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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q99x2's picture

Somebody call the police.

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 www.RoadtoRoota.com

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."


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. ..."



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.





TheRedScourge's picture

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

Manthong's picture

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

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.

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.

boattrash's picture

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

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.

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.

NoDebt's picture

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

Dr. Engali's picture

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

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?

insanelysane's picture

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

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...

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.

pathetic looser's picture

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

Argos's picture

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

Dr. Engali's picture

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

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.

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.

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..."


http://suntzusaid.com/book/13    (with comments)

Pee Wee's picture

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

Dump the "regulators."  All of them.

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?

Save_America1st's picture

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

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."




Seasmoke's picture

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

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...

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. 






boattrash's picture

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

TheRedScourge's picture

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

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'?

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"

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.

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.

Kaiser Sousa's picture

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

dearth vader's picture

If you can't beat them, join them.

youngman's picture

Hey..you take all those bribes for all those years..you have to go work for them...they seem like nice guys..and they have a lot of cash..in unmarked envelopes

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.

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.



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.