“With 10 million fewer Americans working full-time today than six years ago, it is not in the nation’s economic interest for Washington regulators to cause good-paying, full-time jobs to be eliminated. This overreach is just one of many in a regulatory environment that has become a major drag on the U.S. economy…
…Federal regulations now cost the U.S. more than 12% of gross domestic product, or $2 trillion annually, according to the National Association of Manufacturers. The average manufacturing firm spends almost $20,000 per employee per year on complying with federal regulations. For manufacturers with fewer than 50 employees, the per-employee cost rises to almost $35,000.With this level of regulatory cost, it is no wonder that U.S. economic growth is so meager.”, J. Christopher Giancarlo, Commissioner, U.S. Commodity Futures Trading Commission, “Now Federal Job-Killers Are Coming After Derivatives”, Wall Street Journal
Now Federal Job-Killers Are Coming After Derivatives
A benign-sounding ‘advisory’ has the potential to send thousands of financial-services positions overseas.
By J. Christopher Giancarlo
Nearly six years ago, in the aftermath of the 2008 financial crisis, a giant sign was hung from the rafters of the U.S. Chamber of Commerce building, which directly faces the White House. The sign was composed of one word: J-O-B-S. It was a reminder that, despite all the challenges the new Obama administration faced, the ultimate test by which it would be judged would be job creation. It was a statement that Americans—just as they always have been—were ready to work hard to bring the U.S. economy back from the brink, provided that barriers were not placed in their way.
The official U.S. unemployment rate has indeed fallen steadily during the past few years, but the economic recovery has created the fewest jobs relative to the previous employment peak of any prior recovery. The labor-force participation rate recently touched a 36-year low of 62.7%. The number of Americans not in the labor force set a record high of 92.6 million in September. Part-time work and long-term unemployment are still well above levels from before the financial crisis.
Worse, middle-class incomes continue to fall during the recovery, losing even more ground than during the December 2007 to June 2009 recession. The number in poverty has also continued to soar, to about 50 million Americans. That is the highest level in the more than 50 years that the U.S. Census has been tracking poverty. Income inequality has risen more in the past few years than at any recent time.
The “Jobs” sign on the U.S. Chamber of Commerce building in Washington, D.C., in 2010. Bloomberg
New Jersey Gov. Chris Christie recently pointed out that the bigger problem today is not income inequality, it is “opportunity inequality.” He is right. The opportunity in America to work in a full-time job has been diminished over the past few years in an economy that Christine Lagarde , the head of the International Monetary Fund, has called the “new mediocre.”
Unfortunately, federal regulators are not helping matters. One particular action by a little-known federal agency, the Commodity Futures Trading Commission, poses a serious threat to jobs in the U.S. financial-services industry in cities across the country. I know this because I became a CFTC commissioner in June, seven months after the new regulatory action was proposed.
In November 2013, the CFTC issued a benign-sounding “Staff Advisory Notice,” which imposed flawed and overly complex rules on trading activity in swaps and other derivatives between non-U.S. businesses whenever anyone on American soil “arranged, negotiated or executed” the trade. The additional red tape is causing many overseas trading firms to consider cutting off all activity with U.S.-based trade-support personnel.
This damaging advisory was hurriedly issued a year ago by CFTC staff without the vote of a single commissioner. My fellow commissioner and former acting chairman, Mark Wetjen, even said its issuance was not the “right decision.” The advisory jeopardizes the role of bank sales personnel in U.S. financial centers, including those in New York, Boston and Chicago. It will likely have a ripple effect on jobs directly tied to financial institutions, as well as thousands of jobs with vendors who cater to the needs of the U.S. financial-services industry.
In other words, this CFTC staff advisory is a direct threat to thousands of U.S. jobs. In September I called for its withdrawal. Just last week the CFTC delayed its effective date for the fourth time. When a regulatory action needs four delays, that’s a clear sign it is not workable.
With 10 million fewer Americans working full-time today than six years ago, it is not in the nation’s economic interest for Washington regulators to cause good-paying, full-time jobs to be eliminated. This overreach is just one of many in a regulatory environment that has become a major drag on the U.S. economy. Federal regulations now cost the U.S. more than 12% of gross domestic product, or $2 trillion annually, according to the National Association of Manufacturers. The average manufacturing firm spends almost $20,000 per employee per year on complying with federal regulations. For manufacturers with fewer than 50 employees, the per-employee cost rises to almost $35,000.
With this level of regulatory cost, it is no wonder that U.S. economic growth is so meager. It will take years to loosen Washington’s grip on the economy, but the CFTC could set a good example by scrapping its advisory and replacing it with proper rules that do not prevent American workers from supporting vibrant global derivatives markets. Otherwise, New York and other U.S. financial centers will give up valuable jobs to cities like London and Singapore that are only too happy, and eagerly waiting, to take them.
Mr. Giancarlo is a commissioner at the U.S. Commodity Futures Trading Commission. This commentary was adapted from a speech he will deliver Thursday at the U.S. Chamber of Commerce in Washington.