They have largely stopped speaking to one another. About work.
Not only are the commissioners restricted from one-on-one meetings, they try not to get caught alone anywhere in the building. Should Timothy Massad, the CFTC chairman, step into the elevator and bump into one of his two colleagues— Sharon Bowen, a fellow Democrat and J. Christopher Giancarlo, a Republican—they might exchange pleasantries about the weather but will steadfastly avoid talking about their work regulating financial markets.
When it comes to policy, the commissioners can’t sit down and debate over coffee. They deploy aides to shuttle back and forth between their offices relaying points and counterpoints.
“We minimise talking,” Massad said, describing office conversation as a slippery slope. “If you walk down the slope, you’ve got to make sure you don’t slip and fall,” he said.
At the start of a closed-door briefing by senior staff recently, Massad asked Giancarlo about a July work trip through the Midwest to visit a cattle rancher, grain-elevator operator and an oil rig.
“It went well,” Giancarlo said, according to people who attended the meeting. That was the end of the exchange.
The uncomfortable silences coming from the CFTC’s offices are a result of the Government in the Sunshine Act, passed in the wake of Watergate, which was designed to prevent regulators from making deals on policy in proverbial backrooms. It effectively says a majority of a commission can’t deliberate outside an open public meeting.
With two of five CFTC seats vacant, however, any two commissioners in one place constitutes a majority—which blurs the line between merely discussing policy and actually deciding it.
“It’s messed up,” said Bart Chilton, a former Democratic commissioner on the CFTC, which briefly dropped to three members while he was serving from 2007 to 2014. “You’ve got to be careful about even getting in an elevator without an attorney, for fear of violating the law, even if you’re just going to lunch or something.”
The CFTC is the top US regulator of financial products known as derivatives. At its headquarters in downtown Washington, the commissioners have their own beige-carpeted offices, complete with private bathrooms, on the ninth floor.
In normal times, commissioners regularly meet one-on-one. Gary Gensler, Massad’s predecessor, once hammered out a deal with a colleague at Meiwah, a Chinese restaurant down the block—a lunch CFTC insiders refer to as the Meiwah Summit.
While the Sunshine law affects about 50 agencies, few are as strained by it as the CFTC, because the agency has been short-staffed for so long. The commission has been short two members since August 2015 when Mark Wetjen, a Democrat, resigned. (Scott O’Malia, a Republican, resigned a year earlier.) President Barack Obama nominated two people to fill the CFTC vacancies in March, but the Senate hasn’t acted. The nominations are before the Agriculture committee, which hasn’t said when it will sign off on the pair, advancing them to the full Senate.
Sunshine rules have tripped up other regulators, including the Federal Reserve as the financial system was melting down in 2008.
In his memoir “The Courage to Act,” then Fed chief Ben Bernanke said because the Fed was operating with four governors, three fewer than its full complement, he had to exclude colleagues from crisis-fighting brainstorming sessions to avoid being forced to make the meetings public.
“Not a great venue for blue-sky thinking and strategising,” he said.
At the CFTC, though Massad’s and Giancarlo’s offices are separated by a glass door—and Bowen’s is only about 100 feet away—the policy makers may not be able to speak directly for the remainder of the Obama administration.
The three current policy makers, all seasoned attorneys, don’t want to make mistakes. So they are often accompanied by their own lawyers to ensure they don’t break the rules.
In December, when the CFTC was preparing to vote on a bank safety rule, Bowen and Massad differed on a provision.
They decided to hash things out before the meeting—via aides. Staff for Massad and Bowen went back and forth together several times in the days leading up to the vote.
First they would sit and talk with the chairman in his office. Then they would talk with Bowen in her office.
“Tell me why I’m wrong,” Massad said at one point to one of the aides.
Ultimately, Bowen voted against the rule; it passed with Massad and Giancarlo voting for it.
Of course, the CFTC commissioners could embrace the Sunshine law’s spirit and have actual policy debates at public meetings. The CFTC still does the bulk of the sausage-making behind closed doors, like other Washington agencies—while open meetings, where policy is formally greenlighted, are often scripted.
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