This report was written by Matthew Cunningham-Cook.

In a game of musical chairs caused by the resignation of her predecessor, financial executive and current U.S. Sen. Kelly Loeffler, R-Ga. got herself appointed to the Senate Agriculture Committee, which might seem noncontroversial, since the panel is known mostly for its work shaping food stamps and farm subsidies. But the committee also crafts the rules directly governing some of the most important parts of Wall Street — including the specific businesses Loeffler and her husband make their fortune in.

Loeffler was for 16 years a top executive at the firm Intercontinental Exchange (ICE), which owns the New York Stock Exchange and many other exchanges. Her husband is currently the CEO of ICE. The exchanges are regulated by the Commodities Futures Trading Commission (CFTC), which is directly overseen by Loeffler’s committee.

Similarly, Loeffler was also the CEO of an ICE subsidiary called Bakkt, which aimed to set up a respectable and regulated bitcoin exchange. Bitcoins and other digital assets are considered commodities and thus are under the exclusive purview of the CFTC. Bakkt has enjoyed explosive growth since Loeffler joined the Senate, with trades of bitcoin futures growing on its platform 2,500 percent the month she became Senator.

The relationship between Loeffler’s family fortune and the CFTC she oversees is straightforward: The agency’s regulations — or lack thereof — can have a direct impact on the profitability of exchanges.

Loeffler attracted significant controversy in March for controversial stock trades that she and her husband made after she received briefings related to the coronavirus pandemic. The American Prospect additionally revealed in September that Loeffler’s family had received over $3.2 million in agricultural subsidies since 1995, despite her paeans to small government.

Loeffler’s role overseeing the CFTC is another web of potential conflicts. Congressional restrictions on that agency left financial derivatives largely unregulated, which helped fuel the financial crisis that ultimately blew up the global economy.

Twelve years later, if Loeffler and her colleague Sen. David Perdue are reelected on January 5, a GOP-led Senate could upend the Biden administration’s financial reform plans and refuse to confirm Biden’s nominees to the CFTC and other financial agencies. Those agencies then would be hamstrung from providing effective oversight of the markets that Loeffler and her husband operate in and profit from.

“The bottom line is that the CFTC sets the rules for trading 80-90 percent of the complex derivatives markets, and of all the commodity derivatives,” said Marcus Stanley, policy director at Americans for Financial Reform. “Anything that’s not a stock, a bond or an option, the CFTC regulates how it’s traded. That includes all futures, cryptocurrencies, and complex financial derivatives,” Stanley said, like credit-default swaps and collateralized debt obligations, in addition to forwards and swaps generally.

“This is trillions of dollars in markets that affects everything to the price of bread milk or gasoline, as well as the operating rules of a company like ICE,” Stanley said. “The CFTC sets at a very fine level of detail for the rules of how ICE operates, whether it is safe for investors, or the economy.”

“Loeffler’s own personal fortune comes from ICE and now she’ll be overseeing the agency that sets the rules for ICE, so to call it a conflict is almost an understatement,” Stanley concluded.

“(They) Work Very Hard To Make Sure That There’s Very Little Regulation”

The conflict was first reported by the Atlanta Journal-Constitution in January, and Rep. Doug Collins made an ad about it while running against Loeffler in the all-party blanket primary that occurred on November 3.

But since that point, her husband, the CEO of ICE, has spent more than $10 million to reelect Loeffler through a super PAC, in addition to the $23 million that his wife spent out of her own funds. Loeffler’s husband, Jeffrey Sprecher, has grown his empire with the $11 billion acquisition of Ellie Mae, a leading mortgage technology provider.

ICE has a vested interest in less regulatory oversight, pointed out Bart Naylor, a financial policy expert with the watchdog group Public Citizen.

“When you buy stock, you’re buying property and there has to be a transaction cost because you are owning some fraction of the company you’re buying,” Naylor said. “If you’re buying a derivative there’s no property exchange, just a winner and a loser. Because of that derivatives trading is such a wonderful playground for gamblers.”

“Eighty percent of people that play in derivatives markets have nothing to do with agriculture or other commodities — frankly they are mostly machines,” Naylor said, referring to high-frequency traders that use algorithms to make money from millisecond-to-millisecond changes in the market.

“Because it attracts gamblers, it really warrants very tight regulation,” he said. “The participants in these markets, like ICE, know that and work very hard to make sure that there’s very little regulation.”

“The Only Thing That Explains These Proposals Are Lobbyists”

One particular area where Loeffler’s position could be enormously helpful for ICE is in the periodic CFTC reauthorization bill. A CFTC reauthorization bill that passed the House Agriculture Committee in October 2019, prior to Loeffler’s appointment, had serious benefits for ICE, said Steve Suppan, a senior policy analyst at the Institute for Agriculture and Trade Policy.

The reauthorization bill contained provisions that would allow the delay of reporting of information about digital — i.e. Bitcoin — futures and allow foreign exchanges to avoid registering with the CFTC, which would benefit the many foreign subsidiaries of ICE.

“The only thing that explains these proposals are lobbyists for ICE,” said Suppan. “They would have weighed in.” The bill was cosponsored by Rep. David Scott, D-Ga., a senior member of the House Agriculture Committee, and who has received tens of thousands of dollars in campaign contributions from Loeffler and from ICE executives and the company’s political action committee.

If Loeffler is reelected, that CFTC reauthorization bill could come to the Senate floor with her support, ensuring that the benefits for ICE remain intact.

Her opponent is Pastor Raphael Warnock of the Ebenezer Baptist Church, the same church led by Martin Luther King Sr. and Martin Luther King Jr.

Photo credit: Kelly Loeffler campaign.

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