Gary Gensler: A U-Boat Sent into the CFTC?

EB's picture


Although we would substitute "loophole expansion" for the term "de-regulation", inasmuch as the number of financial regulations has more than doubled over the last decade and a half and we have not had anything approaching free markets for well over a century (the received wisdom perpetuated by your oligarchs, notwithstanding), and would finger state-sponsored moral hazard along with free money handed out by the Fed as the primary driver of our financial predicament, the following exposes a number of important facts about the conflicted ex-Goldman Sachs alum that now runs (or did he recuse himself?) the US Commodity Futures Trading Commission, a government chartered institution, whose legacy should one day earn the dubious destinction of that which has institutionalized the trampeling of customer rights (see here for a most egregious example). - EB

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Who was Gary Gensler?

When Gary Gensler was nominated to head the CFTC, most Americans had never heard of him. Yet he had been cruising the inner Beltway of D.C. and halls of influence for years under the radar of most.  Genlser succeeded Brooksley Born who was given a very rough time by the club of Summers, Rubin, Greenspan et. al  when she sounded the alarm bell on the rapid and unregulated growth of off-exchange derivatives. Born sought at least transparency as they “could pose potentially serious dangers to our economy.” Although appointed by Clinton, she never got his support and resigned from her post. For more on her prescient warnings, view this fascinating PBS documentary.  As more collapses happen, the failure to regulate off exchange derivatives from CDO’s to re purchase agreements are increasingly understood to be a prime source of financial collapse.

Lobbying for Loopholes

Back to U-boat Gary. While still at Goldman Sachs brought Robert Rubin (yes, also from GS) recruited Gensler in 1997 to join him as Assistant Secretary for Financial Markets. Later he was promoted to Undersecretary for Domestic Finance in 1999.  Here he worked on the changes to regulation assuring that credit default swaps and other off exchange derivatives were free from regulation.  During the Enron disaster these were called “The Enron Loophole.”

In 2000 Congress passed the Commodity Futures Modernization Act, sponsored by Senator Phil Gramm (and John McCain’s campaign Economic Adviser).  This act was written to keep off exchange derivatives unregulated and, as many are now discovering, opening “Mac Truck sized loopholes” allowing expanded access to customer funds for off exchange, but rated instruments beyond US Treasuries. Gary Gensler was the Treasury’s under secretary for domestic finance and it was his job to assure lobby that the CFMA got through Congress and signed into law.

Cheering the Confirmation

Gensler’s confirmation flew through Congress in 2009, but it was not cheered by all, especially the informed public.  The New York Times named it  “troubling”  at the time and Salon came out with a damming article, “The Oligarch’s President."    Senator Tom Harkin, of the Agriculture Committee, at the time  released a statement of “concerned about the de-regulatory orientation in this nominee’s past.” Senator Bernie Sanders tried to block it and was one of the two votes against Gensler with the strong statement:

… I cannot support his nomination. Mr. Gensler worked with Sen. Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S. history. He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become “too big to fail.” He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices. At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.

Like Brooksley Born, Sander’s lone and prescient voice was ignored by the cheering mob in Congress. Gensler’s nomination was approved.

So how did a guy like this who was a key member of the Washington Beltway Demolition Derby get appointed as Chair of the CFTC?  How did this happen after it was known that the loopholes Gensler had a hand creating and defending known loopholes in regulation that were pivotal to the mortgage banking collapse? Those things do not matter in Washington. Independence has no value.

Gensler served as senior economic adviser to the Hillary Clinton in the 2008 campaign.  When her campaign closed shop, he jumped into the Obama camp as a fundraiser and adviser.  Once elected, the Obama transition team then charged him with charge of the reviewing the SEC.

Prior to this Gensler was active in Democratic party politics, appointed treasurer of the Maryland Democratic Party in 2003. He emerged as a major donor contributing more than $220,000 to Democratic party candidates and committees from 2002.  This figure includes the more than $72,000 in 2008 shortly before his appointment.

Washington D.C. is filled with souless hacks.  Such men and women reduce themselves to be nothing more than instruments of others.  We saw that on display at the hearing this week called by the Agriculture Committee where Chairman Gensler was asked to testify.  His prepared statement did not address the purpose of the hearing, but instead offered more about the Swaps market concluding with meaningless platitudes, “This is why the CFTC is working so hard to ensure that swaps-market reforms promote more open and transparent markets, lower costs for companies and their customers, and protect taxpayers. Thank you, and I would be happy to take questions.”

As questions were asked, more than once Gensler replied he could only speak only as allowed by his legal council…

Mr. Gensler talked much, but said little.  On Monday, the CFTC will finally, and after much delay, vote on rule a required under the Dodd-Frank act removing a brokers’ ability to use their clients’ excess margin, or collateral for future trades, in corporate notes, bonds and commercial paper.  The very changes to CFTC rule 1.25 that Gensler worked so hard to put in place 12 years before.  The changes John Corzine and Laurie Ferber, MF Global’s general counsel, lobbied hard in recent months to protect and  keep in place.

Expect Mr. Corzine to say nothing when he appears to answer to the American people.  Such are the the government servants delivered to us.


* * *

For our own presentation of Gensler as giddy-as-a-schoolgirl power-hungry regulator (indeed, he said he was "tickled pink" by his new authority, and had autographed copies of Dodd-Frank by Bernanke, Shapiro, Geithner, etc. on his desk) and the CFTC's directive as soon-to-be price fixer in chief, see our article from November, 2010: Ex-Goldmanite Gary Gensler "Tickled Pink" as CFTC Ramps Up for Price Fixing. -EB

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turtle's picture

@ Oquities, I'm guessing this is a trick question:

Is it "f... all of the above!"



AndrewCostello's picture

This little circle of friends has the politicians bought and paid for, and they are enslaving us through a corrupt system that only benefits the connected who are able to borrow money from nowhere and be paid out in real assets like gold, silver, land and oil.


It is time for revolution.  But the population are mindless pathetic cowards.




Join us and fight back:

WTF2's picture

He Sucks...


Oquities's picture

Quick quiz:

what do Gensler, Shapiro, Bernanke and Geithner have in common?

a.  they were all appointed by obama

b.  they all have a history as government slugs

c.   they will make fortunes when they leave govt. jobs

d.  they all go to the same synagogue as blankfein, dimon, soros, axelrod, sunstein, emanuel, panneta, lieberman, frank, etc., ad nauseum.

e.  they are all advocates of the modern economic theory of crony capitalsm

Below Zero's picture

What's to worry about? Gensler is in the club and the rest of you fuks are not. Get over it. All of your whining, kiyiing and speaking the truth changes nothing. Learn to accept your place humbly in society. Be grateful for even the down-trodden are still living. Its a great life, enjoy it.

Sabibaby's picture

Here, eat a bullet. You be greatful too, your children won't be so lucky.

Moe Howard's picture

This was all caused by the Republicans deregulating the financial markets. The Democrats were unable to re-regulate because the Republicans made that impossible during the years the Democrats controlled both houses, and for the two years they controlled it all.

In other words, Bush did it.



Ron Paul 2012

mumbo_jumbo's picture

"this was all caused by the republicans deregulating the financial markets"

news flash: Bill Clinton signed the repeal of glass-steagal....

BTW, WTF is up with posting here? no spell check and can't copy/paste???  WTF

cdskiller's picture

Don't be silly. Democrats did not want to re-regulate. Dodd and Frank received the most money in Congress from financial institutions. Chuck Schumer has prevented everything in the Senate and Obama received more bribes from Wall Street than any presidential candidate in the history of the United States.

f16hoser's picture

He's got the kind of face you wanna bitch-slap, over and over and over and over and over again. I bet his mommy tucks him in every night......

topcallingtroll's picture

Another goldman guy huh?

Now they also run the ECB, our treasury, the Italian and Greek governments, the SEC, among their recent conquests not to mention the exhaustive list of institutions they have wormed their way into prior.

They have had a hand in every scandal and bankruptcy and financial cillapse past and pending, yet no one in the government will investigate. When they are caught in blatant, obvious crimes that cant be covered up small settlements are arranged with the SEC that dont even begin to cover their profits from that and similar crimes.

But the FBI is looking for the terrorist boogey man, or working with the medicare AIG to go after doctors for billing twenty bucks more than the documentation supports.

Time for a reset. Somebody hit that damn reset button if you know where it is.

MarcusLCrassus's picture

They need to start putting these Goldman Sachs guys on the No Fly List. 

flacon's picture

It's a shame that the article is so consistently poorly written. 

Atlantis Consigliore's picture

The Tattoo,  of bureaucrat cockroaches:  to Oroarkes  Corsine:


In front of Congress: 

"da budget, de budget" screaming hysterically, we need more pimps whores liars and lawyers, he cried out,  my staff works very hard for the Merican sheep,  pimples,  he cried. as the Whores all nodded;

and the stockholders, and clients defrauded and pimped out:???


Screw em; its an election year,  sink a clearing house or bank or 2

and scare em.   we need more budgets for Dodd


you CAN fool everyone every time, just as enron, or

repeat after me:  :theres no people like sheeple......theres no ...


slvrizgold's picture

That little devious fucker should be beaten mercilessly, scourged, crucified, and left for the vultures.    Hey, isn't that popular culture for his people?

dcb's picture

my understanding is he has in fact ried to reverse things, but lobby influence prevented him from doing so. I would not be surprised if it in fact came from higher up.

Al Gorerhythm's picture

Then he should have followed Brooksley Born's example.

willien1derland's picture

It is not his stature or looks that are of concern it is his deteriorated morals, ethics, & manipulative abilities that are abhorrent & MUST BE PROSECUTED...In one of Tyler's posts today he mentioned that he was tired of the Wall St Propoganda - I too, must admit, that I am weary of the inane rhetoric...this trend has run its course and must be addressed. I am no saint, nor am I so naive that I believe ANYONE in WDC will make any meaningful changes - with McCain & Levin's NDAA legislation it is NOW VERY APPARENT that there is another band of terrorists that wish to destroy the American way of life & they are TRULY in our midst - the FINANCIAL & LEGISLATIVE TERRORISTS should be named & our military should be used, if necessary, to eliminate this risk...It is my sincere hope to see Paulson, McCain, Levin, Bernanke, Geithner, Dimon, Monihan, Blankfein & GS Cronies like Corzine et al in Guantanmo Bay & their ill gotten assets confiscated & used to offset the damage of their crimes & fraud

topcallingtroll's picture

It may be time to get radical.
Where is our Cassius?

Imminent Crucible's picture

He changed his name to Muhammed, and went over to the Sufis.

cdskiller's picture

Every time I look at Gary Gensler and Geithner, I just want to beat them up, you know? Just tie them to a chair and bitch slap them. Followed by waterboarding. God, that would be so much fun!

Seasmoke's picture

line them all up, preferably upside down at a gas station

jackinrichmond's picture

i think bonzai did a gensler-dracula blend..  it's worth looking for

..truly creeeepy.

Hannibal's picture

  Gary Gensler: SCUM OF THE EARTH!

Sabibaby's picture

Oh look, another shyster Jew

Gold Dog's picture

Sabibaby- You would think that the Chosen Ones would be getting a bit nervous by now and telling their brothers to stop fucking everything up or they will get a bad name!



flacorps's picture

Hofjuden do not submit to the rabbis. They're entwined with the regime.

Sabibaby's picture

History repeats! You'd think these knuckleheads would figure that out too!

non_anon's picture

ah, a villain can smile and smile and still be a villain

Conax's picture

Somebody colorized that pic of him. On tv he was shades of grayish green, but this pic is fleshtoned. I think he might be an amphibian.

Imminent Crucible's picture

Amphibian? Nah, just a chameleon. Definitely a reptile.

Everybodys All American's picture

Speaking of derivatives. Has it gotten to the point that we are now allowing weekly derivatives/options to be written on nearly all stocks? Not a peep has been said about this by any of the financial networks.

First off, if you don't think the cabal of banks decides what the narrative will be in the media think again. It used to be that options expired on the third Friday of each month and they still do it's just that there are a ton of other deriviatives that expire every week. For what purpose do they serve? Where is the SEC, CFTC, and FINRA on this subject. Has this just become the only means for BAC, JPM, GS, C, and MS to make the kind of money they need to stay solvent. Is this the equivalent of the "Hail Mary" pass for banks? I think it is.

topcallingtroll's picture

It appears to be the case. Essentially this boils down to collecting money by selling puts. CDS, futures swaptions, all the fancy stuff is just a way to collect ongoing subscription income. It is essentially unrwgulated insurance. They know they could never pay if sovereigns default for examole, but they have doubled and tripled down as a way to dig themselves out of their hole. The gaping hole in their balance sheets that would be obvious if FASB and regulators were doing their job.

If we survive this without a collapse the banks slowly recapitalize thru these sales. That seems to be the plan. Then after surviving this gamble everyone plans to get religion and never gamble again.

If you face certain eventually bankruptcy by doing nothing, and believe you have an opportunity for one last gamble to avoid it, then no matter what the odds are you take the chance.

willien1derland's picture

TCT - Thank you for the post - very informative

willien1derland's picture

Everybody's All - I have heard only nominal information that such activities were occurring - I read on some of the MF Global articles that alternative actions a hedger could take would be to utilize deratives, however, I must admit that I have no real appreciation as to the mechanics or its associated risks - Additionally, I must admit that the whole derivatives arena frightens me as it appears to be associated significnatly with the Godforsaken 'Off Balance Sheet' FASB nonsense - Would really like to educate myself  - is there any information you could share on this? - Many thanks in advance

Bananamerican's picture

"tickled pink"

sounds more like SEC material...but then those blood funnels don't just attach themselves  


Everyman's picture

If there ever was a mas produced zeroing in target for rifles, that sniveling arrogant ass in the  picture certianly deserves it.  That is the picture of a male human (not gonna call THAT a "man") that this world can completely do WITHOUT.  What does that particular person provide to humanity at large other than his ego?

THAT type of human is filling the "leadership" spaces in our society, politics, business, board rooms, and our churches.  This is the type of person that seems to be of no threat, nop hazard, but just "sits there" until the "evil spores" come out and corruption comes through unabated.

Take another look at that face, that is a person that can be co-opted and co-opts people and for nothing more than power of eny kind at any level.  This is the "nice guy" that will put a knife in your back when nobody is looking.

The simpering shit eating grin photo is the face of evil today.  Not a rag headed pissed off muslim.

nowhereman's picture

Nobody here should be surprised by this, ZH was all over this at the time of his (dis)appointment.

connda's picture

Gensler: "MF Global?  What happen at MF Global?  A what?  A Default?  Customers lost money?  Really? Wow!  We ought to look into that."

Rainman's picture

Excellent analysis.The twin towers of financial mayhem were the Glass-Steagall gutting in '99 and CFMA signed in 2000....both by Clinton...CFMA signed on his way out the WH door with the prezidential china. These were the giveaways signed by Bubba to keep his sorry impeached ass from being convicted in the Senate. The backwash continues to this day. Good ol Bubba puffs himself up as an international statesman....bullshit !

HCSKnight's picture

Careful Rainman, don't want to destroy the liberal illusion that underpins so many on ZH that think their white-bread digital rants are real libertarianism.

ZH IS the video game equivalent of libertarian-liberalism for a bunch of twenty somethings that will run to their mama - the liberal courts - the first time they are punched in the mouth.

Sancho Ponzi's picture

I have a 20 something year old son who can kick your sorry ass to the curb in seconds.

You may want to take a grammar course to learn how to properly use punctuation. There's never anything positive in any of your posts, and I'm tired of your pointless tirades and rants. It must suck to be you.


Al Gorerhythm's picture

I have a 10 year old neice who could take over when he ran out of puff. 

pragmatic hobo's picture

gensler is a guy that seemingly says all the right things but does exactly nothing.

Al Gorerhythm's picture

They are all the same. Look how Chilton has hoodwinked GATA, Butler and others.

High Plains Drifter's picture

its all tribal my man. all tribal......