economic standpoint, but also from a national security standpoint? | ||
| If you look at our budget, right, any economist would say, given the amount of money we spend and collect, it doesn't quite make sense that an investor would allocate capital to the U.S. government, but we still maintain and manage to raise debt without a problem at a pretty healthy interest rate because of the confidence in the U.S. and being backed by the U.S. government. | ||
| We need to maintain that. | ||
| And part of that is the commodity markets both being traded here but priced in dollars. | ||
| And there is no doubt in my mind as every element of our economy and our country is constantly being tried to be poked or attacked or undermined. | ||
| This is probably one area. | ||
| Again, it's going to be very far out the curve, but I've mentioned this in a number of speeches over the past four years. | ||
| We've done some thoughtful work at the agency, but it is an area that we cannot take for granted. | ||
| That's the phrase I used in my prepared remarks, and we have to think about in the long run because whether it's agricultural exports, whether it's energy exports or energy independence, and then obviously having the dollar reserve currency status, these are all key, key components of our success as a country, both economically but also from a national security perspective. | ||
| Excellent. | ||
| Ask who in the audience has a question they want to ask the chairman. | ||
| Sir? | ||
| Dave Michaels and with the Wall Street Dave Michaels with the Wall Street Journal. | ||
| The crypto market seems to think at the moment that the SEC is likely to stand down from trying to regulate that market through enforcement of the securities laws and rules as they are today. | ||
| That's kind of been the theme of crypto regulation for the past several years. | ||
| I'm curious, Chairman, how do you think about the next six to 12 months, 18 months of the crypto market of digital assets? | ||
| Is it going to be kind of a free-for-all where regulators are not really CFTC or SEC aren't really trying to apply current law or current rules other than dealing with the anti-fraud authorities that they have? | ||
| And at what point do you see then a regulatory framework kind of passed by Congress that the regulators like your agency or the CFTC are going to implement? | ||
| And then kind of a second, a related question. | ||
| You talked about litigation with risk when you guys pass rules, right? | ||
| And you said if the rules are then sued into oblivion, what was the point of doing that? | ||
| I mean, there is a way to think about what's going on with crypto and more of the SEC than your agency with the enforcement actions because the commission, that commission is under pressure now to stand down from all those lawsuits. | ||
| I think it's natural to ask, or what was the point of all that? | ||
| What do we get from all this? | ||
| You know, all this litigation, all this enforcement since the Dow report in 2017. | ||
| Could you trust that? | ||
| What good do you think came of seven, eight years of hardcore enforcement? | ||
| Well, I'm going to speak for the CFTC and our perspective. | ||
| And obviously, news you covered, Dave, and others in the press. | ||
| And I said this earlier, the enforcement actions and some of the fraudulent conduct speaks for itself. | ||
| And I think what we've seen over the past decade merits action by enforcement agencies, civil enforcement agencies, and criminal authorities, which we've worked with justice on on a number of occasions. | ||
| So what the problem is, I think in part, is there are multiple interpretations of existing law. | ||
| There have been a number of court decisions over the past, call it seven years, that have clearly delineated Bitcoin for sure, in my view and others, and also Ether as commodities. | ||
| But there is a debate, and I think it's open. | ||
| I have my own feelings, but I think there's a debate about the other, literally hundreds of other tokens and how we are to classify them under, again, a 100-year-old securities test or just interpretation of what we view as a commodity or a security. | ||
| So this leaves the market in a place where it's unsure where it can participate and play, and it leaves the regulator in a position where it wants to maintain its number one mission and responsibility of customer protections and doing what it can to ensure that you don't have fraud and manipulation leading to folks losing money. | ||
| In terms of legislation, and I'll get to your few questions. | ||
| I said this in my statement. | ||
| There have been a number of efforts that I've been a part of in Congress over the past couple years, both Chair McHenry, Chair Thompson in the Ag Committee, Senator Stabenow, Bozeman, and others, Lummis and others have put forward bills over the past couple years. | ||
| Not all perfect, but I think really good efforts that try to clarify the sort of space in the playing field, give authority where it was necessary, and move the conversation forward. | ||
| I don't think status quo, i.e. where we are now with the existing statutes, is going to solve the problem. | ||
| I've made this argument, even if you have just a few tokens as non-securities, it is the vast majority of the market from a market capitalization perspective, whether it's Bitcoin and Ether and some other tokens as well. | ||
| So we have to move forward on legislation. | ||
| And that naturally takes time. | ||
| You have a new Congress, a new president. | ||
| My guess is as good as anyone's perhaps, but you would have to imagine it's going to take six to ten months at least to get legislation done if it goes through regular order. | ||
| And then the executive branch responsibility, the rulemaking will take a year at least to get that statute, that new amended statute into the rules. | ||
| I assume, you know, we're going to go through a transition. | ||
| The potential candidate for the SEC has been named. | ||
| No successor of mine has been named. | ||
| Typically, you get the SEC chair in sometime between April and June, CFTC chair sometime between June and September. | ||
| I was a little bit past that. | ||
| But ultimately, I think about this a lot. | ||
| Four years is a long time, but you don't really have four years. | ||
| And I do think there will be a shift in the approach on day one with the acting heads of how they approach regulation. | ||
| There's been a lot of talk from members of the commissions, the existing commissions, about sandboxes and creating environments where the crypto participants can essentially do their business without what they view as fear of enforcement or regulation because it's a controlled environment. | ||
| Perhaps that will be an idea that bears fruit and manifests itself in a new administration. | ||
| But I do think it's important, and I stand by what I said earlier, that there's the risk of litigation challenge. | ||
| That doesn't mean you should stand back and not move forward with an agenda. | ||
| You got to be aggressive. | ||
| You got to be thoughtful. | ||
| But I think in this Loper-Bright environment, you have to be so calculating and so deliberative about what you do and when you do it and how you do it. | ||
| Because in the end, yes, you will look at yourself and say, wow, we just expended an enormous amount of resources on a rule that went nowhere. | ||
| And you also then, there's other components of this too. | ||
| There's reputational risk. | ||
| There's appropriators thinking twice about what you do and how you spend your money. | ||
| So it's not just a simple, like, let's put a bunch of people on a rulemaking team and try to get it done. | ||
| And, you know, if it gets done, great. | ||
| If it doesn't, it doesn't. | ||
| There are unintended consequences that I have to be very mindful of. | ||
| So, Mr. Chairman, we're at time. | ||
| You've had a tremendous run in tenure quickly. | ||
| Yeah. | ||
| One thing that you would tell your successor to do, and one thing you would tell them not to do, because sometimes I think the advice of what not to do in academia, there's a dearth of publication of great hypotheses that fail to prove fruit. | ||
| And so that's frequently replicated. | ||
| We don't really know how many people try to replicate the same idea. | ||
| What would you say to your successor very quickly? | ||
| One thing they should do and one thing they shouldn't do. | ||
| One thing you should always do is, you know, be aggressive, do what you feel is right, but make sure you engage the stakeholder community and you don't let the regulator dictate markets, right? | ||
| In the sense that market regulation will obviously have a direct impact on markets. | ||
| But as you work through that process and that curve, getting people engaged, asking questions, and finding consensus is a huge, huge component of success. | ||
| Doing it any otherwise, any other way risks having an unintended impact on markets that are outside of the domain of sort of supply and demand and market functionality. | ||
| And I think it's very inappropriate to have the market regulator step in too aggressively. | ||
| So just be deliberate, patient, cautious, and get people in. | ||
| What not to do is not to think you have four years. | ||
| It's less than that. | ||
| You think about what I said in response to Dave's question. | ||
| You can almost shave six months off the front end and six months off the back end. | ||
| And then you, as we discussed earlier, you're always going to have a crisis or an issue that you can't plan for, which always shakes your agenda and your process. | ||
| So think about it in a compacted way. | ||
| Get a team together, get a plan, and execute. | ||
| Well, one thing you can plan for is the second of Brookings Center on Regulation and Markets events on the future of financial regulation, which we will host FDIC Chairman Gruenberg here next week. | ||
| But join me in thanking Chairman Benham for his thoughts today and his term and tenure at the CFTC. | ||
| Thank you. | ||
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