Nomination Of Gary Gensler To Be Chairman Of The Commodity Futures Trading Commission

Floor Speech

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Ms. CANTWELL. Mr. President, I rise today to discuss the administration's truly historic announcement last week that in writing they supported bringing unregulated ``dark'' over-the-counter derivative markets under full regulation for the very first time.

For months I have been urging the Obama administration to move quickly and propose strong regulatory controls on these markets, to require transparency in derivatives trading, and to restrict market manipulation.

With the announcement last week by Secretary Geithner of these new regulations, the administration has come down decisively against dangerously unrestricted trading. They have come down on the side of imposing order on a marketplace whose collapse made the current recession much deeper and more painful for average Americans than it needed to be.

The administration's commitment to bringing a ``dark'' market into light is very important. Congress has received a written commitment from the administration that they will bring the unregulated over-the-counter derivatives market under full regulation for the very first time.

This means they have correctly identified three goals of regulatory reform of the over-the-counter derivatives markets. First, if Congress and the administration push through, we will finally gain transparency in the ``dark'' markets. All derivatives transactions and dealers will be brought under prudent regulation and supervision. That means even those that are customized derivatives, not just the OTC market; so prudent regulation and supervision, including capital adequacy requirements, antifraud and antimanipulation authority, very clear transparency and reporting requirements.

Second, standardized trading of physical commodities and derivatives will finally be required to trade on fully regulated exchanges.

Third, the administration is also committed to opposing position limits on regulated markets to prevent any market player from amassing large positions that can harm markets. I have received assurances from the White House that the administration believes these position limits should be applied in the aggregate across all markets.

I still remain concerned about Mr. Gensler's nomination to chair the Commodities Futures Trading Commission. Mr. Gensler was at the Department of the Treasury a decade ago and helped push through a bill, passed by Congress, that provided an ironclad protection against the regulation of financial products such as credit default swaps and derivatives at the heart of this financial crisis. The unfettered speculation that resulted helped bring about not only the energy crisis in my region but decades of other problems that contributed to the demise of AIG, Lehman Brothers, and Bear Sterns.

I believe we need new blood at the CFTC and all regulatory agencies. We need people who will move us from a world of unregulated toxic assets to a world of transparency and aggressive oversight. For nearly three decades the financial industry has had its way in Washington, successfully pushing deregulation in the name of innovation. Time-tested regulatory policies that protected investors and consumers since the Depression were systematically eroded. Many factors led to the present economic meltdown, but we know that chief among them was the policy advocated by Mr. Gensler of not fully regulating the derivatives market.

A decade ago, at the end of the 106th Congress, in the dark of night, Congress passed a law known as the Commodities Futures Modernization Act. But instead of modernizing commodities trading, it took us back in time to the day when securities trading was subject to wild speculation. This law, backed by Mr. Gensler, provided ironclad protection against regulation and oversight of derivatives and has caused many problems. One courageous regulator at the time, then CFTC chairwoman Brooksley Born, warned Congress and the financial community that unregulated derivatives would expose the economy to serious dangers. But some in Washington blocked her efforts, including many on Wall Street. One high-ranking Treasury official charged with pushing these deregulation bills through Congress was Gary Gensler, a former high-ranking executive at Goldman Sachs. As Under Secretary of the Treasury, Mr. Gensler testified before Congress that he opposed regulating the derivatives market. Mr. Gensler, as we know, was wrong. Just yesterday Brooksley Born received recognition for her courage in standing up to the powerful financial interests in proposing tough rules. She was presented with the Profile in Courage award by the John F. Kennedy Foundation.

Remarkably, the Senate is now considering confirming Mr. Gensler to
serve as chair of the CFTC, the same agency Brooksley Born chaired and the same agency Mr. Gensler worked so hard to defang in his previous tenure as Under Secretary of the Treasury. That is why I oppose his confirmation to run the CFTC at a critically important time when we need more financial regulation in these agencies. In the months ahead I will be looking forward to working with the CFTC and the President's working group on financial markets and the Department of the Treasury to actively engage Congress on the reforms that need to be passed into law.

I will be looking to the CFTC to do its job, to prevent excessive speculation from stopping the Nation's economic recovery.

I will be looking to Mr. Gensler to earn the trust of Congress and provide oversight over the commodities and derivatives markets.

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