Safer investments
The Commodity Futures Trading Commission (CFTC) is not exactly a household name -- nor does the agency quite stir public emotions, let alone a line of poetry or two.
But for millions of Americans who have ventured into commodities speculation -- or contemplated doing so -- the way the agency functions could well spell the difference between making a safe investment, or seeing years of savings wiped out. For that reason, efforts by a number of lawmakers to get a better fix on futures trading in general, as well as adopt tougher laws for the whole futures market, deserve broad support.
The CFTC was created by Congress in 1974 to regulate the multibillion-dollar futures industry, i.e., the trading of contracts for future deliveries of such commodities as corn or soybeans, as well as precious metals. But such trading has also come to encompass exotic bond and stock portfolios. Congressman Albert Gore this week expressed the concerns of many Americans when he referred to trading in stock-index futures as ''a giant, white-collar numbers game.''
The extent to which Mr. Gore may be correct is what needs to be determined by a careful study of the industry itself. Michigan Congressman John Dingell, who heads up the House Energy and Commerce Committee, favors a study of the impact of the financial futures market on capital formation. Such a thorough examination -- presumably independent of the CFTC -- is long overdue. Mr. Dingell also seems to have a strong case in favoring a greater role in futures trading for the Securities and Exchange Commission. Such a role has been resisted by the Reagan administration and the current SEC which argue that the industry should police itself.
Under a proposed splitting of authority over the futures market that has been accepted by the agriculture committees in both the Senate and House, the SEC would have a limited jurisdiction over futures trading. Congress, however, should seriously consider granting a broader mandate to the SEC, or at the least forcing the CFTC (which expires at the end of this year without new legislation) to tighten up its policing procedures.
If such a stricter supervision means the need for a larger budget for the CFTC, Congress should provide the funds. A recent report by the General Accounting Office was critical of current enforcement methods.
The whole question of proper jurisidiction over the futures market is highly technical. But, as Mr. Dingell observes, it is crucial that futures trading not be a ''rigged game'' that favors everyone involved -- except the investor.
