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A Revolving Door Farce: CFTC Commissioner Bails To Head Regulator's Biggest Opponent

Tyler Durden's picture


There is no better way to describe what the recently departed CFTC commissioner Scott O'Malia just did when he bailed from the commodity watchdog to become the new head of the International Swaps and Derivatives Association, aka ISDA, the biggest banking group that has constantly opposed every intervention and attempt to regulate the swaps market by the CFTC since the Lehman crisis, than an epic farce.

For those who are unaware ISDA is a global OTC derivative lobby group, counting the world's largest investment banks among its members, and has frequently fought regulatory efforts to reform the market after the financial crisis. ISDA itself was exposed as a complete joke during the European crisis when due to the overhang of avoiding Europe's insolvent reality, it made CDS protection obsolete as protection from sovereign restructurings and credit events, in the process crushing one of the key ways to hedge for credit event risk. 

Meet Scott O'Malia

A member of the U.S. Commodity Futures Trading Commission will become the new head of a bank lobby group that is fighting the derivatives regulator in court over a crucial new rule curtailing Wall Street.


The International Swaps and Derivatives Association said on Wednesday that Scott O'Malia, a Republican who often voted against new CFTC policy in the wake of the financial crisis, will become the trade group's next chief executive.


O'Malia will start his new job as of Aug. 18, ISDA said. The news came only days after O'Malia said he planned to leave the CFTC as of Aug. 8.


ISDA is one of three banking groups that sued the CFTC in December, hoping to beat back tough trading guidelines for U.S. companies doing business overseas, which they fear could hurt markets and cut profits.


The two sides are set to face each other in a first hearing in a federal court in Washington next week.

Even an otherwise impartial Reuters appears outraged by this blatant and painfully clear example of government capture of "public servants" by those who have dangle carrots of money in exchange for lobby (and future employment promise) favors, and thus set the rules, courtesy of people like O'Malia.

The speed of O'Malia's move, and ISDA's high profile, made the appointment striking even by Washington standards, where a 'revolving door' between regulators and those they oversee makes moves from one side to the other common.


"This is why Americans are so disgusted with so many high government officials and believe that Washington is in cahoots with Wall Street," said Dennis Kelleher, who heads Better Markets, a group urging tighter regulation of big banks.


O'Malia spent more than four years as a member of the CFTC, and was an outspoken critic of the rule-making process mandated by the 2010 Dodd-Frank financial reform law, which he said had been rushed, confused and lacked transparency. At the CFTC, he chaired the Technology Advisory Committee, which drives the agency's efforts to better cope with the vast amount of data it has to handle.

But wait, wasn't it that other former CFTC commissioner, Bart Chilton, who since has also departed for the far better paying confines of the private sector, who claimed every chance he got that it was the CFTC's "woefully small budget" that prevented it from analyzing the data it got? Apparently it turns out that the only reason for the CFTC's abysmal enforcement record is because the group in charge of processing said data was controlled by a coopted individual whose only prerogative was to cozy up to his future employer, ISDA, and not make any waves whatsoever.


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Wed, 07/23/2014 - 11:32 | 4993089 q99x2
q99x2's picture

Somebody call the police.

Wed, 07/23/2014 - 11:34 | 4993106 Save_America1st
Save_America1st's picture

I put the below in another thread as off-topic before this write-up was posted, so I'll copy and paste it here in case anyone is interested:


Fed Slams Silver Market Riggers' 50T Euro in Derivatives!


You can't make this up. Just weeks before the London Silver Fix goes by the way of the DoDo Bird the NY Fed slams the Bankster responsible for the ending of the Silver Fix ...Deutsche Bank for having much too high derivative leverage!!

  NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk"
  But that's not the half of it. There are rumors that the companies picked to "replace" the Silver Fix (CME and Reuters) are NOT going to carry on the original "Silver Fix" at all but create a brand new transaction based electronic system that will report something called the "London Silver Price"!
  So what happens to the MASSIVE amount of silver derivative contracts that Deutsche Bank wrote that were dependent on settlement based off the "Silver Fix" after August 14th??
  Poof! Hello weapon of Mass Financial Destruction as counter-parties to Deutsche Bank's 55T Euro derivative book will be decapitated in a Global Derivative Meltdown!
  Those who think the ISDA will come to the rescue with a revised definition of the "Silver Fix" don't understand that this is all being done ON PURPOSE!
  The only question left...WHAT WILL WE DO AFTER THE CRASH?
  That is where the decision for FREEDOM will be either demanded by the People or forfeited by the People.
  I choose FREEDOM...what about YOU?
  May the Road you choose be the Right Road.
  Bix Weir

Wed, 07/23/2014 - 12:01 | 4993280 Stackers
Stackers's picture

Regulatory capture

Wed, 07/23/2014 - 12:04 | 4993305 Pool Shark
Pool Shark's picture



"It's a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham."


Wed, 07/23/2014 - 12:46 | 4993560 Pinto Currency
Pinto Currency's picture



This is no surprise as the major banks own the CFTC - see the following.

The major banks started manipulating commodities (gold) heavily in the 1990s.  (J.Aron is a gold trading house in London and its staff, including Blankfein, took over Goldman after it was acquired by them.):

"...In 1991, the CFTC started issuing exemption letters.  The first letter was written to J. Aron, a subsidiary of … Goldman Sachs.

Pretty soon, every major bank in the U.S. was given an exemption.

Congress didn’t know about the exemptions.  Indeed, the House Agricultural Commission – which oversees the CFTC – didn’t even find out about the exemptions until 6 years later … in 1997.

When a congressman on the Agricultural Commission asked the CFTC for a sample of one of the exemption letters, the CFTC official said he had to ask Goldman Sachs whether or not the CFTC could show a copy to Congress.  In other words, the banks were already running D.C. by the 90s. ..."


Wed, 07/23/2014 - 16:30 | 4994813 Boxed Merlot
Boxed Merlot's picture

Indeed, the House Agricultural Commission – which oversees the CFTC...



Ya know, in 1991 I was knee deep in learning my craft in building materials, construction, contracting, distribution, manufacturing and delivery / installation.  To learn now I entrusted my future to these YAHOOS who themselves hid in the anterooms of agricultural concerns in order to weasel their cancerous criminality into the fabric of US "good faith and credit" is reason enough to smoke every last one of them out with far more vehemence than even any self-deluded and pitiful "Allah Akbar" screamer.  At least these folks can be contained as a benign cancer, these infectious traitors are a malignancy.





Wed, 07/23/2014 - 17:21 | 4995113 TheRedScourge
TheRedScourge's picture

That guy needs to move to S. O'Malia.

Wed, 07/23/2014 - 22:13 | 4996338 Manthong
Manthong's picture

ISDA.. isn’t that the acronym for ““Imperious Society of Default Abolitionists”?

Wed, 07/23/2014 - 12:05 | 4993317 gjp
gjp's picture

This must be the 'macro-prudential regulation' that Janet says will save us all when this latest greatest bubble blows up in everyone's face.  Thank goodness our regulators are on the job.

Wed, 07/23/2014 - 13:10 | 4993739 SoilMyselfRotten
SoilMyselfRotten's picture

And to think we once imagined that the CFTC would look into metal manipulation.....hahahahahaahahahahahahaha. A good belly laugh once in awhile is a healthy thing.

Wed, 07/23/2014 - 11:44 | 4993168 astoriajoe
astoriajoe's picture

LOL, good one.

Wed, 07/23/2014 - 11:47 | 4993184 boattrash
boattrash's picture

q99x2, I've called the police 18 times this morning. I just won't repeat WHAT I've called them.

Wed, 07/23/2014 - 11:49 | 4993196 HardAssets
HardAssets's picture

"Somebody call the police."

They own the police.  Own the judges too.


Theyre absolutely in our face with the corruption now, aren't they ?

A hundred years of dumbing down the American public in the 'schools' has paid off Big Time.

Thu, 07/24/2014 - 20:54 | 5001705 papaclop
papaclop's picture

Bart Chilton and this Omalia really do show the pieces of crap who were supposed to bring fairness to futures trading and sold out to the likes of JP Morgan when their 4 year silver price fixing "investigation " turned up nothing suspicious. Both of these assholes can go to hell.

Wed, 07/23/2014 - 11:32 | 4993094 ebworthen
ebworthen's picture

Den of thieves.

Wed, 07/23/2014 - 11:35 | 4993096 NoDebt
NoDebt's picture

Blythe Masters just jumped to her death after reading this.  The irony and unfairness was too much for her to handle.

Wed, 07/23/2014 - 11:33 | 4993097 Dr. Engali
Dr. Engali's picture

CNBS will be all over this story, as soon as they get done with their incessant BTFD stories.

Wed, 07/23/2014 - 11:35 | 4993108 insanelysane
insanelysane's picture

Why are people that buy gold referred to as hoarders but people that just keep buying, buying, and buying stocks aren't?

Wed, 07/23/2014 - 11:41 | 4993147 Dr. Richard Head
Dr. Richard Head's picture


Wed, 07/23/2014 - 11:44 | 4993167 Dr. Engali
Dr. Engali's picture

....and barbaric.

Wed, 07/23/2014 - 11:34 | 4993098 insanelysane
insanelysane's picture

Fortunately this type of behavior by government employees didn't impede their investigations into Madoff, oh wait...

Wed, 07/23/2014 - 11:33 | 4993099 jmcadg
jmcadg's picture

Smug fuck

Wed, 07/23/2014 - 11:37 | 4993115 Kaiser Sousa
Kaiser Sousa's picture

and there you have it...
gee, wonder why he always impeded reform of this fake ass financial house of shit...
it dont even matter cause itS all crumbling according to plan and Apmex shipped my shit today...

Wed, 07/23/2014 - 11:44 | 4993160 Dr. Richard Head
Dr. Richard Head's picture

Reform really doesn't matter with regulatory capture.  Give a group the power to create and that group will then determine how to enforce and on whom they enforce based on their own needs.  It's all malarky.

Wed, 07/23/2014 - 11:36 | 4993118 pathetic looser
pathetic looser's picture

(p)ISDA ....))))      childish , i know ............

Wed, 07/23/2014 - 11:37 | 4993123 Argos
Argos's picture

How do these people live with themselves?  Are they all delusional sociopaths?

Wed, 07/23/2014 - 11:44 | 4993163 Dr. Engali
Dr. Engali's picture

Yes. 99% of these blood suckers are in it for one thing..... themselves.

Wed, 07/23/2014 - 11:50 | 4993199 SheepDog-One
SheepDog-One's picture

The entry exam for banksters is killing a sack of puppies, eating a baby, and dousing a tram with gasoline and throwing in a lit match.

Wed, 07/23/2014 - 12:13 | 4993287 HardAssets
HardAssets's picture

"How do these people live with themselves?  Are they all delusional sociopaths?"

No, some of them are psychopaths. The difference ? Some are responsible for bringing about the deaths of people quickly, and others more slowly. Example of the latter ? Those who steal from people so they no longer have the resources to live a long, healthy, & relatively worry free life.

Wed, 07/23/2014 - 12:04 | 4993309 Boxed Merlot
Boxed Merlot's picture


Are they all delusional sociopaths?...


Perhaps, or they may actually be seeing our US government as the useless, foul and irrelevant force it has become and are jumping ship.  Too bad they fail to recognize their own service in degrading it and the stench emanating from the organization they're attaching themselves to now.


From The Art of War, chapter 13: The Use of Spies


Having INWARD SPIES, making use of officials of the enemy.

Tu Mu enumerates the following classes as likely to do good service in this respect: "Worthy men who have been degraded from office, criminals who have undergone punishment; also, favorite concubines who are greedy for gold, men who are aggrieved at being in subordinate positions, or who have been passed over in the distribution of posts, others who are anxious that their side should be defeated in order that they may have a chance of displaying their ability and talents, fickle turncoats who always want to have a foot in each boat. Officials of these several kinds," he continues, "should be secretly approached and bound to one's interests by means of rich presents..."    (with comments)

Wed, 07/23/2014 - 11:38 | 4993125 Pee Wee
Pee Wee's picture

An entire nation's farse is one mans record bonus.

Dump the "regulators."  All of them.

Wed, 07/23/2014 - 11:39 | 4993128 El Vaquero
El Vaquero's picture

Is now the time to point out that all of the OTC derivatives held by Citi, BofA and JPM are tucked away in deposit taking FDIC insured subsidiaries of those companies?

Wed, 07/23/2014 - 11:43 | 4993153 Save_America1st
Save_America1st's picture

howz about that Bix Weir deal I posted above regarding Deutche Bank'ss 55 Trillion in derivatives exposure?  Ouch...

Wed, 07/23/2014 - 12:41 | 4993561 Blankenstein
Blankenstein's picture


The morgue has $79 trillion and BofA $75 trillion. 

"Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show."


Wed, 07/23/2014 - 11:41 | 4993141 Seasmoke
Seasmoke's picture

If you ain't cheating.   You ain't trying. 

Wed, 07/23/2014 - 11:41 | 4993144 buzzsaw99
buzzsaw99's picture

Cryin' won't help you, prayin' won't do you no good,
Now, cryin' won't help you, prayin' won't do you no good,
When the levee breaks, mama, you got to move...

Wed, 07/23/2014 - 11:43 | 4993156 Madcow
Madcow's picture

I wonder ... is this what the gun control effort is all about?

From Gov-Co's perspective, it would be good to dis-arm the American people BEFORE the bankers steal everyone's deposits.





Wed, 07/23/2014 - 11:43 | 4993157 boattrash
boattrash's picture

Scott O'Malia, you are cordially invited to go kitesurfing with me. Come on, the water's nice! RSVP

Wed, 07/23/2014 - 17:21 | 4995111 TheRedScourge
TheRedScourge's picture

Anyone else notice that his name is S. O'malia?

Wed, 07/23/2014 - 11:43 | 4993158 jay28elle
jay28elle's picture

Is this like the Iraqi army, when confronted with more horsepower than they possess, taking off their uniforms and joining the ranks of their 'enemies'?

Wed, 07/23/2014 - 12:08 | 4993335 HardAssets
HardAssets's picture

Naw . . . theyre in on it from the beginning.

The game is to fool the sheep into thinking they're "looking out for the people"

Wed, 07/23/2014 - 11:45 | 4993171 SheepDog-One
SheepDog-One's picture

Well now, it really wouldn't be a great day in 'Murka without some staggering farce bigger than yesterday's farces.

Wed, 07/23/2014 - 11:57 | 4993253 jmcadg
jmcadg's picture

It's like the debt based money system ... the next farce has to be bigger than the last otherwise the ponzi implodes. Next up Jon Corzine heads up CFTC.

Wed, 07/23/2014 - 11:45 | 4993176 Kaiser Sousa
Kaiser Sousa's picture

hey, do u think they aint placing a hard cap on Silver at $21????

Wed, 07/23/2014 - 11:46 | 4993181 dearth vader
dearth vader's picture

If you can't beat them, join them.

Wed, 07/23/2014 - 11:48 | 4993193 youngman
youngman's picture take all those bribes for all those have to go work for them...they seem like nice guys..and they have a lot of unmarked envelopes

Wed, 07/23/2014 - 11:51 | 4993208 Cthonic
Wed, 07/23/2014 - 11:54 | 4993239 Salsipuedes
Salsipuedes's picture

Your only hope is to pray your children grow up to be boot-licking, two-faced, gutless scum who value money above life, liberty, dignity, integrity or their own families. My little Timmy wants to study "the Art of Genocide" at Yale! He's already got the 'dead eyes' look down cold! Call me! I'll make him available.

Wed, 07/23/2014 - 11:58 | 4993256 JRobby
JRobby's picture

They have not found anyone with the guts or know how to diffuse this bomb yet.

If they did, the candidate would be immediately assassinated when their plan for unwind is presented.

Like the opium addict that continuously fires the errand boy he hires to keep him from going to the pharmacy when the boy refuses to go to the pharmacy.

There is no recovery for the derivatives addict.


With prejudice.



Wed, 07/23/2014 - 11:59 | 4993260 Amish Hacker
Amish Hacker's picture

Does anyone remember Brooksley Born? She quit as head of the CFTC when Rubin, Summers and Greenspan squashed her plan to regulate OTC derivatives. When she left, moral principle left with her, and it hasn't been sighted at the CFTC since. Laughably, Congress prohibited regulation of these toxic time bombs because only the Big Boys traded them, and, of course, the Big Boys are too smart to let anything bad happen in the derivative markets.

Wed, 07/23/2014 - 12:04 | 4993314 JRobby
JRobby's picture

They assassinated her character and abilities in a very public forum. She never had a chance.


Wed, 07/23/2014 - 14:08 | 4993500 jay28elle
jay28elle's picture

A couple times each year I go to the PBS Frontline site and watch the "The Warning" videos they did about the collapse and what led up to it.  Surprisingly non-biased.  Anyway, it introduces Brooksley and describes her attempts to bring the risks to light and how she was dispelled, exactly as you described.

Link to the Video series and a brief description from the site.  Note the last paragraph.

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.


Wed, 07/23/2014 - 12:01 | 4993282 BullyBearish
BullyBearish's picture

Yet another example of the "New America" its finest

Wed, 07/23/2014 - 12:01 | 4993289 Colonel Klink
Colonel Klink's picture

This guy deserves a long drop and a sudden stop.

Wed, 07/23/2014 - 12:06 | 4993325 mastersnark
mastersnark's picture

Hakuna Matata, the circle of life.

Wed, 07/23/2014 - 12:08 | 4993331 Tsar Pointless
Tsar Pointless's picture

Shadow elite. Great book on the subject. I own and have read it. Twice.

Sat, 07/26/2014 - 08:30 | 5006800 Comte d'herblay
Comte d'herblay's picture

Looks like only a few of us have read and/or listened to Ms. Wedel.  I would have her children if I could, though it is highly significant that she has not been attacked anywhere that I can see. 

So sure are the participants of their "Untouchability"  in the Shadows, that they have no concern about being outed. 

Her solutions however are impotent. I don't know how you attack an amorphous enemy and emerge the victor.


Wed, 07/23/2014 - 12:12 | 4993355 Atomizer
Atomizer's picture

We need to sweep the fuck ups under the rug to lure new investment muppets. 

Bait and switch.

Wed, 07/23/2014 - 12:22 | 4993414 Atomizer
Atomizer's picture

Liesman on damage control in five.

Wed, 07/23/2014 - 12:21 | 4993416 SethDealer
SethDealer's picture

CFTC sucks, Fed Sucks, Yellin Sucks, Obama Sucks

Wed, 07/23/2014 - 12:21 | 4993417 dbTX
dbTX's picture

Nothing new here.

Wed, 07/23/2014 - 12:23 | 4993434 Comte d'herblay
Comte d'herblay's picture

"When the Best are Corrupt, the Worst for us all".

Wed, 07/23/2014 - 12:25 | 4993444 Atomizer
Atomizer's picture

The transparent US Government runs a muck. 

Wed, 07/23/2014 - 12:37 | 4993531 firstdivision
firstdivision's picture

Just think of where the world would be if Wall Street couldn't attact the brightest minds, and these people did actual research of value.

Wed, 07/23/2014 - 12:45 | 4993592 RaceToTheBottom
RaceToTheBottom's picture

I think that the real benefit of BITCOIN could be the bidding and consolidating funds for hitmen to perform cancer surgery on the offensive parts of society. 

The bidding is the marketplace deciding and prioritizing where the knife should operate.

I believe there are already sites out there that pretend to do this...

Wed, 07/23/2014 - 14:27 | 4994199 zipit
zipit's picture


Wed, 07/23/2014 - 15:33 | 4994580 GoingLoonie
GoingLoonie's picture

Reserve this man a guillotine.

Wed, 07/23/2014 - 19:00 | 4995526 Chief Kessler
Chief Kessler's picture

Just like half the wackos in this place, Zero Shame

Thu, 07/24/2014 - 16:28 | 5000265 rbblum
rbblum's picture

Rather SIGNIFICANT that a constitutional republic is conveniently tainted by the rule of man. . . . which, in part, explains the success of the Obama administration. 

Do NOT follow this link or you will be banned from the site!