Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1668742
label
1974/10/23 HR13113 Commodity Futures Trading Commission Act of 1974 (1)
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1668742
sourceUrl
contentType
document
title
1974/10/23 HR13113 Commodity Futures Trading Commission Act of 1974 (1)
citationUrl
collections
White House Records Office: Legislation Case Files
Legislation Case Files
subjects
Commodity Futures Trading Commission. 10/23/1974-
Legislation
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1668742
coverageEndDate
logicalDate
1974-10-31
month
10
year
1974
coverageStartDate
logicalDate
1974-10-01
month
10
year
1974
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
5cd601f544c89546
ocrText
The original documents are located in Box 10, folder "10/23/74 HR13113 Commodity
Futures Trading Commission Act of 1974 (1)" of the White House Records Office:
Legislation Case Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
APPROVED lassed 10/24/74
Digitized from the White House Records Office: Case Legislation Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
ACTION
WASHINGTON
Last day - Wednesday, October 23
October 21, 1974
MEMORANDUM FOR
THE PRESIDENT
announced
FROM:
KEN COLE
10/23
SUBJECT:
Enrolled Bill: Commodity Futures Trading
Jo archines
Commission Act of 1974, H.R. 13113
10/24
BACKGROUND
This bill will strengthen and transfer the responsibilities of the
Commodity Exchange Authority which is currently a part of the Depart-
ment of Agriculture, to an independent regulatory Commission. The
new Commission would have complete jurisdiction over all governmental
regulations in the commodity futures area, including agriculture com-
modities, lumber and metals.
This legislation was not sponsored by the Administration, but we have
generally supported its substantive provisions because there is a
demonstrated need for increased regulation and tougher enforcement
in this field.
However, the House-Senate Conference Committee added two provisions
which are likely to weaken the Executive Branch's authority over this
independent agency and this has led most of your advisers to recommend
veto. These provisions are (1) concurrent submission to Congress and
OMB of the Commission's budget requests and (2) concurrent submission
of legislative proposals. The bill also contains a third provision
authorizing the Commission to go directly into court to litigate their
cases, bypassing the Justice Department.
All your advisers will support a bill that does not contain these
three provisions.
ARGUMENTS FOR SIGNING
This bill provides needed reform to the nation's commodity futures
markets. These markets have become increasingly volatile due to
improper activities by some of the merchants. The present regulatory
scheme within the Department of Agriculture is not adequate COFCOPE
with this problem.
CERALD LIBRARY
2
ARGUMENTS FOR VETO
OMB argues that the bypass provisions of this bill will substantially
weaken the ability of the Executive Department to control the budget
of this new Commission, as well as present to Congress a coordinated
and consistent legislative program.
The basic thrust of the bypass provision is inconsistent with the
increasing need for budgetary discipline. This is an extremely bad
precedent to set at a time when we are trying to further control Federal
spending.
Furthermore, the litigation bypass provision would, according to Justice,
seriously erode their control of Federal litigation.
STAFF AND AGENCY POSITIONS
The following recommend signature:
Phil Areeda
Department of Agriculture
Civil Service Commission
The following recommend veto and approval of the veto message which
supports the reform portions of the bill and objects only to the
three provisions which weaken Executive control:
Roy Ash (see attached enrolled bill memo)
Ken Cole
Bill Timmons
Justice Department
DECISION - H.R. 13113
Sign (Tab A)
Veto
(Sign veto message at Tab B which
Paul Theis has also approved)
THE WHITE HOUSE
WASHINGTON
6:50
T Tan: an :
10/23
Prem Office amanded
that Prenduthad requed
HR13113 and that a
statement would be
releared in the morning.
Katy was advised.
Ren
TO THE HOUSE OF REPRESENTATIVES:
I am withholding my approval from H.R. 13113, the
Commodity Futures Trading Commission Act of 1974.
This bill would provide for the first major overhaul
of the existing Commodity Exchange Act since its inception
by establishing a new regulatory structure to apply to all
commodity futures trading. This is an objective which I
fully support.
Unfortunately, in passing an otherwise desirable bill,
the Congress has incorporated three objectionable provisions
which would enable the Commodity Futures Trading Commission,
which the bill would create, to bypass traditional Executive
Branch functions. I find these provisions unacceptable.
They represent a retreat from my goal of reduced federal
spending. They will make it more difficult for me to
review all requests for federal spending to insure that
the taxpayers' dollars are spent prudently.
First, it would require the concurrent submission to
Congress of the Commission's budget requests and docu-
mentation when these are submitted to the President or the
Office of Management and Budget. This would in effect
undermine the provisions of the Budget and Accounting Act
of 1921 which requires the President to submit to Congress
a single coordinated budget.
Second, as with the budget requests, it would require
concurrent submission of the Commission's legislative
proposals. Such a requirement, particularly if extended
to other agencies, would make it difficult for the
President to develop and present to the Congress a coherent,
coordinated legislative program as well as advice on the
relationship of Congressionally sponsored legislation to
his program.
2
Third, it would authorize the Commission to bypass the
Attorney General and go directly to the courts in enforce-
ment and litigation matters. Such decentralization of
litigation control would produce less objectivity, lessen
the ability of the government to present the courts with
uniform positions on important legal issues and limit the
government's choice of important test cases.
In summary, I believe that the executive bypass
provisions on the budget, legislation, and litigation
represent an unacceptable erosion of Presidential and
executive functions and responsibilities.
However, the bill is otherwise acceptable and desirable
legislation and, therefore, I stand ready to approve a bill
if it is amended to eliminate the objectionable provisions.
I am advised by the Attorney General and I have
determined that the absence of my signature from this bill
prevents it from becoming law. Without in any way qualifying
this determination, I am also returning it without my approval
to those designated by Congress to receive messages at this
time.
THE WHITE HOUSE,
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OCT 17 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
Sponsor - Rep. Poage (D) Texas and 14 others
Last Day for Action
October 23, 1974 - Wednesday
Purpose
Creates an independent Commodity Futures Trading Commission
to strengthen the regulation of futures trading and to bring
all commodities traded on exchanges under regulation.
Agency Recommendations
Office of Management and Budget
Disapproval (Veto
Message attached)
Department of Justice
Would concur in Veto
recommendation
Department of Agriculture
Approval
Civil Service Commission
Approval
Department of the Interior
No objection (Informally)
Department of Commerce
No objection (Informally)
Department of the Treasury
No objection
Department of State
No objection
Council of Economic Advisers
No objection(Informally)
Securities and Exchange Commission
No position
Discussion
The present Commodity Exchange Authority (CEA) is an agency
within the Department of Agriculture that is responsible for
administering the Commodity Exchange Act of 1922, as amended.
In this role, CEA works to protect the hedging and price
2
functions of the Nation's commodity futures markets with
respect to 18 specific agricultural commodities including
cotton, butter, eggs, pork bellies, frozen orange juice,
wheat, soybeans, potatoes, and rice. Accordingly, CEA
seeks to assure competitive pricing and fair trading
practices in the commodity groups over which it has authority.
However, over the last decade, there has been increasing
concern that Federal regulation of commodity futures trading
was too narrow in scope and that the present regulatory
scheme was inadequate. These concerns have been heightened
in more recent years as the commodity markets have become
increasingly volatile and with the financial failure of
various futures commission merchants who had been dealing
in unregulated commodities.
H.R. 13113 would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a comprehensive regulatory structure to apply
to all commodity futures trading. The major provisions of
the enrolled bill are set forth in the attachment and
summarized as follows:
- Creates a full time, independent regulatory
commission entitled the Commodity Futures
Trading Commission (CFTC) with five Commissioners
in place of the present Commodity Exchange
Authority within USDA and the interagency
Commodity Exchange Commission. The Commissioners
would be appointed by the President with one
designated as Chairman, by and with advice and
consent of the Senate.
- Significantly enlarges the jurisdiction of the
government's regulation in this area to include
all futures trading including lumber and metals.
- Confers significantly stronger regulatory and
enforcement powers on the new Commission than
those held by the present Commodity Exchange
Authority.
While this legislation was not sponsored by the Administration,
we have supported the broader jurisdiction and stronger
regulatory and enforcement powers in this field, since they
3
appear to meet a genuine need and have widespread backing.
We had hoped that the regulatory body would be retained
within the USDA framework rather than being established as
a fully independent commission. However, the arguments
for separation from Agriculture -- especially since
non-agricultural products are now to be included -- were
more persuasive to Congress. The enrolled bill therefore
stipulates organizational independence, but directs both
Agriculture and the Commission to maintain liaison with
each other through offices established in each agency for
that purpose.
The Congressional choice of a fully independent Commission
is understandable, and we were prepared to recommend approval
of H.R. 13113, since up until the time the legislation went
to conference it did not contain provisions so serious as to
warrant a veto recommendation. However, the bill was amended
in conference to include two features which increase the
independence of regulatory bodies which we have strongly
resisted in other bills. These features, which are already
contained in the Consumer Product Safety Act of 1972 plus a
third authorization that was contained in the Senate passed
bill, weaken Presidential ability to manage the Executive
Branch. They are:
- Concurrent submission to Congress of CFTC
budget requests and documentation when they are
submitted to OMB (i.e., budget bypass).
- Prohibition of OMB review or clearance of
CFTC's legislative proposals or comments on
legislation -- concurrent submissions of
legislative recommendations would also be
required (i.e., legislative bypass).
- Authorization for the CFTC to bypass the Attorney
General and go directly to the courts in enforce-
ment and litigation matters.
Because of our serious objections to these bypass amendments
and in light of the questionable manner that the budget and
legislative provisions (these were not contained in bills
as passed by both Houses) were added in conference, the
4
Administration attempted to have the bill returned to
conference for deletion of the offensive provisions, but
this effort was defeated.
The requirements for concurrent submission would, if
allowed to become law, eliminate Presidential authority
to review and control budgetary and legislative proposals
originating from the new agency, and would be a further
precedent for similar provisions in all Federal regulatory
agency legislation if not executive agencies in general,
Budget bypass problems
Congress and the Executive Branch have long recognized the
problems of handling separate appropriations requests
submitted separately and independently by the multitude of
Federal organizations. To avoid this chaotic situation,
the Congress enacted the Budget and Accounting Act of 1921
which barred the direct submission of budgets by individual
organizations and directed the President to present a unified
and coordinated Executive Branch budget.
That Act still requires that the President present to the
Congress a coordinated budget which has been evaluated to
eliminate duplication and meet program objectives in the
most effective, efficient and economical way. Direct agency
submissions would eliminate one of the President's means of
controlling the budget and promote excessive expenditures
at a time when Congress itself has moved toward a more
unified approach in its consideration of the budget by
enacting the Congressional Budget and Impoundment Control
Act of 1974. Under this new law Congress has a statutory
right to obtain, following submission of the President's
Budget to Congress, the appropriate budget requests and
supporting information, as now is voluntarily provided.
The budgets of the independent commissions and the programs
they support have important relationships with those of
other agencies and programs of the Government. Such relation-
ships cannot be seen or evaluated until the entire budgetary
picture is revealed when the President sends the Budget to
Congress. Premature disclosure of certain agency budget
requests would encourage a narrowly-focused, disjointed
5
consideration of such requests and deprive the Congress of
other related budgetary information.
In addition, early disclosure would also most likely affect
the budget estimates. For example, an agency, knowing of a
difference of opinion between the President and many members
of the Congress, could hardly help being influenced by that
fact. This could also attract external pressures for more
spending to a far greater extent than at present.
Legislation bypass problems
The requirements to submit to the Congress any proposed
legislation, testimony, or comments on legislation that are
submitted to the President are undesirable for reasons
similar to those given for premature disclosure of budgetary
requests. Such requirements would make it difficult for the
President to develop and present to the Congress a coherent,
coordinated legislative program.
OMB's coordination of legislative proposals and reports by
the various executive agencies serves several important
purposes for the agencies, the Administration, and the
Congress. Among other purposes, it encourages the various
agencies to take the problems, concerns, and expertise of
other agencies into account; it facilitates the development
of a consistent Presidential or Administration position on
legislation; and it assures that the Congress gets coordinated
and informative agency views on legislation under consideration
and is thus able to anticipate more effectively the impact of
such legislation.
In adding the budget and legislation bypass provisions in
conference, no explanation was given by the conferees for
their action. When OMB subsequently enlisted Representative
Baker's help in seeking to recommit the bill to conference
with instructions to strike these provisions, Representative
Poage, the bill's sponsor, attempted to downplay their
significance as he stated: "The gentleman from Tennessee
(Mr. Baker) is unduly alarmed, because the bill does not
require anything more than merely the sending of a copy of
the Commission's budget request to the House and the Senate."
6
We cannot agree with the Congressional view that these
provisions would not make substantial differences in
current practice. First, it must be reemphasized that
when such precedents are further permitted they are likely
to spread rapidly to other program areas where the costs
and consequences are much greater than with this bill
considered separately. Second, the publicity which would
often attend the preclearance submissions would make
departures from such submissions much more difficult both
for the President and the Congress. Finally, the submissions
would be made in the context of isolated programs and needs
of the Commission and would not be viewed in the context of
related program and overall resource needs.
Litigation bypass problems
Somewhat paralleling those problems cited above, the authority
for the CFTC to bypass the Attorney General and go directly
to the courts in enforcement and litigation matters would
set yet another precedent for increasing the autonomy of
other regulatory agencies, and would seriously erode the
control of Federal litigation by the Department of Justice.
In summary, we believe that the executive bypass provisions
on the budget, legislation, and litigation represent an
unacceptable erosion of Presidential and executive responsi-
bilities and prerogatives. Accordingly, we strongly recommend
that you veto H.R. 13113.
However, in that the enrolled bill is otherwise acceptable
and desirable legislation, we have prepared, for your
consideration, the attached veto message which notes that
while you find the three bypass provisions unacceptable,
you stand ready to approve a new bill that does not contain
these objectionable provisions. In the event that you decide
to approve the enrolled bill in its present form, we have
also prepared, for your consideration, a signing statement
which notes your serious concern over the objectionable
features.
Director
Enclosures
THE COMMODITY FUTURES TRADING COMMISSION ACT OF 1974
TITLE I - Commodity Futures Trading Commission
1.
Establishes an independent agency of the U. S. Govern-
ment - CFTC - composed of a chairman and four other
Commissioners appointed by the President by and with
advice and consent of Senate.
2.
Specifies five year staggered terms, no more than three
members of the same political party and membership to
include, but not be limited to, persons of demonstrated
knowledge in futures trading or its regulation, and in
the production, merchandising, processing or distribution
of commodities which are futures traded.
3.
Sets Chairman at Level III and members at Level IV.
4.
Provides a Level V General Counsel, appointed by
Commission, and not subject to Senate confirmation.
5.
Provides a Level V Executive Director appointed by the
Commission and subject to confirmation by Senate.
6.
Assigns executive and administrative functions to the
Chairman - subject to general policies of the Commission.
7.
Requires CFTC to set up a separate office to maintain
liaison with USDA. Similarly the Sec. of Agriculture
is directed to set up a separate liaison office of CFTC.
8.
Directs CFTC to concurrently transmit copies of budget
estimates or requests to House and Senate Agriculture
Committees - when submitting to President or OMB.
9.
Directs CFTC to concurrently transmit any legislative
recommendations, testimony or comments to the House
and Senate Agriculture Committees when submitting to
President or OMB.
10. Prohibits any requirement for prior review or clearance
of CFTC legislative proposals, testimony or comments by
any officer or agency of the U.S.
2
11. Authorize CFTC to promulgate rules and regulations.
12. Authorize CFTC to hire employees and consultants -
up to daily rate of a GS 18 - enter into contracts,
acquire space.
13. Authorizes appropriations of such sums as may be
required for each fiscal year through June 30, 1978.
14. Directs CFTC to submit an annual report within 120 days
after the end of each fiscal year.
15. Directs Comptroller General to conduct reviews and
audits of CFTC and requires CFTC to furnish all
necessary information.
16. Authorizes and directs transfer of CFTC of all personnel
of CEA, property, records and unexpended funds available
for administration of Commodity Exchange Act.
TITLE II - Regulation of Trading and Exchange Activities
1.
Extends regulation of all futures markets, including
markets in currently unregulated agricultural commodities,
e.g., coffee, sugar, cocoa and lumber; metals, e.g., gold,
silver and copper; foreign currencies, e.g., Japanese yen,
British pound and Deutschemark.
2.
Gives the Commission exclusive jurisdiction over all
futures transactions.
3.
Requires the Commission, in approving any bylaw, rule
or regulation of a contract market, to take into considera-
tion the public interest to be protected by the antitrust
laws.
4.
Provides regulation for margin or leverage transactions for
the delivery of gold and silver bullion and coins.
5.
Provides a customer's reparation procedure for handling
customers' complaints which arise from violations of the
Act.
3
6.
Regulates commodity trading advisors and commodity
pool operators and sets fitness standards for persons
engaged in these activities.
7.
Extends fitness standards now applied to floor brokers
and principals of futures commission merchant firms to
all persons handling customers' accounts.
8.
Directs the Commission to determine whether floor brokers
and futures commission merchants may trade for their own
account and for customers and, if so, under what conditions.
9.
Authorizes the Commission to establish additional delivery
points for futures contracts to diminish price manipulation,
market congestion, or the abnormal movement of commodities
in interstate commerce if, after a request by the
Commission, a contract market fails to establish such
points.
10. Authorizes the Commission to approve, disapprove, or
require a contract market to make changes in its rules
where necessary or appropriate for protection of the
public interest.
11. Authorizes the Commission to go into court to obtain
injunctions to prevent violations of the Act or restraint
of trade.
12. Authorizes the Commission to direct a contract market to
take action in an emergency situation to maintain or
restore orderly trading in futures contracts.
13. Authorizes penalties up to $100,000 in administrative
proceedings for violations of the Act.
14. Increases the criminal penalties from $10,000 to $100,000
for violations of the Act.
15. Authorizes the Commission to determine whether option
trading is to be permitted in the currently unregulated
commodities and, if so, under what conditions.
16. Directs the Commission to define "bona fide" hedging.
17. Authorizes the Commission to require contract markets
to file with the Commission daily reports showing the
details of all trades, including the time of execution
and identification of the parties thereto.
4
18. Authorizes the Commission to discipline a member of
a contract market if the contract market fails to do
so and to review, upon appeal, and set aside disciplinary
action of a contract market against a member.
TITLE III - Enabling authority for creation of National
Futures Associations
1.
Authorizes the Commission to approve and set the
standards for voluntary associations established by
the commodity trading business to regulate the practices
of members.
TITLE IV - Miscellaneous Provisions
1.
Requires the Commission to establish and maintain research
and information programs to investigate new technology
which might be used to strengthen or improve futures
trading, e.g., trading by computer.
2.
Requires the Commission to investigate the need for an
insurance program to protect customers against losses
caused by the financial failure of futures commission
merchants.
3.
Provides for an additional 20 supergrade positions for
CFTC.
4.
Provides for an effective date of the Act 180 days after
its enactment with exceptions stated having to do
generally with facilitating implementation.
To Hindride
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASH INGTON, D.C. 20503
OCT 17 1974
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
Sponsor - Rep. Poage (D) Texas and 14 others
Last Day for Action
October 23, 1974 - Wednesday
Purpose
Creates an independent Commodity Futures Trading Commission
to strengthen the regulation of futures trading and to bring
all commodities traded on exchanges under regulation.
Agency Recommendations
Office of Management and Budget
Disapproval (Veto
Message attached)
Department of Justice
Would concur in Veto
recommendation
Department of Agriculture
Approval
Civil Service Commission
Approval
Department of the Interior
No objection (Informally)
Department of Commerce
No objection (Informally)
Department of the Treasury
No objection
Department of State
No objection
Council of Economic Advisers
No objection( Informally)
Securities and Exchange Commission
No position
Discussion
The present Commodity Exchange Authority (CEA) is an agency
within the Department of Agriculture that is responsible for
administering the Commodity Exchange Act of 1922, as amended.
In this role, CEA works to protect the hedging and price
2
functions of the Nation's commodity futures markets with
respect to 18 specific agricultural commodities including
cotton, butter, eggs, pork bellies, frozen orange juice,
wheat, soybeans, potatoes, and rice. Accordingly, CEA
seeks to assure competitive pricing and fair trading
practices in the commodity groups over which it has authority.
However, over the last decade, there has been increasing
concern that Federal regulation of commodity futures trading
was too narrow in scope and that the present regulatory
scheme was inadequate. These concerns have been heightened
in more recent years as the commodity markets have become
increasingly volatile and with the financial failure of
various futures commission merchants who had been dealing
in unregulated commodities.
H.R. 13113 would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a comprehensive regulatory structure to apply
to all commodity futures trading. The major provisions of
the enrolled bill are set forth in the attachment and
summarized as follows:
- Creates a full time, independent regulatory
commission entitled the Commodity Futures
Trading Commission (CFTC) with five Commissioners
in place of the present Commodity Exchange
Authority within USDA and the interagency
Commodity Exchange Commission. The Commissioners
would be appointed by the President with one
designated as Chairman, by and with advice and
consent of the Senate.
- Significantly enlarges the jurisdiction of the
government's regulation in this area to include
all futures trading including lumber and metals.
- Confers significantly stronger regulatory and
enforcement powers on the new Commission than
those held by the present Commodity Exchange
Authority.
While this legislation was not sponsored by the Administration,
we have supported the broader jurisdiction and stronger
regulatory and enforcement powers in this field, since they
3
appear to meet a genuine need and have widespread backing.
We had hoped that the regulatory body would be retained
within the USDA framework rather than being established as
a fully independent commission. However, the arguments
for separation from Agriculture -- especially since
non-agricultural products are now to be included -- were
more persuasive to Congress. The enrolled bill therefore
stipulates organizational independence, but directs both
Agriculture and the Commission to maintain liaison with
each other through offices established in each agency for
that purpose.
The Congressional choice of a fully independent Commission
is understandable, and we were prepared to recommend approval
of H.R. 13113, since up until the time the legislation went
to conference it did not contain provisions so serious as to
warrant a veto recommendation. However, the bill was amended
in conference to include two features which increase the
independence of regulatory bodies which we have strongly
resisted in other bills. These features, which are already
contained in the Consumer Product Safety Act of 1972 plus a
third authorization that was contained in the Senate passed
bill, weaken Presidential ability to manage the Executive
Branch. They are:
- Concurrent submission to Congress of CFTC
budget requests and documentation when they are
submitted to OMB (i.e., budget bypass).
- Prohibition of OMB review or clearance of
CFTC's legislative proposals or comments on
legislation --- concurrent submissions of
legislative recommendations would also be
required (i.e., legislative bypass).
- Authorization for the CFTC to bypass the Attorney
General and go directly to the courts in enforce-
ment and litigation matters.
Because of our serious objections to these bypass amendments
and in light of the questionable manner that the budget and
legislative provisions (these were not contained in bills
as passed by both Houses) were added in conference, the
4
Administration attempted to have the bill returned to
conference for deletion of the offensive provisions, but
this effort was defeated.
The requirements for concurrent submission would, if
allowed to become law, eliminate Presidential authority
to review and control budgetary and legislative proposals
originating from the new agency, and would be a further
precedent for similar provisions in all Federal regulatory
agency legislation if not executive agencies in general,
Budget bypass problems
Congress and the Executive Branch have long recognized the
problems of handling separate appropriations requests
submitted separately and independently by the multitude of
Federal organizations. To avoid this chaotic situation,
the Congress enacted the Budget and Accounting Act of 1921
which barred the direct submission of budgets by individual
organizations and directed the President to present a unified
and coordinated Executive Branch budget.
That Act still requires that the President present to the
Congress a coordinated budget which has been evaluated to
eliminate duplication and meet program objectives in the
most effective, efficient and economical way. Direct agency
submissions would eliminate one of the President's means of
controlling the budget and promote excessive expenditures
at a time when Congress itself has moved toward a more
unified approach in its consideration of the budget by
enacting the Congressional Budget and Impoundment Control
Act of 1974. Under this new law Congress has a statutory
right to obtain, following submission of the President's
Budget to Congress, the appropriate budget requests and
supporting information, as now is voluntarily provided.
The budgets of the independent commissions and the programs
they support have important relationships with those of
other agencies and programs of the Government. Such relation-
ships cannot be seen or evaluated until the entire budgetary
picture is revealed when the President sends the Budget to
Congress. Premature disclosure of certain agency budget
requests would encourage a narrowly-focused, disjointed
5
consideration of such requests and deprive the Congress of
other related budgetary information.
In addition, early disclosure would also most likely affect
the budget estimates. For example, an agency, knowing of a
difference of opinion between the President and many members
of the Congress, could hardly help being influenced by that
fact. This could also attract external pressures for more
spending to a far greater extent than at present.
Legislation bypass problems
The requirements to submit to the Congress any proposed
legislation, testimony, or comments on legislation that are
submitted to the President are undesirable for reasons
similar to those given for premature disclosure of budgetary
requests. Such requirements would make it difficult for the
President to develop and present to the Congress a coherent,
coordinated legislative program.
OMB's coordination of legislative proposals and reports by
the various executive agencies serves several important
purposes for the agencies, the Administration, and the
Congress. Among other purposes, it encourages the various
agencies to take the problems, concerns, and expertise of
other agencies into account; it facilitates the development
of a consistent Presidential or Administration position on
legislation; and it assures that the Congress gets coordinated
and informative agency views on legislation under consideration
and is thus able to anticipate more effectively the impact of
such legislation.
In adding the budget and legislation bypass provisions in
conference, no explanation was given by the conferees for
their action. When OMB subsequently enlisted Representative
Baker's help in seeking to recommit the bill to conference
with instructions to strike these provisions, Representative
Poage, the bill's sponsor, attempted to downplay their
significance as he stated: "The gentleman from Tennessee
(Mr. Baker) is unduly alarmed, because the bill does not
require anything more than merely the sending of a copy of
the Commission's budget request to the House and the Senate."
6
We cannot agree with the Congressional view that these
provisions would not make substantial differences in
current practice. First, it must be reemphasized that
when such precedents are further permitted they are likely
to spread rapidly to other program areas where the costs
and consequences are much greater than with this bill
considered separately. Second, the publicity which would
often attend the preclearance submissions would make
departures from such submissions much more difficult both
for the President and the Congress. Finally, the submissions
would be made in the context of isolated programs and needs
of the Commission and would not be viewed in the context of
related program and overall resource needs.
Litigation bypass problems
Somewhat paralleling those problems cited above, the authority
for the CFTC to bypass the Attorney General and go directly
to the courts in enforcement and litigation matters would
set yet another precedent for increasing the autonomy of
other regulatory agencies, and would seriously erode the
control of Federal litigation by the Department of Justice.
In summary, we believe that the executive bypass provisions
on the budget, legislation, and litigation represent an
unacceptable erosion of Presidential and executive responsi-
bilities and prerogatives. Accordingly, we strongly recommend
that you veto H.R. 13113.
However, in that the enrolled bill is otherwise acceptable
and desirable legislation, we have prepared, for your
consideration, the attached veto message which notes that
while you find the three bypass provisions unacceptable,
you stand ready to approve a new bill that does not contain
these objectionable provisions. In the event that you decide
to approve the enrolled bill in its present form, we have
also prepared, for your consideration, a signing statement
which notes your serious concern over the objectionable
features.
packan
Director
Enclosures
THE COMMODITY FUTURES TRADING COMMISSION ACT OF 1974
TITLE I - Commodity Futures Trading Commission
1.
Establishes an independent agency of the U. S. Govern-
ment - CFTC - composed of a chairman and four other
Commissioners appointed by the President by and with
advice and consent of Senate.
2.
Specifies five year staggered terms, no more than three
members of the same political party and membership to
include, but not be limited to, persons of demonstrated
knowledge in futures trading or its regulation, and in
the production, merchandising, processing or distribution
of commodities which are futures traded.
3.
Sets Chairman at Level III and members at Level IV.
4.
Provides a Level V General Counsel, appointed by
Commission, and not subject to Senate confirmation.
5.
Provides a Level V Executive Director appointed by the
Commission and subject to confirmation by Senate.
6.
Assigns executive and administrative functions to the
Chairman - subject to general policies of the Commission.
7.
Requires CFTC to set up a separate office to maintain
liaison with USDA. Similarly the Sec. of Agriculture
is directed to set up a separate liaison office of CFTC.
8.
Directs CFTC to concurrently transmit copies of budget
estimates or requests to House and Senate Agriculture
Committees - when submitting to President or OMB.
9.
Directs CFTC to concurrently transmit any legislative
recommendations, testimony or comments to the House
and Senate Agriculture Committees when submitting to
President or OMB.
10. Prohibits any requirement for prior review or clearance
of CFTC legislative proposals, testimony or comments by
any officer or agency of the U.S.
3
6.
Regulates commodity trading advisors and commodity
pool operators and sets fitness standards for persons
engaged in these activities.
7.
Extends fitness standards now applied to floor brokers
and principals of futures commission merchant firms to
all persons handling customers' accounts.
8.
Directs the Commission to determine whether floor brokers
and futures commission merchants may trade for their own
account and for customers and, if so, under what conditions.
9.
Authorizes the Commission to establish additional delivery
points for futures contracts to diminish price manipulation,
market congestion, or the abnormal movement of commodities
in interstate commerce if, after a request by the
Commission, a contract market fails to establish such
points.
10. Authorizes the Commission to approve, disapprove, or
require a contract market to make changes in its rules
where necessary or appropriate for protection of the
public interest.
11. Authorizes the Commission to go into court to obtain
injunctions to prevent violations of the Act or restraint
of trade.
12. Authorizes the Commission to direct a contract market to
take action in an emergency situation to maintain or
restore orderly trading in futures contracts.
13. Authorizes penalties up to $100,000 in administrative
proceedings for violations of the Act.
14. Increases the criminal penalties from $10,000 to $100,000
for violations of the Act.
15. Authorizes the Commission to determine whether option
trading is to be permitted in the currently unregulated
commodities and, if so, under what conditions.
16. Directs the Commission to define "bona fide" hedging.
17. Authorizes the Commission to require contract markets
to file with the Commission daily reports showing the
details of all trades, including the time of execution
and identification of the parties thereto.
4
18. Authorizes the Commission to discipline a member of
a contract market if the contract market fails to do
SO. and to review, upon appeal, and set aside disciplinary
action of a contract market against a member.
TITLE III - Enabling authority for creation of National
Futures Associations
1.
Authorizes the Commission to approve and set the
standards for voluntary associations established by
the commodity trading business to regulate the practices
of members.
TITLE IV - Miscellaneous Provisions
1.
Requires the Commission to establish and maintain research
and information programs to investigate new technology
which might be used to strengthen or improve futures
trading, e.g., trading by computer.
2.
Requires the Commission to investigate the need for an
insurance program to protect customers against losses
caused by the financial failure of futures commission
merchants.
3.
Provides for an additional 20 supergrade positions for
CFTC.
4.
Provides for an effective date of the Act 180 days after
its enactment with exceptions stated having to do
generally with facilitating implementation.
TO THE HOUSE OF REPRESENTATIVES
I am returning without my approval H.R. 13113, the Commod-
ity Futures Trading Commission Act of 1974.
This bill would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all commod-
ity futures trading. Briefly, the bill would:
*
Create a full time, independent regulatory commission
to' be known as the Commodity Futures Trading Commission
(CFTC) with five Commissioners in place of the present
Commodity Exchange Authority within the Department of
Agriculture. The Commissioners would be appointed
by the President by and with advice and consent of the
Senate.
*
Enlarge the jurisdiction of the government's regulation
of commodities to include all futures trading including
lumber and metals -- at present only certain agricultural
commodities are regulated including pork bellies, frozen
orange juice, soybeans, wheat, and corn.
*
Confer significantly stronger regulatory and enforcement
powers on the new Commission than those held by the
present Commodity Exchange Authority.
Unfortunately, in passing an otherwise desirable bill, the
Congress has incorporated three objectionable provisions which
would enable the CFTC to bypass traditional Executive Branch
functions. I find these provisions unacceptable.
2.
Firs it would require the concurrent submission to Congress
of CFTC budget requests and documentation when these are sub-
mitted to the President or the Office of Management and Budget.
This would in effect undermine the provisions of the Budget
and Accounting Act of 1921 which requires the President to submit
to Congress a single coordinated budget. Ultimately, it could
result in a return to the fiscal chaos that prompted the Congress
to require the President to develop such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it would
essentially prohibit the President and OMB from reviewing any
CFTC legislative proposals or comments on legislation. Such
a requirement, particularly if extended to other agencies, would
make it impossible for the President to develop and present
to the Congress a coherent, coordinated legislative program as
well as advice on the relationship of Congressionally sponsored
legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and liti-
gation matters. Such decentralization of litigation control
would produce less objectivity, lessen the ability of the govern-
ment to present the courts with uniform positions on important
legal issues, and limit the government's choice of important
test cases.
In summary, I believe that the executive bypass provisions
on the budget, legislation, and litigation represent an unaccept-
able erosion of Presidential and executive functions and
responsibilities. Accordingly, I am withholding my approval
from H.R. 13113.
3.
However, in that the bill is otherwise acceptable and
desirable legislation, I stand ready to approve a bill if it
is amended to eliminate the objectionable provisions.
THE WHITE HOUSE
October
, 1974
STATEMENT BY THE PRESIDENT
I have today signed H.R. 13113, the Commodity Futures Trad-
ing Commission Act of 1974.
This bill would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all commod-
ity futures trading. Briefly, the bill would:
*
Create a full time, independent regulatory commission
to be known as the Commodity Futures Trading Commission
(CFTC) with five Commissioners in place of the present
Commodity Exchange Authority within the Department of
Agriculture. The Commissioners would be appointed
by the President by and with advice and consent of the
Senate.
*
Enlarge the jurisdiction of the government's regulation
of commodities to include all futures trading including
lumber and metals -- at present only certain agricultural
commodities are regulated including pork bellies, frozen
orange juice, soybeans, wheat, and corn.
*
Confer significantly stronger regulatory and enforcement
powers on the new Commission than those held by the
present Commodity Exchange Authority.
The basic objectives of this legislation have my full support.
However, I regret that Congress has felt it necessary to enact
the present legislation which I think is subject to the follow-
ing serious objections.
2.
First, it would require the concurrent submission to Congress
of CFTC budget requests and documentation when these are sub-
mitted to the President or the Office of Management and Budget.
This would in effect undermine the provisions of the Budget
and Accounting Act of 1921 which requires the President to submit
to Congress a single coordinated budget Ultimately, it could
result in a return to the fiscal chaos that prompted the Congress
to require the President to develop such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it would
essentially prohibit the President and OMB from reviewing any
CFTC legislative proposals or comments on legislation. Such
a requirement, particularly if extended to other agencies, would
make it impossible for the President to develop and present
to the Congress a coherent, coordinated legislative program as
well as advice on the relationship of Congressionally sponsored
legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and liti-
gation matters. Such decentralization of litigation control
would produce less objectivity, lessen the ability of the govern-
ment to present the courts with uniform positions on important
legal issues, and limit the government's choice of important
test cases.
My approval of H.R. 13113 is based on the belief that the
significant strengthening of commodity futures trading regulation
outweighs the offensive executive bypass provisions I have referred
to above. I strongly urge the Congress to refrain from further
inroads on executive functions and responsibilities which long
experience has taught us need to be carried out on a coordinated
and unified basis.
ASSISTANT ATTORNEY GENERAL
LEGISL ATIVE AFFAIRS
Department of Justice
Washington, D.C. 20530
OCT 17 1974
Honorable Roy L. Ash
Director, Office of
Management and Budget
Washington, D. C. 20503
Dear Mr. Ash:
In compliance with your request, I have examined a
facsimile of the enrolled bill H.R. 13113, the proposed
Commodity Futures Trading Commission Act of 1974.
The Department of Justice is very concerned about
section 101 of the bill which would amend section 2 (a) of the
Commodity Exchange Act (7 U.S.C. 2,4) to authorize the General
Counsel of the proposed Commodity Futures Trading Commission
to represent the Commission in courts of law and section 211
of the bill which would add a new section 6c to the Act which
would authorize the Commission to bring actions in United
States district courts to enjoin acts in violation of the
statute or enforce compliance with its provisions.
To authorize the Commodities Commission to conduct
its own litigation would create an exception to 28 U.S.C. 516,
which provides that, unless otherwise authorized by law, the
conduct of litigation in which the United States is a party is
reserved to officers of the Department of Justice under the
direction of the Attorney General. With respect to appeals,
28 U.S.C. 518 (a) provides that the Attorney General and the
Solicitor General shall conduct and argue suits and appeals in
the Supreme Court and the Court of Claims in which the United
States is interested, unless the Attorney General, in a parti-
cular case, directs otherwise.
These provisions represent a Congressional determina-
tion that the Federal Government take a consistent and uniform
position in its litigation and that authority for representa-
tion of the Government's interests in court derive from one
source. While a few so-called independent agencies, such as
the Securities Exchange Commission and the Federal Power
Commission, have historically had special statutory authority
to appear in court, such authority is the exception and has
been narrowly confined. See Federal Trade Commission V.
Guignon, 390 F.2d 323 (9th Cir. 1968). Generally, we think
that even the special statutory authorizations now extant are
unwise as a dilution of the centralization which necessarily
best protects the Government's interests in litigation.
- 2 -
There are basically four major policy reasons
supporting the principle of centralized litigating control.
These are:
1. The presentation of a uniform position on
important legal issues to the courts requiring the exercise of
selectivity in the filing and presentation of cases;
2. The ability to select test cases which will present
the Government's position in the best possible light since
court determinations will have precedential effect beyond the
particular agency involved;
3. Greater objectivity in the filing and handling of
cases by attorneys who are not themselves the affected litigants,
and;
4. Achievement of better rapport with the courts
since there is an undeniable recognition of the judiciary's
preference for litigation control by the Department of Justice.
Although this intrusion on the Attorney General's
litigating responsibilities is most objectionable to this
Department, the fact that this is our only objection to the
bill makes us hesitate to recommend a veto. However, if there
are other objections to the bill, we would recommend against
Executive approval of the bill.
Sincerely,
W.Rokestraw
W. Vincent Rakestraw
Assistant Attorney General
STATE DEPARTMENTOS SECURITY
DEPARTMENT OF AGRICULTURE
OFFICE OF THE SECRETARY
WASHINGTON, D. C. 20250
October 15, 1974
Honorable Roy L. Ash
Director, Office of Management
and Budget
Washington, D. C.
Dear Mr. Ash:
In reply to the request of your office, the following report is
submitted on the enrolled enactment H.R. 13113, "to strengthen the
regulation of futures trading, to bring all agricultural and other
commodities traded on exchanges under regulation, and for other
purposes."
This Department recommends that the President approve the bill.
The bill establishes a new commission, the Commodity Futures Trading
Commission, which would take over the regulatory authority over
futures trading in certain agricultural commodities currently granted
the Secretary of Agriculture and the part-time Commodity Exchange
Commission. Regulation would be extended to cover all commodities
currently or hereafter traded on futures markets. The estimated
value of contracts traded on futures markets exceeds $500 billion
annually. The bill would also provide additional regulatory tools
which would strengthen regulation of the futures markets.
The Administration filed a report in general support of the congres-
sional proposal for the strengthening of futures trading regulation,
H.R. 11955, which later became H.R. 13113. The Administration
recommended that the new regulatory. authority be exercised by a
part-time commission, which would include the Secretary of Agriculture
or his designee. The bill, as passed by the Congress, provides for
a full-time commission on which the Secretary is not represented.
The enrolled bill also contains authority for the establishment of
a voluntary futures association(s) which would regulate the practices
of members. The Administration opposed this provision in previous
reports. Other major provisions of the bill do not conflict with
the Administration's recommendations. It is our opinion that the
favorable aspects of this bill far outweigh the problems which the
Administration foresaw in the establishment of a full-time independent
regulatory commission and voluntary futures associations.
Honorable Roy L. Ash
2
Proper operation of futures markets is essential in the production
and marketing of major commodities. The markets provide an
opportunity for producers, merchandisers, and processors to avoid
or reduce price risks by establishing hedging positions. They
further provide for the open and competitive execution of trades
and establish prices which are widely used in the purchase and
sale of actual commodities. By providing hedging and pricing
services, futures markets aid in the movement of commodities from
the producer to the consumers and permit such movement with a
minimum of middleman costs, thus contributing to higher prices for
producers and lower prices for consumers. Futures markets, however,
are subject to abuse from price manipulation, excessive speculation,
and fraud and must have strong Federal supervision if they are to
operate in the public interest.
The bill provides for a 180-day period of transition, after which it
is intended that the new Commission be fully operational and futures
trading in all commodities be effectively regulated. To accomplish
this result, certain provisions of the bill are to become effective
immediately on enactment, for example: the new Commission is
established; funds appropriated for the administration of the
Commodity Exchange Act, as amended, are permitted to be used to
implement the bill; members of the new Commission may be appointed
and compensated; staff may be hired and compensated; investigations
and hearings may be conducted; boards of trade may be designated as
contract markets; persons may be registered; and regulations may be
issued.
Certain business activities, now being carried on and intended to be
regulated and not prohibited, will become unlawful on the 180th day
after enactment unless certain actions have been taken by the new
Commission before that 180th day; such business activities include:
(1) futures trading in commodities not now subject to the Act;
(2) being associated with a futures commission merchant or
agent thereof in certain capacities; and
(3) engaging as commodity trading advisor or commodity pool
operator.
If the President approves the bill, it is urgent that the Commissioners
be appointed as soon as possible after enactment in view of the
nature and scope of the activities and functions which can only be
performed by the new Commission and which must be done during the
180-day period of transition in order to implement the new Act and
prevent a serious disruption of futures market transactions.
Honorable Roy L. Ash
3
It is believed that a total of approximately $11,000,000 would
be needed under this bill for the first full year of operation.
This would exceed by approximately $6,000,000 the expected cost
of regulation of the markets currently under the Commodity
Exchange Act. Approximately $2,500,000 would be needed for
the fiscal year 1975.
Sincerely,
Phil Campbell
Under Secretary
OF
THE THE TREASURY
THE GENERAL COUNSEL OF THE TREASURY
WASHINGTON. D.C. 20220
1789
OCT 16 1974
Director, Office of Management and Budget
Executive Office of the President
Washington, D. C. 20503
Attention: Assistant Director for Legislative
Reference
Sir:
Reference is made to your request for the views of this
Department on the enrolled enactment of H.R. 13113, "To amend
the Commodity Exchange Act to strengthen the regulation of
futures trading, to bring all agricultural and other commodities
traded on exchanges under regulation, and for other purposes."
H.R. 13113 as passed by the House of Representatives would
have authorized the proposed Commodity Futures Trading Commission
to regulate all goods, articles, services, rights and interests
"in which contracts for future delivery are presently or in the
future dealt in." The Department, in a July 30, 1974 report to
the Senate Committee on Agriculture and Forestry, opposed this
broad authority and recommended an amendment to make clear that
the provisions of the bill would not be applicable to futures
trading in foreign currencies or other transactions involving
financial instruments such as security warrants, rights, resale
of installment loan contracts, repurchase options in Government
securities, etc., other than on organized exchanges. The enrolled
enactment incorporates the general substance of the Department's
proposed amendment.
In view of the foregoing, the Department would have no
objection to a recommendation that the enrolled enactment be
approved by the President.
Sincerely yours,
General Counsel
DEPARTMENT OF STATE
Washington, D.C. 20520
OCT 16 1974
Honorable Roy L. Ash
Director, Office of
Management and Budget
Washington, D.C.
Dear Mr. Ash:
I refer to a request from your office for the
Department's comments on H.R. 13113, an
enrolled bill with the title of "Commodity
Futures Trading Commission Act of 1974". The
bill would amend the present Commodity Exchange
Act in order to strengthen the regulation of
futures trading and to bring all agricultural
and other commodities under the same rules and
regulations.
It is our understanding that the Department of
Agriculture has principal responsibility for
the detailed analysis and comment on this bill.
Our examination of the bill from the point of
view of its effect on the foreign relations of
the United States in general and international
trade in the commodities to be affected by the
bill lead to the conclusion that there would
be no objection to its enactment.
Cordially,
Linwood Holton
Assistant Secretary for
Congressional Relations
UNITED
STATE
UNITED STATES CIVIL SERVICE COMMISSION
IN REPLY PLEASE REFER TO
CIVIL SERVICE COMMINITY
WASHINGTON, D.C. 20415
YOUR REFERENCE
October 16, 1974
Honorable Roy L. Ash
Director
Office of Management and Budget
Washington, D. C. 20530
Attention: Assistant Director for
Legislative Reference
Dear Mr. Ash:
This is in reply to your request for the views of the Civil Service
Commission on the Enrolled Bill H.R. 13113 which will establish an
independent regulatory commission called the Commodity Futures Trading
Commission.
The bill contains the following personnel provisions:
- The Commission will consist of a Chairman, Executive
Level III and four other Commissioners, Executive Level
IV, to be appointed by the President by and with the
advice and consent of the Senate.
- It will have:
A General Counsel, Executive Level V, appointed
by the Commission.
An Executive Director, Executive Level V,
appointed by the Commission by and with the
advice and consent of the Senate.
- It may employ experts and consultants in accordance
with section 3109 of title 5 U.S.C. and compensate
them at rates not in excess of the maximum daily rate
prescribed for grade GS-18.
- It amends section 5108 (c) of title 5, U.S.C. by
authorizing the Commission to "place an additional
20 positions in GS-16, GS-17, and GS-18 for purposes
of carrying out its functions."
90
MERIT PRINCIPLES ASSURE QUALITY AND EQUAL OPPORTUNITY
1883-1973
2
The bill authorizes the new agency to engage in rule making and
adjudication in a number of areas. The bill's language leaves some
ambiguity as to whether its rule making and adjudication will be
subject to the provisions of the Administrative Procedure Act, but
this ambiguity does not appear to be of sufficient substance as to
require a negative report on the bill.
If our comments on this bill had been requested at an earlier date,
we would have proposed an objection to the method selected for providing
for the new agency's quota supergrade needs. However, this is now an
enrolled bill, and we do not believe such an objection would warrant
a recommendation to veto it. Consequently, we recommend that the
President sign H.R. 13113.
By direction of the Commission:
Sincerely yours,
Robert Hampton
Chairman
DEPARTMENT OF CONNERCE
GENERAL COUNSEL OF THE
DEPARTMENT OF COMMERCE
UNITED STATES OF AMERICA
Washington, D.C. 20230
OCT 18 1974
Honorable Roy L. Ash
Director, Office of Management
and Budget
Washington, D. C. 20503
Attention: Assistant Director for Legislative Reference
Dear Mr. Ash:
This is in reply to your request for the views of this Department
concerning H.R. 13113, an enrolled enactment
"To amend the Commodity Exchange Act to strengthen
the regulation of futures trading, to bring all agri-
cultural and other commodities traded on exchanges
under regulation, and for other purposes,'
to be cited as the "Commodity Futures Trading Commission Act
of 1974. 11
H.R. 13113 would establish an independent regulatory commission,
called the Commodity Futures Trading Commission, with broad
authority to regulate futures trading and exchange activities.
This Department would have no objection to approval by the
President of H.R. 13113.
Enactment of this legislation may involve the expenditure of
additional funds by this Department if we are requested by the
new Commission to furnish it with economic commodity data.
However, we are unable at this time to estimate the amount,
if any, of these additional funds.
Sincerely,
Karl E. Bakke
2ile
General Counsel
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
October 16, 1974
Dear Mr. Rommel:
The Council of Economic Advisers has no objections
to the President's signing H.R. 13113, an Act "To amend
the Commodity Exchange Act to strengthen the regulation
of futures trading, to bring all agricultural and other commodi-
ties traded on exchanges under regulation, and for other
purposes. "
R Alan Greenspan
Sincerely,
Mr. W. H. Rommel
Assistant Director for Legislation Reference
Office of Management and Budget
Washington, D. C. 20503
AMERICAN REVOLUTION EXPENTENNAL
1776-1976
FEDERAL HOME LOAN BANK BOARD
GREAT HOME LOAN BANK
WASHINGTON. D.C. 20552
FEDERAL HOME LOAN BANK SYSTEM
FEDERAL SAVINGS AND LOAN
101 INDIANA AVENUE, N. W.
INSURANCE CORPORATION
FEDERAL SAVINGS AND LOAN SYSTEM
OFFICE OF THE
October 18, 1974
GENERAL COUNSEL
Mr. Wilfred H. Rommel
Assistant Director for
Legislative Reference
Office of Management and Budget
Washington, D.C. 20503
Attention: Mr. Ronald Peterson
Re: H.R. 13113
Dear Mr. Rommel:
This will confirm the telephone conversation of October 16, 1974
between Mr. Orentlicher of this Office and Mr. Peterson indicating
our views regarding H.R. 13113, the Commodity Futures Trading
Commission Act of 1974.
As indicated by Mr. Orentlicher, the Bill itself does not appear to
affect the substantive program of this agency. The Board would not
therefore have any objection to approval of the bill by the President.
(This is on the assumption, of course, that the term "commodity", as
used through the Bill, will continue to refer only to agricultural com-
modities. We do have a program involving future commitments as to
the purchase of mortgages, which could be adversely affected should
any subsequent amendment of the proposed Act make its provisions
applicable to non-agricultural commodities.)
As was also indicated, we do want to call attention to the breadth
and scope of the proposed section (9), as set forth in Section 101 (a)
of the Bill. The final sentence of the proposed Section (9)(B) could,
if it is accepted as a precedent, seriously affect interchange of views
between government agencies generally.
2 Fale
Mr. Wilfred H. Rommel
Page Two
Also as a matter of general policy and possible adverse precedential
effect, we find troublesome the provision in Section 211 (at page 14 of
the enrolled bill) which includes a proposed new Section 6c relating to
judicial action in protection of the program provided for in the Act.
Our concern relates to the proviso that "no restraining order or in-
junction for violation of the [any] provisions of this Act shall be issued
ex parte". In this respect also the objective is understandable, but
given the public interest features of the proposed program as stressed
throughout the Bill, there may well be instances where emergency
action is clearly necessary if the public interest involved is to be
adequately protected. Some qualification on ex parte orders may be in
order; it is another matter to bar them altogether regardless of the
showing made to the Court as to need.
Sincerely,
Charles E. Allen
General Counsel
By: William T. Nachbaur
Associate General Counsel
S. OF THE INTERIOR
United States Department of the Interior
OFFICE OF THE SECRETARY
March
TRAP
WASHINGTON, D.C. 20240
3,
OCT 17 1974
Dear Mr. Ash:
This responds to your request for our views on the enrolled bill
H.R. 13113, "To amend the Commodity Exchange Act to strengthen
the regulation of futures trading, to bring all agricultural and
other commodities traded on exchanges under regulation, and for
other purposes."
With respect to the matters contained in H.R. 13113 which affect
the Department of the Interior, we have no objection to the
President's approval of the enrolled bill. With regard to all
other matters contained in the bill, we defer in our views to
the Department of Agriculture, the Securities and Exchange
Commission, and any other agency directly affected by the
provisions of H.R. 13113.
H.R. 13113, which amends the Commodity Exchange Act (7 U.S.C.
Section 1 et. seq.), has four titles. Title I creates an
independent regulatory commission called the Commodity Futures
Trading Commission, consisting of a chairman and four other
commissioners. The commissioners are appointed by the President,
with the advice and consent of the Senate. H.R. 13113 directs
the President to establish and maintain a balanced Commission
containing persons of demonstrated knowledge in the production,
merchandising, processing or distribution of one or more of the
commodities covered by the bill. This provision envisions the
creation of a commission whose members will have a broad range
of expertise. This Department anticipates that the range as
projected will encompass mineral knowledge and expertise.
Title I further provides that all existing authority under the
Commodity Exchange Act which is presently vested in the Secretary
of Agriculture and the Commodity Exchange Commission will be
transferred to the new Commission.
Title II provides broad authority to the new Commission to regu-
late futures trading and exchange activities. All goods, articles,
services, rights and interest traded for future delivery are
brought under Federal regulation. The legislative history indicates
CONSERVE
AMERICA'S
ENERGY
Save Energy and You Serve America!
-2-
that this coverage extends to all commodities regardless of whether
they are "grown or mined." (Remarks of Senator Talmadge, Cong. Rec.
S. 16128, daily ed., Sept. 9, 1974.) Section 217 of title II vests
authority in the Commission to regulate transactions for the delivery
of gold and silver bullion pursuant to standardized margin or
leverage account contracts. We have no objection to the provisions
of title II, or to those of the other titles, which include minerals
in the Act's coverage.
Title III provides enabling authority at the discretion of the
Commission for persons registered under the Commodity Exchange Act
and in the commodity trading business to establish voluntary associ-
ations for regulating the practices of the members. The Commission's
annual reports to the Congress are to include information concerning
the futures associations registered pursuant to title III, and the
effectiveness of such associations in regulating the practices of
the members.
Title IV makes a number of technical and conforming changes in
present law designed to expand the ability and authority of the
Commission to conform with the amended Act, as well as to make other
necessary changes in existing laws. Section 402(c) of title IV
gives the Commission the authority to set different terms and condi-
tions for different markets. The legislative history states that
there are some unique differences that are characteristic of the
"world commodities." The bill provides the Commission with the
authority to ffferentiate among commodities, and provides further
authority to treat different commodities differently. (Remarks of
Senator Talmadge, Cong. Rec. S. 16130, daily ed., Sept. 9, 1974.)
We are satisfied that this flexibility will apply to trading limits
on minerals with respect to foreign mineral exchanges.
Although we have no strong objections to the bill as it affects
Interior's mission, we are nonetheless concerned that this regulatory
device could be used to decrease competition rather than increase it.
Also, we are concerned that inappropriate regulations could be
developed which would reduce the efficiency of commodity trading.
The distortions caused by other regulatory bodies are constant
reminders of this possibility. We strongly recommend, if the
President signs the bill, that precautionary steps be taken through
selection of Commission members and budgetary and other oversight
mechanisms to reduce the possibility of these problems.
Sincerely yours,
Jash WCarlem Secretary of the Interior
Assistant
Honorable Roy L. Ash, Director
Office of Management and Budget
Washington, D.C. 20503
AND
MCMXXXIV* COMMISSIONS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
OFFICE OF
THE CHAIRMAN
OCT1 7 1974
Honorable Wilfred H. Rommel
Assistant Director for
Legislative Reference
Office of Management and Budget
Executive Office of the President
Washington, D. C. 20503
Attention: Mrs. L. Garziglia
7201 New Executive Office Building
Re:
Enrolled Bill H.R. 13113
Dear Mr. Rommel:
This will acknowledge receipt of a copy of the above-
referenced enrolled bill, together with your request for the
Commission's views and recommendations with respect to the
bill.
As its title indicates, the bill would create a Commodity
Futures Trading Commission and would vest in that Commission
certain authority to regulate trading in agricultural and other
commodities.
Prior to the passage of this bill by the Congress, the
Securities and Exchange Commission informally advised members
of the staffs of the Senate Committee on Agriculture and
Forestry and the House Committee on Agriculture that the
bill appeared to have unintended impacts on the jurisdiction
of this Commission in certain areas. We were assured,
however, that the bill was not intended to affect our
jurisdiction in the areas with which we were concerned.
The assurances we received subsequently were confirmed in
statements made both by Senator Talmadge and Congressman
Poage at the time the conference committee report and the bill
were considered by the Senate and the House, respectively.
Honorable Wilfred H. Rommel
Page Two
Accordingly, in the light of these assurances that the bill
will not adversely affect our jurisdiction, this Commission
takes no position on the question whether the President should
approve the enrolled bill.
Sincerely,
Bay Hamesh.
Ray Garrett, Jr.
Chairman
TO THE HOUSE OF REPRESENTATIVES:
I am withholding my approval from H.R. 13113, the
Commodity Futures Trading Commission Act of 1974.
This bill would provide for the first major overhaul
of the existing Commodity Exchange Act since its inception
by establishing a new regulatory structure to apply to all
commodity futures trading. This is an objective which I
fully support.
Unfortunately, in passing an otherwise desirable bill,
the Congress has incorporated three objectionable provisions
which would enable the Commodity Futures Trading Commission,
which the bill would create, to bypass traditional Executive
Branch functions. I find these provisions unacceptable.
They represent a retreat from my goal of reduced federal
spending. They will make it more difficult for me to
review all requests for federal spending to insure that
the taxpayers' dollars are spent prudently.
First, it would require the concurrent submission to
Congress of the Commission's budget requests and docu-
mentation when these are submitted to the President or the
Office of Management and Budget. This would in effect
undermine the provisions of the Budget and Accounting Act
of 1921 which requires the President to submit to Congress
a single coordinated budget.
Second, as with the budget requests, it would require
concurrent submission of the Commission's legislative
proposals. Such a requirement, particularly if extended
to other agencies, would make it difficult for the
President to develop and present to the Congress a coherent,
coordinated legislative program as well as advice on the
relationship of Congressionally sponsored legislation to
his program.
2
Third, it would authorize the Commission to bypass the
Attorney General and go directly to the courts in enforce-
ment and litigation matters. Such decentralization of
litigation control would produce less objectivity, lessen
the ability of the government to present the courts with
uniform positions on important legal issues and limit the
government's choice of important test cases.
In summary, I believe that the executive bypass
provisions on the budget, legislation, and litigation
represent an unacceptable erosion of Presidential and
executive functions and responsibilities.
However, the bill is otherwise acceptable and desirable
legislation and, therefore, I stand ready to approve a bill
if it is amended to eliminate the objectionable provisions.
I am advised by the Attorney General and I have
determined that the absence of my signature from this bill
prevents it from becoming law. Without in any way qualifying
this determination, I am also returning it without my approval
to those designated by Congress to receive messages at this
time.
THE WHITE HOUSE,
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 677
Date:
October 18, 1974
Time:
12:00 Noon
FOR ACTION: Michael Duval
cc (for information): Warren K. Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Norm Ross
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date:
Monday, October 21, 1974 Time: 2:00 p.m.
SUBJECT:
Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
TO THE HOUSE OF REPRESENTATIVES
I am returning without my approval H.R. 13113, the Commod-
ity Futures Trading Commission Act of 1974.
This bill would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all commod-
ity futures trading. Briefly, the bill would:
* Create a full time, independent regulatory commission
to be known as the Commodity Futures Trading Commission
(CFTC) with five Commissioners in place of the present
Commodity Exchange Authority within the Department of
Agriculture. The Commissioners would be appointed
by the President by and with advice and consent of the
Senate.
*
Enlarge the jurisdiction of the government's regulation
of commodities to include all futures trading including
lumber and metals -- at present only certain agricultural
commodities are regulated including pork bellies, frozen
orange juice, soybeans, wheat, and corn.
*
Confer significantly stronger regulatory and enforcement
powers on the new Commission than those held by the
present Commodity Exchange Authority.
Unfortunately, in passing an otherwise desirable bill, the
Congress has incorporated three objectionable provisions which
would enable the CFTC to bypass traditional Executive Branch
functions. I find these provisions unacceptable.
2.
First, it would require the concurrent submission to Congress
of CFTC budget requests and documentation when these are sub-
mitted to the President or the Office of Management and Budget.
This would in effect undermine the provisions of the Budget
and Accounting Act of 1921 which requires the President to submit
to Congress a single coordinated budget. Ultimately, it could
result in a return to the fiscal chaos that prompted the Congress
to require the President to develop such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it would
essentially prohibit the President and OMB from reviewing any
CFTC legislative proposals or comments on legislation. Such
a requirement, particularly if extended to other agencies, would
make it impossible for the President to develop and present
to the Congress a coherent, coordinated legislative program as
well as advice on the relationship of Congressionally sponsored
legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and liti-
gation matters. Such decentralization of litigation control
would produce less objectivity, lessen the ability of the govern-
ment to present the courts with uniform positions on important
legal issues, and limit the government's choice of important
test cases.
In summary, I believe that the executive bypass provisions
on the budget, legislation, and litigation represent an unaccept-
able erosion of Presidential and executive functions and
responsibilities. Accordingly, I am withholding my approval
3.
However, in that the bill is otherwise acceptable and
desirable legislation, I stand ready to approve a bill if it
is amended to eliminate the objectionable provisions.
THE WHITE HOUSE
October , 1974
THE WHITE HOUSE
WASHINGTON
October 18, 1974
MEMORANDUM FOR:
WARREN K, HENDRIKS
FROM:
WILLIAM E. TIMMONS
SUBJECT:
Action Memorandum - Log No. 677
Enrolled Bill H.R. 13113 - Commodity
Futures Trading Commission Act of 1974
The Office of Legislative Affairs concurs with OMB's recommendation
of a veto and of the proposal that the President indicate in his
signing statement that he will sign the bill if the three objectionable
provisions, which are not directly related to Futures Trading, are
removed.
file
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 677
Date:
October 18, 1974
Time:
12:00 Noon
FOR ACTION: Michael Duval
CC (for information): Warren K. Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Norm Ross
Paul Theis
RUSH
FROM THE STAFF SECRETARY
FRT ceris cob
DUE: Date:
Monday October 21, 1974 Time: 2:00 p.m.
SUBJECT:
Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Erief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Warren K. Hendriks
telephone the Staff Secretary immediately.
For the President
TO THE HOUSE OF REPRESENTATIVES
I am withholding my approval from H.R. 13113, the Commodity Futures
Trading Commission Act of 1974.
This bill would provide for the first major overhaul of the existing
Commodity Exchange Act since its inception by establishing a new regulatory
structure to apply to all commodity futures trading. This is an objective
which I fully support.
Unfortunately, in passing an otherwise desirable bill, the Congress
has incorporated three objectionable provisions which would enable the
Commodity Futures Trading Commision, which the bill would create, to bypass
traditional Executive Branch functions. I find these provisions unacceptable [insers]
First, it would require the concurrent submission to Congress of the
Commission's budget requests and documentation when these are submitted
to the President or the Office of Management and Budget. This would in
effect undermine the provisions of the Budget and Accounting Act of 1921
which requires the President to submit to Congress a single coordinated
budget.
Second, as with the budget requests, it would require concurrent
submission of the Commission's legislative proposals. Such a requirement,
particularly if extended to other agencies, would make it difficult for the
President to develop and present to the Congress a coherent, coordinated
legislative program as well as advice on the relationship of Congressionally
sponsored legislation to his program.
Third, it would authorize the Commission to bypass the Attorney General
and go directly to the courts in enforcement and litigation matters. Such
decentralization of litigation control would produce less objectivity, lessen
2
the ability of the government to present the courts with uniform positions
on important legal issues and limit the government's choice of important
test cases.
In summary, I believe that the executive bypass provisions on the budget,
legislation, and litigation represent an unacceptable erosion of Presidential
and executive functions and responsibilities.
However, the bill is otherwise acceptable and desirable legislation
and, therefore, I stand ready to approve a bill if it is amended to eliminate
the objectionable provisions.
I am advised by the Attorney General and I have determined
that the absence of my signature from this bill prevents it
from becoming law. Without in any way qualifying this
determination, I am also returning it without my approval to
those designated by Congress to receive messages at this time.
THE WHITE HOUSE
WASHINGTON
October 22, 1974
MEMORANDUM FOR
JERRY JONES
FROM:
MIKE DUVAL
Ken Cole would like the following language added to the
third paragraph of the veto statement.
They represent a retreat from my goal of reduced
inseet
federal spending. They will make it more difficult
for me to review all requests for federal spending
to insure that the taxpayers' dollars are spent
prudently.
THE WHITE HOUSE
WASHINGTON
October 21, 1974
MEMORANDUM FOR: MR. WARREN HENDRIKS
FROM:
WILLIAM E. TIMMONS
SUBJECT:
Action Memorandum - Log No. 677
Enrolled Bill H. R. 13113 - Commodity
Futures Trading Commission Act of 1974
The Office of Legislative Affairs concurs in the attached
proposal and has no additional recommendations.
Attachment
NOTE: I would beef up
The Message by praising
The intent of The legislation,
its need, etc. Emphange
PP would Rign if
objectionalle removed. fatures are
BT
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 677
Date:
October 18, 1974
Time:
12:00 Noon
FOR ACTION: Michael Duval
CC (for information): Warren K. Hendriks
Phil Buchen
Jerry Jones
Bill Timmons
Norm Ross
Paul Theis
FROM THE STAFF SECRETARY
DUE: Date:
Monday, October 21, 1974
Time:
2:00
p.m.
SUBJECT:
Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
deloy in submitting the required material, please
Warren K. Hendriks
telephone the Staff Secretary immediately.
For the President
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.: 677
Date:
October 18, 1974
Time:
12:00 Noon
FOR ACTION: Michael Duval
CC (for information): Warren K. Hendriks
Phil Buchen
Jerry Jones
Bill Timmons 1974 OCT 18 PM 3 49
Norm Ross
Paul Theis
PAT
FROM THE STAFF SECRETARY
DUE: Date:
Monday, October 21, 1974
Time:
2:00
p.m.
SUBJECT:
Enrolled Bill H.R. 13113 - Commodity Futures
Trading Commission Act of 1974
ACTION REQUESTED:
For Necessary Action
XX For Your Recommendations
Prepare Agenda and Brief
Draft Reply
For Your Comments
Draft Remarks
REMARKS:
Please return to Kathy Tindle - West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Warren K. Hendriks
telephone the Staff Secretary immediately.
For the President
TO THE HOUSE OF REPRESENTATIVES
I am withholding my approval from H.R. 13113, the Commodity Futures
Trading Commission Act of 1974.
This bill would provide for the first major overhaul of the existing
Commodity Exchange Act since its inception by establishing a new regulatory
structure to apply to all commodity futures trading. This is an objective
which I fully support.
Unfortunately, in passing an otherwise desirable bill, the Congress
has incorporated three objectionable provisions which would enable the
Commodity Futures Trading Commision, which the bill would create, to bypass
traditional Executive Branch functions. I find these provisions unacceptable. [inser]
First, it would require the concurrent submission to Congress of the
Commission's budget requests and documentation when these are submitted
to the President or the Office of Management and Budget. This would in
effect undermine the provisions of the Budget and Accounting Act of 1921
which requires the President to submit to Congress a single coordinated
budget.
Second, as with the budget requests, it would require concurrent
submission of the Commission's legislative proposals. Such a requirement,
particularly if extended to other agencies, would make it difficult for the
President to develop and present to the Congress a coherent, coordinated
legislative program as well as advice on the relationship of Congressionally
sponsored legislation to his program.
Third, it would authorize the Commission to bypass the Attorney General
and go directly to the courts in enforcement and litigation matters. Such
decentralization of litigation control would produce less objectivity, lessen
2
the ability of the government to present the courts with uniform positions
on important legal issues and limit the government's choice of important
test cases.
In summary, I believe that the executive bypass provisions on the budget,
legislation, and litigation represent an unacceptable erosion of Presidential
and executive functions and responsibilities.
However, the bill is otherwise acceptable and desirable legislation
and, therefore, I stand ready to approve a bill if it is amended to eliminate
the objectionable provisions.
I am advised by the Attorney General and I have determined
that the absence of my signature from this bill prevents it
from becoming law. Without in any way qualifying this
determination, I am also returning it without my approval to
those designated by Congress to receive messages at this time.
THE WHITE HOUSE
WASHINGTON
October 22, 1974
MEMORANDUM FOR
JERRY JONES
FROM:
MIKE DUVAL
Ken Cole would like the following language added to the
third paragraph of the veto statement.
They represent a retreat from my goal of reduced
Insert
federal spending. They will make it more difficult
for me to review all requests for federal spending
to insure that the taxpayers' dollars are spent
prudently.
STATEMENT BY THE PRESIDENT
I have today signed H.R. 13113, the Commodity Futures Trad-
ing Commission Act of 1974.
This bill would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all commod-
ity futures trading. Briefly, the bill would:
*
Create a full time, independent regulatory commission
to be known as the Commodity Futures Trading Commission
(CFTC) with five Commissioners in place of the present
Commodity Exchange Authority within the Department of
Agriculture. The Commissioners would be appointed
by the President by and with advice and consent of the
Senate.
*
Enlarge the jurisdiction of the government's regulation
of commodities to include all futures trading including
lumber and metals -- at present only certain agricultural
commodities are regulated including pork bellies, frozen
orange juice, soybeans, wheat, and corn.
*
Confer significantly stronger regulatory and enforcement
powers on the new Commission than those held by the
present Commodity Exchange Authority.
The basic objectives of this legislation have my full support.
However, I regret that Congress has felt it necessary to enact
the present legislation which I think is subject to the follow-
ing serious objections.
2.
First, it would require the concurrent submission to Congress
of CFTC budget requests and documentation when these are sub-
mitted to the President or the Office of Management and Budget.
This would in effect undermine the provisions of the Budget
and Accounting Act of 1921 which requires the President to submit
to Congress a single coordinated budget. Ultimately, it could
result in a return to the fiscal chaos that prompted the Congress
to require the President to develop such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it would
essentially prohibit the President and OMB from reviewing any
CFTC legislative proposals or comments on legislation. Such
a requirement, particularly if extended to other agencies, would
make it impossible for the President to develop and present
to the Congress a coherent, coordinated legislative program as
well as advice on the relationship of Congressionally sponsored
legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and liti-
gation matters. Such decentralization of litigation control
would produce less objectivity, lessen the ability of the govern-
ment to present the courts with uniform positions on important
legal issues, and limit the government's choice of important
test cases.
My approval of H.R. 13113 is based on the belief that the
significant strengthening of commodity futures trading regulation
outweighs the offensive executive bypass provisions I have referred
to above. I strongly urge the Congress to refrain from further
inroads on executive functions and responsibilities which long
experience has taught us need to be carried out on a coordinated
and unified basis.
TO THE HOUSE OF REPRESENTATIVES:
I am withholding my approval from H.R. 13113, the
Commodity Futures Trading Commission Act of 1974.
I am advised by the Attorney General and I have deter-
mined that the absence of my signature from this bill prevents
it from becoming law. Without in any way qualifying this
determination, I am also returning it without my approval
to those designated by Congress to receive messages at this
time.
This bill would provide for the first major overhaul of
the existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all
commodity futures trading. Briefly, the bill would:
- Create a full time, independent regulatory com-
mission to be known as the Commodity Futures
Trading Commission (CFTC) with five Commissioners
in place of the present Commodity Exchange Authority
within the Department of Agriculture. The
Commissioners would be appointed by the President
by and with advice and consent of the Senate.
Enlarge the jurisdiction of the government's
regulation of commodities to include all futures
trading including lumber and metals -- at present
only certain agricultural commodities are regulated
including port bellies, frozen orange juice, soybeans,
wheat, and córn.
- Confer significantly stronger regulatory and enforce
ment powers on the new Commission than those held by
the present Commodity Exchange Authority.
2
Unfortunately, in passing an otherwise desirable bill,
the Congress has incorporated three objectionable provisions
which would enable the CFTC to bypass traditional Executive
Branch functions. I find these provisions unacceptable
First, it would require the concurrent submission to
Congress of CFTC budget requests and documentation when these
are submitted to the President or the Office of Management
and Budget. This would in effect undermine the provisions
of the Budget and Accounting Act of 1921 which requires the
President to submit to Congress a single coordinated budget.
Ultimately, it could result in a return to the fiscal chaos
that prompted the Congress to require the President to develop
such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it
would essentially prohibit the President and OMB from review-
ing any CFTC legislative proposals or comments on legislation.
Such a requirement, particularly if extended to other agencies,
would make it impossible for the President to develop and
present to the Congress a coherent, coordinated legislative
program as well as advice on the relationship of Congressionally
sponsored legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and
litigation matters. Such decentralization of litigation
control would produce less objectivity, lessen the ability
of the government to present the courts with uniform positions
on important legal issues, and limit the government's choice
of important test cases.
In summary, I believe that the executive bypass provisions
on the budget, legislation, and litigation represent an un-
acceptable erosion of Presidential and executive functions and
responsibilities. Accordingly, I am withholding my approval
from H.R. 13113.
3
However, in that the bill is otherwise acceptable and
desirable legislation, I stand ready to approve a bill if
it is amended to eliminate the objectionable provisions.
THE WHITE HOUSE,
TO THE HOUSE OF REPRESENTATIVES
I am withholding my approval from H.R. 13113, the Commodity Futures
Trading Commission Act of 1974.
This bill would provide for the first major overhaul of the existing
Commodity Exchange Act since its inception by establishing a new regulatory
structure to apply to all commodity futures trading. This is an objective
which I fully support.
Unfortunately, in passing an otherwise desirable bill, the Congress
has incorporated three objectionable provisions which would enable the
Commodity Futures Trading Commision, which the bill would create, to bypass
traditional Executive Branch functions. I find these provisions unacceptable.
[insers]
First, it would require the concurrent submission to Congress of the
Commission's budget requests and documentation when these are submitted
to the President or the Office of Management and Budget. This would in
effect undermine the provisions of the Budget and Accounting Act of 1921
which requires the President to submit to Congress a single coordinated
budget.
Second, as with the budget requests, it would require concurrent
submission of the Commission's legislative proposals. Such a requirement,
particularly if extended to other agencies, would make it difficult for the
President to develop and present to the Congress a coherent, coordinated
legislative program as well as advice on the relationship of Congressionally
sponsored legislation to his program.
Third, it would authorize the Commission to bypass the Attorney General
and go directly to the courts in enforcement and litigation matters. Such
decentralization of litigation control would produce less objectivity, lessen
THE WHITE HOUSE
WASHINGTON
October 22, 1974
MEMORANDUM FOR
JERRY JONES
FROM:
MIKE DUVAL
Ken Cole would like the following language added to the
third paragraph of the veto statement.
They represent a retreat from my goal of reduced
inseet
federal spending. They will. make it more difficult
for me to review all requests for federal spending
to insure that the taxpayers' dollars are spent
prudently.
2
the ability of the government to present the courts with uniform positions
on important legal issues and limit the government's choice of important
test cases.
In summary, I believe that the executive bypass provisions on the budget,
legislation, and litigation represent an unacceptable erosion of Presidential
and executive functions and responsibilities.
However, the bill is otherwise acceptable and desirable legislation
and, therefore, I stand ready to approve a bill if it is amended to eliminate
the objectionable provisions.
I am advised by the Attorney General and I have determined
that the absence of my signature from this bill prevents it
from becoming law. Without in any way qualifying this
determination, I am also returning it without my approval to
those designated by Congress to receive messages at this time.
2
Unfortunately, in passing an otherwise desirable bill,
the Congress has incorporated three objectionable provisions
which would enable the CFTC to bypass traditional Executive
Branch functions. I find these provisions unacceptable.
First, it would require the concurrent submission to
Congress of CFTC budget requests and documentation when these
are submitted to the President or the Office of Management
and Budget. This would in effect undermine the provisions
of the Budget and Accounting Act of 1921 which requires the
President to submit to Congress a single coordinated budget.
Ultimately, it could result in a return to the fiscal chaos
that prompted the Congress to require the President to develop
such a single Federal budget.
Second, as with the budget requests, it would require
concurrent submission of CFTC legislative proposals and it
would essentially prohibit the President and OMB from review-
ing any CFTC legislative proposals or comments on legislation.
Such a requirement, particularly if extended to other agencies,
would make it impossible for the President to develop and
present to the Congress a coherent, coordinated legislative
program as well as advice on the relationship of Congressionally
sponsored legislation to his program.
Third, it would authorize the CFTC to bypass the Attorney
General and go directly to the courts in enforcement and
litigation matters. Such decentralization of litigation
control would produce less objectivity, lessen the ability
of the government to present the courts with uniform positions
on important legal issues, and limit the government's choice
of important test cases.
In summary, I believe that the executive bypass provisions
on the budget, legislation, and litigation represent an un-
acceptable erosion of Presidential and executive functions and
responsibilities. Accordingly, I am withholding my approval
from H.R. 13113.
3
However, in that the bill is otherwise acceptable and
desirable legislation, I stand ready to approve a bill if
it is amended to eliminate the objectionable provisions.
THE WHITE HOUSE,
70R IMMEDIATE RELEASE
OCTOBER 24, 1978
Office of the White House Press Secretary
(Des Maineo, Iown)
THE WHIT E HOUSE
STATEMENT BY THE PRESIDENT
I am pleased to anhounce that I have signed into Law H.R. 13113, the
Commodity Futures Trading Commission Act of 1974.
This not will provide the first major overhaul of the existing Commodity
Exchange Act since Its Inception by establishing & now regulatory structure
to apply to oll commodity futures trading. This is an objective which I
fully support.
This logislation was prompted by increasing concern that Federal regulation
of commodity futures trading is too narrow in Bcope and that the present
regulatory system in inadequate. In the paat few years, the Federal
Government has disposed of large accumulations of minerals and agricultural
commodities. But present stocks are not large enough to stabilize prices,
The recent market situation has been characterized by widely swinging prices.
The futures markets have become increasingly important to our marketing
system withholder value of futures trading DOW totaling $500 billion annually.
The increased trading has attracted more speculators and vautly increased
the potential for unothical and illegal practices. This has resulted in failures
of financial Gross and losses by innocent Investors.
Consumers also have suffered since the grations of the futures markets
have, in some cases, driven up prices to consumers.
It is important that futures trading take place under conditions in which
traders and the public have full confidence in the system. This new law is
an important step in this direction.
Unfortunately, in passing an otherwise desirable bill, the Congress has in-
corporated three objectionable provisions which would enable the new
Commodity Fatures Trading Commission to compromise traditional Executive
Branch functions. I find these provisions unacceptable as well as being
unnecessary for the effective operation of the Commission.
The first one would require the concurrent submission of Commission budget
requests to Congress and to the President 07 to the Office of Management
and Budget. This would in ellect undercut the provisions of the Dudget and
Accounting Act of 1921 which requires the President to submit to Congress a
single coordinated budget. It also requesents a retreat from my goal of
reduced federal spending, since il will make it more difficult for me to
review all requests for federal spending in advance of submission to Congress.
Second, as with the budget requests, it would require concurrent submission
of the Commission's leginlative proposals. If extended to other agencies,
such A requirement would make it diffic for me to develop and present to
the Congress a coherent, coordinat legislative program.
Third, the Commission is empowered to appoint an Executive Director by
and with the advice and consent of the Senate. This raises serious constitutional
questions, by providing for an Executive Branch appointment In a maius r not
contemplated by the Constitution. This encroachment on the separation of
powers can easily be corrected by deletion of the request for Sanate confirmas
tion of the Executive Director.
MORE
-2-
Nevertheless, because of the need for better regulation of commodity
futures trading, I have signed H.R. 13113, notwithstanding my strong objec-
tions to these three provisions which erode necessary Executive control.
I will submit to the Congress legislation which would correct these three
provisions and I will strongly urge its passage during this session of the
93rd Congress.
#
#
#
I am pleased to announce that I have signed into law
H.R. 13113, the Commodity Futures Trading Commission Act
of 1974.
This act will provide the first major overhaul of the
existing Commodity Exchange Act since its inception by
establishing a new regulatory structure to apply to all commodity
futures trading. This is an objective which I fully support.
This legislation was prompted by increasing concern that
Federal regulation of commodity futures trading is too narrow
in scope and that the present regulatory system is inadequate.
In the past few years, the Federal Government has disposed of
large accumulations of minerals and agricultural commodities.
present STOCKS are not
But
large enough
The recent
to stabilize prices.
market situation
has been characterized by
widely swinging
prices. The futures markets have become increasingly important
to our marketing system -- with the value of futures trading
now totaling $500 billion annually.
The increased trading has attracted more speculators and
vastly increased the potential for unethical and illegal practices.
This has resulted in failures of financial firms and losses by
innocent investors.
Consumers also have suffered since the gyrations of the
futures markets have, in some cases, driven up prices to consumers.
2
It is important that futures trading take place under
conditions in which traders and the public have full confidence
in the system. This new law is an important step in this
direction.
Unfortunately, in passing an otherwise desirable bill,
the Congress has incorporated three objectionable provisions
which would enable the new Commodity Futures Trading Commission
Companise
to bypass traditional Executive Branch functions. I find these
provisions unacceptable as well as being unnecessary for the
effective operation of the Commission.
The first one would require the concurrent submission of
Commission budget requests to Congress and to the President
or to the Office of Management and Budget. This would in effect
undercut the provisions of the Budget and Accounting Act of
1921 which requires the President to submit to Congress a single
coordinated budget. It also represents a retreat from my goal
of reduced federal spending, since it will make it more difficult
for me to review all requests for federal spending in advance of
submission to Congress.
Second, as with the budget requests, it would require
concurrent submission of the Commission's legislative proposals.
If extended to other agencies, such a requirement would make it
difficult for me to develop and present to the Congress a coherent
coordinated legislative program.
Third, the Commission is empowered to appoint an Executive
Director by and with the advice and consent of the Senate. This
raises serious constitutional questions, by providing for an
3
Executive Branch appointment in a manner not contemplated
by the Constitution. This encroachment on the separation of
powers can easily be corrected by deletion of the request
for Senate confirmation of the Executive Director.
Nevertheless, because of the need for better regulation
cf commodity futures trading, I have signed H.R. 13113, notwithst
my strong objections to these three provisions which erode necessa
Executive control. 'I will submit to the Congress legislation
would
which will correct these three provisions and I will strongly
This session
urge its passage during the Winter term of the 93rd Congress.