Genslers commitment to reform is not the result of any recent Damascene conversion. ![]() They are not capital-building vehicles designed to hit home runs. Gensler is trying to make sure all futures markets are stable, since the futures markets, including derivatives, were designed to be hedging vehicles in order to boost liquidity, says Michael Greenberger, a professor at the University of Maryland School of Law and a former director of the Division of Trading and Markets at the CFTC under Brooksley Born, who sought unsuccessfully to regulate derivatives in the late 1990s. The new attitude at the CFTC represents a stark departure from the laissez-faire ethos of the precrisis years. ∾very exemption for financial companies creates a link in the chain between a dealers failure and a taxpayer bailout, Gensler, 52, told bankers and analysts at a financial services conference in New York earlier this month. The CFTC boss hailed the Senates passage of a reform bill last month, saying it promised to bring comprehensive oversight to the unregulated over-the-counter derivatives market. And as members of the House and Senate began meeting to reconcile competing reform proposals and draw up final legislation, which President Obama is expected to sign this summer, Gensler sought to blunt industry lobbying efforts aimed at widening exemptions in the new derivatives rules for trades with end users, such as corporations seeking to hedge fuel or commodity costs. We need to lower risk and increase transparency. I believe we benefit from a regulated market economy, he says in a recent interview at his Washington office. The CFTC needs to play an activist role in enforcing transparency in futures markets so that companies and investors can hedge risks at the lowest possible cost, he asserts. Gensler shrugs off the complaints and insists that his job is to serve the interests of Main Street, not Wall Street. Its a measure of Genslers performance that his main critics today are not in Congress but in his former industry, which contends that new regulations will drive up the cost of hedging activity for corporate America and drive financial activity into offshore markets. In addition, Gensler has sought to extend the CFTCs authority to impose position limits on oil futures, to prevent speculation from driving up energy prices. He also wants to ensure that all derivatives dealers be subject to supervision. He wants as much of the business as possible to be conducted on regulated exchanges and processed through central clearinghouses that would impose collateral and margin requirements on dealers. As Congress has moved forward on a broad financial reform bill in recent months, Gensler has tirelessly campaigned for tough new rules for the $615 trillion derivatives market. The banker-turned-regulator has won over most of his congressional skeptics with his strong advocacy of tighter regulation. We need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy, Independent Senator Bernie Sanders proclaimed in opposing the nomination.Īfter a year on the job, Gensler is still getting flak, but not from the usual suspects. When President Barack Obama nominated Gary Gensler last year to be chairman of the Commodity Futures Trading Commission (CFTC), skeptics questioned whether a former Goldman Sachs Group partner who served in the Clinton administrations Treasury Department when it refused to regulate over-the-counter derivatives in the late 1990s could be trusted to head a major financial regulator.
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