Commodity Futures Trading Commission Chairman Gary Gensler said U.S. regulators won’t succumb to Wall Street efforts to weaken financial-market oversight as they implement the biggest rules overhaul since the Great Depression.
“Wall Street would like to keep these markets dark, and Congress has said there has to be transparency,” Gensler said yesterday in an interview for Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Congress has been very specific, and we are going to follow it.”
CFTC and Securities and Exchange Commission staff members will meet in Washington today to discuss derivatives regulation, and have invited representatives from Morgan Stanley, JPMorgan Chase & Co. and industry trade groups to attend. Under the Dodd- Frank Act, regulators must ensure that most swaps are processed by clearinghouses and traded on exchanges.
Gensler, 52, said the SEC, the Federal Reserve and the Federal Deposit Insurance Corp. will be as open as possible in publicly disclosing meetings with banks and their lobbyists related to the rules overhaul. The FDIC has already announced plans to post reports of meetings on its website.
“We are still sorting through this,” said Gensler, a Democrat who worked at the Treasury Department during President Bill Clinton’s administration. “We are already posting any memos or documents that are handed to us by the various outside parties, so we are very similar. I think that the next step is just to post the actual meetings.”
Efforts to boost oversight of derivatives follow the collapse of the U.S. housing market, which sparked a credit- market freeze in 2008 that led to the worst financial crisis since the 1930s. Private swap deals complicated efforts to stem the meltdown, because regulators couldn’t easily determine how much the contagion had spread among different firms.
Wall Street will be motivated to continue lobbying over the derivative provisions in the Dodd-Frank law, because they have a duty to shareholders to maintain profits, said Gensler, a former Goldman Sachs Group Inc. partner.
President Barack Obama signed the measure, named for Senate Banking Committee Chairman Christopher Dodd of Connecticut and House Financial Services Committee Chairman Barney Frank of Massachusetts, last month. Dodd and Frank are both Democrats.
“There will be those that try to weaken the rules, but I think the Congress has been very specific,” Gensler said. “There is going to be transparent trading of the standard swaps.”
May 6 Crash
Gensler also addressed the May 6 market crash, in which $862 billon was erased from U.S. stocks in 20 minutes before equities rebounded. Regulators must ensure that markets dominated by computers trading thousands of shares in seconds “work for small investors,” he said.
While the CFTC and SEC haven’t pinpointed a direct cause of the crash, the agencies plan to “complete some work” on the event in September, Gensler said.
The CFTC and SEC will collaborate in developing rules for derivatives, as they will share oversight of the products whose value is linked to assets such as stocks, bonds or commodities.
Two years after the financial crisis, Gensler said he hopes banks haven’t moved their focus purely to making money again.
“The crisis certainly gave a lot of people on Wall Street pause,” he said. “It failed America, both in Washington and New York so I’m hopeful as we go through this rulemaking that Wall Street understands that we still need to do this.”