Gary Gensler’s term as chairman of the U.S. agency writing regulations required by the Dodd-Frank Act for the global swaps market ends tomorrow. All the same, his ability to craft rules for companies including Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) could extend at least until next year.
Federal rules permit Gensler, a Democrat, to remain as chairman of the U.S. Commodity Futures Trading Commission until the end of 2013. If President Barack Obama loses re-election in November, his successor could nominate a replacement as chairman earlier. White House spokeswoman Amy Brundage declined to comment on whether the president will re-nominate Gensler.
“It’s a fight not worth having because he’s in place for another year,” said Mark Calabria, an economist and the director of financial studies at the Cato Institute and a former senior aide for Republicans on the Senate Banking Committee. Calabria said he would be surprised if the administration formally submits Gensler for re-nomination this year.
“There is certainly at least one Republican if not dozens that would object to him,” Calabria said in a telephone interview.
The CFTC is in the process of completing scores of regulations required by the 2010 financial-regulation law that are designed to reduce risk and boost oversight of derivatives and swaps, whose notional value is estimated at $708 trillion. Dodd-Frank was enacted after largely unregulated swaps helped fuel the 2008 credit crisis and contributed to the bailout of American International Group Inc. (AIG)
‘I Anticipate Serving’
“I anticipate serving in this post well past April 13,” Gensler told reporters after a speech last month at the Futures Industry Association conference in Boca Raton, Fla. “There is a lot of work we have to do together in this administration to get these rules finalized.”
The CFTC is trying to complete the rules by the end of the year after missing the law’s July 2011 deadline. The agency has voted to give the industry “temporary relief” from Dodd-Frank rules that had been scheduled to take effect. The delays were approved to give the agency more time to implement rules.
The regulations are intended to have most swaps guaranteed by clearinghouses and traded on exchanges or other platforms.
Gensler could face a difficult path to confirmation with 60 votes necessary in the U.S. Senate. A single senator can also block confirmation by holding up a final vote. Democrats have criticized Gensler for failing to quickly adopt regulations limiting speculation in oil and natural gas.
“If CFTC Chairman Gary Gensler doesn’t act soon to implement rules that will cut down on speculation in the oil futures markets, then you should consider not reappointing him,” Senator Bill Nelson, a Florida Democrat, said in an April 3 letter to Obama. The speculation rules, approved by the CFTC in October as part of Dodd-Frank, haven’t taken effect in the market.
Republicans have argued Gensler has overstepped the agency’s authority under Dodd-Frank and has erred in his response to the investigation of MF Global Holdings Ltd. (MFGLQ), the New York-broker that filed for bankruptcy protection on Oct. 31. The CFTC, Securities and Exchange Commission, Justice Department and bankruptcy trustee are investigating the collapse. The bankruptcy trustee has estimated a $1.6-billion gap between customer claims and assets available.
Gensler decided against participating in the CFTC’s investigation because he said he didn’t want his prior relationship with Jon S. Corzine, MF Global (MF)’s former chairman and chief executive officer, to be a “distraction” from the agency’s work. Gensler and Corzine were colleagues at Goldman Sachs.
“We want a person to come before us and answer the hard questions. That’s what your job is about,” Senator Mike Johanns, a Nebraska Republican, told Gensler at a December congressional hearing. “And it just feels to me like you’re not discharging the responsibilities of that job.”
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