Obama Nominee for Swaps Agency Draws Skepticism Over Experience

Timothy Massad, a little-known Treasury official who oversaw the U.S. rescue of Wall Street, faces skepticism about his qualifications from lawmakers who will vote on his nomination to lead the country’s top derivatives regulator.

Massad, 57, was picked by President Barack Obama yesterday to succeed Gary Gensler as chairman of the Commodity Futures Trading Commission, which won authority in the 2010 Dodd-Frank Act to regulate swaps trading by Wall Street firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co.

If confirmed, Massad will take the helm of an agency in transition. The CFTC is pivoting from writing Dodd-Frank rules to enforcing them even as Gensler and the administration have so far failed to convince Congress to fund the additional staff and technology needed to do the job.

Senators Elizabeth Warren, a Massachusetts Democrat, and Bernie Sanders, a Vermont independent, along with consumer groups expressed questions about Massad, saying they need more information about his qualifications and views on financial regulation.

“The CFTC does critical work, and Gary Gensler set a very high standard for the chairman position,” Warren said in a statement.

Sanders said he would question Massad about his commitment to supporting limits on speculation in oil and gas, a CFTC rule that Wall Street banks successfully sued to overturn in federal court.

“Will Mr. Massad make sure that the price of heating oil and gasoline is based on the fundamentals of supply and demand and not Wall Street greed?” Sanders said in a statement.

Seeking Commitment

Americans for Financial Reform and Better Markets, groups that advocate tighter regulation of Wall Street, issued statements calling on Massad to demonstrate a commitment to be tough on banks.

The agency Massad would inherit has put in place more than 60 rules required by Dodd-Frank that are designed to reduce risk and increase transparency in the global swaps market. After largely unregulated swaps helped fuel the 2008 credit crisis and the rescue of American International Group Inc., Congress gave the CFTC authority in 2010 to oversee about 95 percent of the market.

Gensler, a former Goldman Sachs partner whose own confirmation was held up for months because lawmakers questioned his views on regulation, surprised Wall Street during the last four years with his desire to increase restrictions. Obama said Massad has a “deep commitment to a reform agenda” and would continue Gensler’s work.

Swaps Pioneer

Early in his career at Cravath, Swaine & Moore LLP in 1987, Massad was involved with the swap industry’s original efforts to standardize documents. Swaps had developed in the 1980s as a way to shift risk directly between buyers and sellers, and the industry was looking for a way to ease the logistics of trading.

Massad was the senior associate on the effort and served essentially as the chief operating officer of the project, according to Dan Cunningham, a New York-based partner at Quinn Emanuel Urquhart & Sullivan LLP and formerly of Cravath. The agreements and user guides were part of the early documents from the International Swaps & Derivatives Association Inc.

“He did an excellent job of taking a variety of viewpoints on many issues and helping people reach a consensus,” Cunningham said in a telephone interview.

TARP Oversight

Massad worked at Cravath for 25 years, and his work included advising the Singapore exchange that handled stocks and derivatives, a senior administration official said. After the credit crisis, Massad worked for a brief time on the congressional oversight panel for the Troubled Asset Relief Program to rescue Wall Street.

The program, which he then was confirmed to manage at Treasury, spurred a political backlash that drove congressional supporters from office in the 2010 election and fed criticism of the banking industry.

“Nobody ever wants to see TARP repeated. But the fact is, TARP is a program that did its job,” Massad said Sept. 30 at the Brookings Institution. “It has worked faster, better, and cheaper than most people ever thought possible.” He didn’t comment about his nomination yesterday.

As of Nov. 8, $421.54 billion had been disbursed under the TARP program, while $406.48 billion had been repaid, according to the latest numbers from the Treasury Department.

The commission, which is designed to have five members, may instead have only one Democrat and one Republican early next year if Obama and the Senate cannot overcome political hurdles to confirm three new commissioners.

In August, Obama nominated J. Christopher Giancarlo to succeed Jill E. Sommers, a Republican. Meanwhile, the president is considering nominating Sharon Y. Bowen, a securities lawyer at Latham & Watkins LLP in New York, to fill the spot being vacated this year by Bart Chilton, a Democrat, according to four people in the financial industry.

The Senate Agriculture Committee, which has jurisdiction over the CFTC, has yet to schedule confirmation hearings for any of the nominees.

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