Gary Gensler, chairman of the Commodity Futures Trading Commission, took his seat before a Senate appropriations subcommittee on May 4 to make his case for a $106 million budget increase.
Without the money, Gensler said, his agency wouldn’t be able to perform its new job of policing roughly $300 trillion in U.S. over-the-counter derivatives, a market that includes the credit-default swaps that helped push the U.S. economy into the worst recession in 70 years, Bloomberg Markets magazine reports in its August issue.
“In 2008, both the financial system and the financial regulatory system failed the test for the American public,” Gensler, 53, told the senators. “An investment in the CFTC is warranted, because, as we saw in 2008, without oversight of the swaps market, billions of taxpayer dollars may be at risk.”
Even before Gensler had a chance to make his rounds at the Republican-controlled House, he got its response. Representative Jack Kingston, a Georgia Republican, proposed a spending bill on May 23 that called for a 15 percent CFTC budget cut to $172 million.
Although the Dodd-Frank Wall Street Reform and Consumer Protection Act required the commission to write and enforce more than 50 new rules regulating derivatives trading and commodities futures, Gensler, who’d gotten an increase for the current year, needed to tighten his belt starting on Oct. 1, as at other agencies, Kingston said.
‘Thinking Has Evolved’
The news was the latest blow to the former Wall Streeter, who has been knocked around repeatedly since he began advocating in 2009 that the huge derivatives market had to be controlled — and that his CFTC was the agency to do it.
As a Goldman Sachs Group Inc. (GS) partner and then Treasury undersecretary, Gensler had lined up with the hands-off- derivatives crowd behind the $601 trillion global market.
He says the near-collapse of the world’s financial system changed his mind about regulation.
“My thinking has evolved,” Gensler says in his ninth- floor Washington office, which is decorated with artwork by his three daughters. “I was part of the consensus view on derivatives, and it’s fair to say that the consensus missed it. We should have done more to protect the American people.”
Gensler is an unlikely agitator for reform. While he was at the Treasury, the administration of President Bill Clinton refused to regulate OTC derivatives, the financial instruments that derive their value from an underlying asset. Gensler helped push an anti-regulation bill through Congress in 2000.
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As usual spending cuts where we need it most.
They will complain in the future that they could not police activities, for lack of funding, just like the SEC.
Expect more derivative debacles.
Indeud…