Treasury Secretary Nicholas Brady says he will oppose further reductions of the Commodity Futures Trading Commission's powers if Congress passes legislation stripping the agency's authority over stock-index futures. Brady offered the olive branch at a Senate committee hearing Thursday on the Bush administration's plan to transfer control over stock-index futures to the rival Securities and Exchange Commission. One futures industry official said he saw Brady's remarks as an indication that the secretary thinks ``he's losing'' in the race to win Senate approval. ``I will oppose more sweeping changes to the CFTC authority if the administration's bill passes in its present form,'' Brady told the Senate Banking, Housing and Urban Affairs Committee. But outside the hearing, when asked what he would do if Congress doesn't pass the bill, Brady said: ``I think it will pass.'' A spokesman for the Chicago Mercantile Exchange, Andrew Yemma, declined comment but noted that in the past the Merc has favored merging the SEC and CFTC over stripping the futures regulator of some of its authority. At the Chicago Board of Trade, spokesman Michael O'Connell also declined comment on the specifics of Brady's proposal but restated the BOT's position that ``we are against the proposed legislation and stand by the CFTC as the regulatory body that should oversee all futures markets.'' ``We are opposed to anything that weakens the CFTC,'' said John Damgard, president of the Washington-based Futures Industry Association. Although he hadn't seen Brady's statement, Damgard who was in Chicago to give a speech, noted: ``I think there's a sense on Brady's part that he's losing. If this went to a vote right now, we're pretty confident we would take the day on an up or down vote.'' Stock-index futures, often used in program trading strategies by large institutional investors such as pension funds, allow investors to trade on the movement of a basket of stocks without having to buy the underlying stocks. The CFTC and the futures industry oppose the administration bill, saying it would cripple the agency's ability to regulate other futures products while drying up market liquidity and driving business out of the country. But the SEC and the Treasury Department argue the move is necessary to curb wild price swings in the stock markets arising out of price differences between the futures and securities markets. ``Stocks and stock-index futures are one market linked together by electronics,'' said Brady, who first advanced that opinion while heading a presidential task force that investigated the 1987 stock market crash. He noted that in the 42 years between 1940 and 1982 when stock index futures first began trading, there were only three instances when the Dow Jones Industrial Average declined by more than 6 percent, while there have been four instances since the 1987 crash. In an apparent attempt to allay concerns that the bill is the first step toward a complete dismantling of the CFTC which oversees the futures industry, Brady said ``the administration's proposal is not the proverbial `camel's nose under the tent.' ``The way the markets are now functioning makes no further shifts in regulatory jurisdiction necessary _ not Treasury bond futures to the SEC, not a full merger of the SEC and CFTC,'' he said. He urged passage of the bill to prevent further market disruptions. Noting that debate on the bill would lead to a political ``bloodletting,'' Sen. Christopher Dodd, D-Conn., complained that the administration should have settled the dispute. Instead ``we find ourselves acting as a referee between the SEC and the CFTC'' which he described as ``two agencies acting like children.''
