ADDITIONAL OBAMA APPOINTMENTS
Gary Gensler - Chair, Commodity Futures Trading Commission
Former Treasury Undersecretary, Clinton administration
Former Assistant Secretary to the Treasury, Clinton administration
Former Senior Advisor, Hillary Clinton campaign
Former Partner, Goldman Sachs
Nominated: December 18, 2008
Obama’s comments:
“To chair the Commodity Futures Trading Commission, I’ve chosen Gary Gensler, who brings a wealth of expertise from both the public and private sectors to this position. In addition to serving as Under Secretary of Treasury during the Clinton Administration and a Senior Advisor to the Senate Banking Committee, Gary also gained a deep knowledge of our financial institutions during his decade as a partner at Goldman Sachs. As the new chairman of a commission charged with regulating some of the unsound practices and excessive leverage that helped cause this crisis, I know he will restore sound judgment and strict oversight to our markets. Along with Mary, Treasury Secretary-designee Tim Geithner, and others, Gary will also serve as a key member of the team that will reform our outdated financial regulations.”
Others’ comments:
Walter Lukken, CFTC Chair during the Bush administration, “called Gensler’s nomination an ‘outstanding choice’ to help the agency in its ‘vigorous oversight’ of markets.
“Greg Zerzan, counsel and head of global public policy at the International Swaps and Derivatives Association, said Gensler was well respected in Washington and Wall Street circles.
“‘The new administration has set an ambitious agenda for reforming the financial services regulatory structure, and Mr. Gensler is certainly going to be one of the people doing the heavy lifting,’ said Zerzan.
“Gensler advised Democratic Sen. Paul Sarbanes on the Sarbanes-Oxley corporate reform law and is a former partner at Goldman Sachs. He also has been an outspoken critic of the mutual fund industry, and co-authored a book, The Great Mutual Fund Trap.
“Gensler is one of three people named by Obama’s transition team to review the SEC.”
—Reuters
“In 1988, Gensler joined Goldman, Sachs and Co., specializing in media companies. He advised the National Football League in its television negotiations in 1990. He stayed at Goldman for nine years, before moving to government at the Treasury Department. Gensler served under two Clinton Treasury secretaries. From 1997 to 1999, Gensler worked as assistant secretary of the Treasury under Robert Rubin until Rubin stepped down in 1999. Lawrence Summers then became the Treasury head, and Gensler was promoted to Treasury undersecretary.
“[Some] have hit Gensler for his history at Goldman Sachs, which forecasted high oil prices in the immediate future and issued investment products based on commodities markets.
“‘I would not put any Goldman Sachs person in charge,’ said Fadel Gheit, a managing director of oil and gas research at Oppenheimer & Co. and one who has testified that speculation caused oil prices to jump. ‘These are the financial geniuses that created the toxic assets. Who are we kidding?’
“Gensler never worked in commodities during his tenure at Goldman, and left Goldman in 1997, well before any speculation would have occurred during the recent fluctuations in oil prices.”
—Who Runs Government
“As Treasury under secretary for domestic finance, Gensler helped broker a deal on the Commodity Futures Modernization Act of 2000 (PL 106-554), which governs trading in energy and agriculture futures, that exempted credit default swaps from regulation.
“Critics link those financial products, which are insurance-like derivatives contracts, to the destruction of the nation’s largest insurer, American International Group Inc.
“‘The 2000 legislation was a travesty,’ said William K. Black, a University of Missouri - Kansas City economics and law professor, who recently testified before Harkin’s committee about the role of credit derivatives in the current financial crisis. ‘The bipartisan intervention that prevented vital regulation’ of credit default swaps in 2000 ‘exposed the nation and the global economy to severe risk and caused great loss.’
“Nick Shapiro, a spokesman for the Obama transition team, said, ‘Gary Gensler brings a wealth of expertise from both the public and private sectors to this position. It’s important to understand that Mr. Gensler was a member of President Clinton’s Working Group on Financial Markets’ process that recommended regulation of broker dealer derivative affiliates and called for the use of clearinghouses. President-elect Obama knows that he will restore sound judgement and strict oversight to our markets.’
“The predecessor to the 2000 law, the Commodity Exchange Act of 1936 as amended, did not define swap transactions as futures contracts. Had the 2000 law redefined swaps as futures contract, swap transactions would have faced immediate regulation and all existing contracts would have had to have been annulled.
“In his May 1999 testimony on the reauthorization of the CFTC, Gensler told a House panel that the $70 trillion worldwide derivatives market ‘shows the vibrancy and the importance of this market for all sorts of participants to hedge their risks and transfer risks,’ including grain producers and homeowners.
“‘We should recognize that and put the burden on those who are suggesting changes and further regulation, put the burden on them before we tamper on some of the successes of this marketplace for the economy,’ he said. ‘The swap exemption reflects the implicit consensus that has existed for the past 10 years: swap transactions should not be regulated under the CEA. It is our view that swaps are not futures under the CEA and that the CEA, because of its rigidity, is not well-suited to regulation of the institutional swaps market.’
“Gensler worked at Treasury from 1997 to 2001, before serving as an adviser to former senator Paul S. Sarbanes, D-Md. (1977-2007) on the 2002 Sarbanes-Oxley Act (PL 107-204), which overhauled corporate accounting rules. Earlier in his career, he spent nearly two decades at Goldman Sachs.”
Congressional Quarterly Politics
“Gensler has been working to convince members of Congress that he is now ready to expand the agency’s regulatory authority to include $28 trillion in credit-default swaps and other derivatives.
“Gensler must convince Congress that his attitude toward regulation is closer to his work on the 2002 Sarbanes- Oxley Act toughening corporate governance rules than the 2000 Commodity Futures Modernization Act, which he also helped shape.”
—Bloomberg News
Sworn In: May 26, 2009
Appointment Impact:
“While the Securities and Exchange Commission regulates stock markets, the CFTC polices futures and options markets. Some financial analysts expect Obama to attempt to merge the two agencies and to make other fundamental changes.
“Like the SEC, the CFTC has been criticized recently for failing to detect and fix problems with exotic financial instruments that are at the roots of the crisis.
“The CFTC also has come under intense criticism to boost oversight and rein in runaway speculation that has led to volatile swings in energy and commodity markets.
“Congress is pushing for more regulation of the $58 trillion credit-default swaps market, financial instruments partly responsible for contributing to the global financial crisis.”
—Reuters
“Efforts to combine the agencies could be impeded by politics. Each has its own constituency and is overseen by different congressional committees, whose members rely heavily on campaign contributions from the financial industry.”
—The Baltimore Sun
“The commission oversees $5 trillion in futures and options trading, including oil and agricultural markets and foreign currency exchange. The agency has come under heightened scrutiny from Congress as lawmakers push for greater regulation of the $31 trillion credit-default swaps market, financial instruments blamed in part for the credit crisis.
“The agency has also faced congressional inquiries into its capabilities during record price increases in energy and commodity markets. Oil futures prices touched a record $147.27 a barrel in July.”
—Bloomberg News
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