Streetwise Professor

So let me get this straight. The DOJ submitted its comments to Treasury two months after the end of the public comment deadline. Moreover, the Treasury disclaims any interest whatsoever in antitrust issues in futures markets (from Bloomberg):

Treasury officials preparing an overhaul of U.S. financial regulations haven’t discussed antitrust issues involving financial futures exchanges, Treasury Undersecretary Robert Steel said, two days after the Justice Department said the companies may inhibit competition. “Our issue is the overall structure” of markets and not antitrust matters, Steel said today in an interview.

How clearinghouses are structured “really hasn’t been part of our discussion,” Steel said. “The issue of antitrust is not something Treasury is involved with.” Steel said such matters were under the authority of the DOJ.

Now, what is the probability that DOJ didn’t know that Treasury couldn’t care less about clearing market structure? Zero would be a good guess–and my only one.

So, let’s put it together. Well after the deadline for public comment DOJ submits a tendentious comment letter on an issue of no interest to the recipient thereof. The comment therefore did not serve its ostensible purpose of illuminating Treasury about a matter of concern to it, and the DOJ surely knew this was the case. So, what was the motive for doing this?

I don’t want to go all Soviet over this, and turn every question of fact into question of motive, but the objective reality is that there is an agenda at work here. Exactly what it is I don’t know. But the situation bears the hallmarks of a disgruntled staff getting some payback, or attempting to achieve a desired policy outcome (the derailing of the CME-NYMEX tie up?) that it could not achieve through established procedures (e.g., a merger review). Did DOJ feel pressured by Illinois’ formidable Congressional delegation into waving through a CME-CBOT merger that it really wanted to oppose? Just guessing here, but the extraordinary circumstances (timing, disconnect between the comments and the DOJ announcement on its closing of the investigation of CBT-CME merger, the fact that the comments were completely off point to the issue about which comments were solicited) raise very serious questions. I have tried–really I have–to discern a benign or favorable interpretation of these facts, but have failed miserably.

This is serious business. These gratuitous, unsolicited comments cost investors billions of dollars. They created tremendous uncertainty. DOJ better have a very good reason for its actions, but I’ll be damned if I can think of one. Somebody got some ‘splainin to do, Lucy.

The politics/motive are interesting and important, but the most important thing is to focus on the substance of the comments. As I blogged yesterday, the substance is an embarrassment. The suspicious circumstances surrounding the release only gild the lily.