While the financial markets are closely eyeing the shutdown of the government, Wall Street itself is barely being monitored by one of its federal watchdogs, who says it's had to furlough most of its staff.
The Commodity Futures Trading Commission, which employs around 700 people, is down to just 30 employees as the government shutdown enters its third week.
"We're a skeleton crew right now and, at best, we have a cursory oversight of the markets," CFTC Chairman Gary Gensler said in a speech at Georgetown University Law School on Friday.
While not as well known as the Securities and Exchange Commission, which regulates the stock market and remains open during the shutdown, the CFTC regulates options and futures markets.
Among other high-profile investigations recently, the CFTC filed charges in June against Jon S. Corzine, the former New Jersey senator and governor who oversaw the costly collapse of investment firm MF Global.
The commission also regulates the once-secretive derivative market, which came under scrutiny during the 2008 financial meltdown that saw taxpayers fund a $182 billion bailout of insurance giant AIG.
"It's an agency people don't recognize, but they're overseeing the agricultural, energy and metals commodities, which have a huge impact on the prices of things we buy every day," said Tyson Slocum, energy program director for the watchdog group Public Citizen. "Having the market monitored is crucial to ensure the prices are based on supply and demand and not market shenanigans."
Mr. Gensler, whose five-year term expires at the end of the year, said the commission's office in Kansas City, where the Kansas City Board of Trade operates a commodity and futures exchange, is completely shut down.
Other CFTC units have a handful of employees still reporting to work, but the agency has effectively stopped monitoring the markets, the chairman acknowledged.
Mr. Gensler's comments echo the warning of CFTC Commissioner Bart Chilton, who issued a statement as the shutdown drew near calling the lack of a regulator "grave news for consumers."
"Under a shutdown scenario, government regulators will be handcuffed in our ability to go after crooks who are trying to evade our oversight and protection of markets," Mr. Chilton said in a statement last month.
"You can bet the 'do-badders' are licking their chops."
Asked if he's worried about fraud in the markets in the absence of a regulator, Mr. Gensler said while the commission is "dark right know," officials still get data every day, which officials can use when the shutdown ends to uncover questionable trading activity.
Still, Mr. Gensler said the CFTC is the only federal financial regulator closed these days because of the government shutdown. The newly created Consumer Financial Protection Bureau is self-funded, while the SEC had funding carried over from the previous fiscal year.
On Monday, the SEC website said the agency remains open for now. But under an operational plan, the SEC eventually could have to discontinue much of its investigative work, among other functions.
Meanwhile, with so much of his staff on furlough, Mr. Gensler said he relies on his senior counsel, Eric Juzenas, to operate as the commission's press, legislative affairs, international and chief economist offices.
The near total shutdown also comes as the CFTC, a once fairly obscure federal agency, has seen its enforcement reputation on the rise. The agency received a lot more regulatory muscle under the Dodd-Frank financial reforms.
In 2011 and 2012, for instance, the CFTC filed at least 201 enforcement actions — more than in the previous five years combined, according to a report in April by lawyers for Gibson Dunn law firm.
"With the passage of Dodd-Frank and the support of an administration which believes in its mission, the CFTC's days of relative obscurity are over," the report concluded.
Despite the closure, Mr. Gensler said the commission's biggest challenge isn't the shutdown. As he sees it, the agency just isn't big enough.
"We're only an agency of 680 people, far too small to oversee the markets we've been tasked with by Congress," he said.
Under sequestration, the agency's budget dropped from $205 million to $195 million, with cuts mostly from salary and expenses, he said.
The employee count dipped from 711 to 680. One key departure was announced the day the shutdown started with the resignation of David Meister, who led the CFTC's enforcement division in charge of cases such as MF Global.
Meanwhile, a CFTC study found that even in cash-squeezed times, the CFTC will need to recruit outside talent given its expanded powers under Dodd-Frank. But the internal consulting study, obtained through the Freedom of Information Act, found a lack of a strategic recruiting partly because of years of hiring freezes and budget uncertainty.
Mr. Gensler also finds himself in the unusual spot of advocating for more money and staff at a time when agencies are under immense pressure to cut costs. He hasn't been without critics.
Rep. K. Michael Conaway, Texas Republican, said at a hearing in July that Congress mandated a "staggering amount of work" for the CFTC, conferring new registration reporting and oversight powers.
"The commission has spent the past three years on this herculean task, but today, it is still frustratingly behind schedule in some of those," he said. "Rulemakings that were supposed to be completed in a year have slipped into the third year."
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