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Gary Gensler: A U-Boat Sent into the CFTC?
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
Guest Post Submitted by MFGFacts.com
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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I knew Gary Gensler slightly in college - University of Pennsylvania in Philadelphia. He was the fourth string varsity (vice frosh) heavyweight coxwain on the crew team. I rowed lightweights. He probably coxed my boat 20 times over three years.
To those critizing his size - yes he is of diminutive stature - probably weighed 90-100 pounds in college. Hey - genetic roll of thedice my friends. Can't pick on a person for his size.
Being on the team at all speaks well for anybody - perhaps not if you want to get a good education. Had to be at the boathouse from 3-7 September-May - often in sub-freezing temps. Had to spend your Christmas and spring vacations rowing. The varsity coach - Ted Nash didn't put with any BS from anybody. So he survived in a tough demanding environment.
I always thought that he was geekish and lacking in confidence. I wondered why he bothered being on the team. He had no future. Too many far better coxswains ahead of him. He did up Wharton undergrad and grad in five years. An imprssive acomplishment for anybody - w/o spending four hours a day on sports.
So that is that.
Now as far as being in "the tribe" I might have some truly worthwhile input. I was an engineering student. I didn't know what an investment bank was. All of those Wharton types were a definite strong northeast clique. They huddled all the time, mumbling strange portents like "Goldman-Sachs," and "JP Morgan." I thought that it was some strange religious cult - banking Druids. It was clear that they had been plugged into their career paths well before college - probably in utero by their parents. This group also tended to be very liberal - big government. If you mentioned to them that Gerry Ford did a good thing by not bailing out New York City circa 1973, you would be publically upbraided and ostracized. Not treated with an open mind at all. Trust me - I did it and felt the wrath. I never thought too highly of the business majors. I remember taking basic business law as an elective - a required course for the business majors. The only people doing any work - or not struggling - were myself and two other engineers.
I remember seeing Gensler on the front of the business page (WAPO?) fifteen years ago. He had done something like forcing mutual fund advisors to cut their commissions by one basis point. I thought - big deal. Just a bleeding heart liberal championing the common man.
I did have a mild sense that he knew how to game the system - check all of the right boxes. Not necessarily a bad thing. There are always things one has to do to build a career, and certain boxes are better to check than others - and we all have choices along the way.
I have nothing against the guy - except that he willingly slept in the Clinton's bed.
I'm sure that Heinrich Himmler was quite an approchable fellow in certain circles too.
"He did up Wharton undergrad and grad in five years. An imprssive acomplishment for anybody - w/o spending four hours a day on sports."
I'm a Wharton alumn of the nineties. Undergrad is tougher than the grad program since at that time the grads only had a pass/fail grading system. Tough to get into the MBA program and tough to fail it. I knew many students who studied double degrees engineering or law and MBA. Even undergrad is doable with lots of parties on the side. It's another one of these degrees in worthlessness that doesn't get you anywhere, unless you suck up big time later on your job. In comparison to an engineering degree at ETH in Zurich it's a cake walk.
Beside that, go tell this story to a single mother who supports four children and working three jobs. She will be impressed by Mr. Gensler's achievements. She would hit him with her LV bag she is never able to afford in her life.
"fourth string varsity (vice frosh) heavyweight coxwain on the crew team"
Here's half the problem, another "crew" hamster - think TV commercial - talking about WASP college athletics like it was a gladiator sport. Really "frosh".
Gensler is a putrid piece of pathetic pandering.
Crew my @SS.
Really? That is all you have against this walking criminal catastrophe? Your political issues? Man you are trailer park Republican, as opposed to caviar Republican. Do you know the difference?
Thank you for the candid post, however, I DO HAVE SOMETHING AGAINST THIS GUY - He has manipulated the system for his & his cronies gains whilst ensuring that the field of play is skewed to ensure that a few connected groups game the system that functions to support & aid price stability & commerce. He has violated his fiduciary responsibility & should be prosecuted - he recused himself early because his INSIDE info must have indicated that the issues surrounding MF Global were far worse than reported - The GUY has proven to be less than honest & should be removed from his position - he obviously will not resign because to do so would require a conscious which obviously has been ignored for so long it no longer functions...Everyman's post was SPOT ON - This is NOT A MAN...he is demon whose form is best described as a male humanoid -
I'd be careful about that demonizing thing. It can lead us down some hideous avenues. That said, Gensler is certainly a sociopath. Our government is now full of them. He has little or no conscience, no sense of responsibility to others, no compassion or empathy for anyone but himself, and no concern for the damage he causes as he pursues his self-centered goals.
As for Brad Surfer-Boy Chilton, at least he has a good head of hair, and the ability to at least sound like he gives a damn.
My wife worked for a year or two filling prescriptions at a Wal-Mart Pharmacy. She was stunned by the number of ordinary Americans taking psychotropic drugs, mainly anti-depressants and anti-anxiety drugs.
This public malaise is a direct consequence of the government being in the hands of what can only be called a mafia. Your local postmaster, or the gals at the DMV are probably hard-working, conscientious public employees. But the people at the top of the power pyramid are--to a man--mafiosa like Gensler. How long will we tolerate it? Or will we just stay on Ativan and Zoloft forever?
Re the pharmacy -- yep we have a nation of people on soma, just so they can keep functioning in an increasingly inhumane society without going insane. And we are increasingly kept passively entertained by the internet, where TPTB can conveniently monitor what we are doing and thinking on any given day, not to mention our cell phones... just google "Carrier IQ".
You are correct IC - I do need to be careful about the demonizing thing...that path is ugly because as you rightly indicate it dehumanizes and once that ideal takes hold actions can have disasterous results - Thank you for pointing that out - It is my sincere hope that if we Americans begin to take a greater interest in these issues it would not take a great deal to turn the tide of corruption...Again thank you for the constructive criticism...I needed it
That ugly little pasty man!
see-no-evil, hear-no-evil 'regulator'.
There's no need to worry. Everybody loves Bart Chilton, the voice of the CFTC.
http://tradewithdave.com/?p=4791
Good cop/Bad cop. Chilton is the Pin-up Golden Boy for that org. He's the surfy guy without the board. He's the guy who makes all the noise about doing something every few months but releases just enough to paint the picture of "renegade" in the system. He's all hat, no cattle. Where's the beef, Bart? Where's the cash? Where's the transparency after 3 and 3/4 years of investigation into silver manipulation? What a mob of whores.
Where's the money, bitch.
Filth like Gensler do not deserve the dignity of such a question.
He and all the others deserve public hangings.
Btw, OWS children are merely the Lambs of Sheeple. They bay like babies without the backbone or bearing becoming of their base beliefs.
The day is coming girls. These scumb do not know the wrath that is being held back by the patience of true Americans.
The irony is that compared to at least 2 of the 5 CFTC members, Gensler's a good guy. He was one of the 3 who voted to support position limits. They're taking forever to implement them and we'll see if there are loopholes that allow JP Morgan et al to get around them. But 2 of the 5 members are clearly WORSE than Gensler.
the federal reserve bank.
http://expose2.wordpress.com