Prez Cans Gensler on Aggressive Regulating

[don]

Obama Quietly Firing the CFTC's Gary Gensler For Pressuring Banks on Swaps

It appears that President Obama is bidding adieu to CFTC Chairman Gary Gensler, purportedly for being 'too aggressive' with the Banks over their antics in the markets, with special emphasis on swaps and derivatives activity offshore.

I wonder who put the word in President Barry's ear? It is best to tread lightly around those treasured havens for financial piracy.

I discount any speculation that this is in reaction to a major breaking scandal on the metals exchanges. That would be too good.

The replacement is reported to be a Amanda Renteria, the former chief of staff to Senate Agriculture Committee Chairwoman Debbie Stabenow, Democrat of Michigan. Renteria was the first Latina chief of staff in the Senate.

She is the daughter of Mexican immigrant workers, studied at Harvard Business School, and spent most of her career in public service. However, after graduating she worked briefly at Goldman Sachs & Co.

She might turn out to be a highly effective regulator despite her lack of practical experience in financial regulation. That would be a nice change of pace for a generally docile and Big Finance compliant administration. Let's see what she has to say. But I am not hopeful given the Obama crew's abysmal track record in financial reform and 'change you can believe in.'

Here is a link to Renteria's bio.

Here is the story as it was carried by The Huffington Post.

Common Dreams
Obama Cans Regulator Who Crossed Wall Street
Ouster is a gain for big bankers advocating lax oversight
Sarah Lazare, staff writer

The Obama Administration is quietly firing Commodity Futures Trading Commission head Gary Gensler, who ran afoul of big banks by pushing for greater government oversight.

The ouster comes in the midst of controversy over a proposed CFTF rule, strongly supported by Gensler, that would extend U.S. regulation to swaps--a kind of derivative exhange--involving firms founded or doing business in the United States. This means that foreign banks and hedge funds would face the same regulations as U.S. ones when trading in swaps with U.S. parties....

In related news . . .

Banks Manipulating Trades and Rigging Benchmarks in Foreign Exchange Markets

Are there any markets that have not been corrupted by lax regulation and Banks who have been emboldened in their insatiable greed by the lack of effective enforcement of the rules and equal justice for all?

It is somewhat ironic that this news comes on the revelation that Obama is replacing Gary Gensler, Chairman of the CFTC, for being too aggressive in seeking to regulate the Swaps markets and angering some foreign banks (read London trading operations of the big multinational banks). London has become a favored haven for corrupt financial practices.

I will suggest to you that this is still just the tip of the iceberg. And for anyone who thinks that there is no manipulation in the precious metals markets, despite all the odd price action and blatantly predatory selling raids, I would suggest that they are obviously lacking in something, exactly what I cannot say.

There will be no sustainable recovery until the impediments to honest price discovery and the tax of corruption is eliminated through greater transparency, enforcement of existing laws, and serious reform.

And one can seriously wonder how confident the people are that the governments of the US and the UK, and of Europe as well, are seriously committed to performing the basic function of maintaining honest markets for their constituents. If market confidence breaks, there will be hell to pay.

Markets have a significant role to play in the economy, and that function has been allowed to become warped and perverted through corrupt practices, with serious real world consequences, that accumulate and worsen over time, which we have yet to discover.

Breaking News from Bloomberg:

"Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter..."

All courtesy of Jesse's Cafe Americain http://jessescrossroadscafe.blogspot.com/

[wayiwalk]

Re: Prez Cans Gensler on Aggressive Regulating

Jesse's hopefully optimistic but I see no reason to be. I don't see anything in her bio that suggests she's other than a Congressional Crony Corporate Capitalista.....her support for the items Stabenow introduced in congress seems like a list of "things we wish the feds DIDN'T get involved in".

[Polish_Silver]

What to do?

It is somewhat ironic that this news comes on the revelation that Obama is replacing Gary Gensler, Chairman of the CFTC, for being too aggressive in seeking to regulate the Swaps markets and angering some foreign banks (read London trading operations of the big multinational banks). London has become a favored haven for corrupt financial practices.

I think the best solution is to redefine how banks work. Then hedge fund shenanigans would not threaten the payment system. As it is, my checking account is encumbered with the banks highly leveraged business. There is no reason for that. They use my capital to get their profits, and I get ZIRP returns.

Checking accounts should work like warehouses. No risk other than fire or theft. (no default risk)

Savings accounts should bring interest (and risk) to me from the borrowers. The bank would be only a market maker--they would not face default risk.

[dcarrigg]

Re: Prez Cans Gensler on Aggressive Regulating

Don, do you remember my assessment of the screwy CFTC in this thread?

Gensler seemed to have been stonewalling swaps and futures position limits for a while.

Chilton was the one arguing for regulation and basically saying Gensler wasn't doing his job without naming names.

In fact, Bernie Sanders has been calling for Gensler's resignation for not implementing Dodd-Frank for years.

And more and more Senators and Congressmen started jumping on board the "Scold Gensler's CFTC" train a year ago this week.

Now all of the sudden Gensler was tough on Wall Street?

Who reports this stuff?

[don]

Re: Prez Cans Gensler on Aggressive Regulating

Great info, dcarrigg. The propaganda mill churns 24/7.

[GRG55]

Re: Prez Cans Gensler on Aggressive Regulating

Great info, dcarrigg. The propaganda mill churns 24/7.

+1 dcarrigg. Well done. Yet again an iTuliper cuts through the fog...

[Thailandnotes]

Re: Prez Cans Gensler on Aggressive Regulating

The real problem is how the general public can cut through the fog...

http://www.washingtonpost.com/opinio...459_story.html

[dcarrigg]

Re: Prez Cans Gensler on Aggressive Regulating

Rah ro, Shaggy. Looks like the press is way off here on the Gary Gensler story.

And they're missing the juicy bits of the story too, which is something I just can't forgive.

Senator Shelby, it seems is not done with Corzine or the MF Global case. And he instigated investigations into Corzine's relationship with regulators. Among these was our friend Gary. And what they found didn't look good.

Gensler might not be going out because Obama didn't want him taming the CFTC, but rather, because maybe he is becoming a bit toxic. Gensler was under IG investigation.

So I dug up the Inspector General report.

Looks like Gensler's under IG investigation specifically for allegedly/potentially interacting inappropriately with Corzine during the finals days of MF Global, and then promptly recusing himself once public outcry about Gensler regulating Corzine, a former friend and colleague and Goldman alum.

Moreover, the report makes the CFTC look hamhanded. Employees and regulators were on site at MF Global as it was collapsing, and didn't have a clue until after the run had happened. Nobody coordinated with anybody. The whole thing seems to have been handled quite poorly.

"The report raises significant concerns regarding the CFTC's leadership and regulatory capabilities, particularly in light of its expanded powers and request for additional taxpayer funding," Senator Shelby said last month.

IG issues the report publicly on May 30th. Gensler's on his way out the door June 13th.

I wonder when Gary gave his 2-weeks' notice?

Here's the highlight reel:

We have undertaken to answer in detail eight questions posed by Senator Shelby.
In the aftermath of MFGI, a number of regulatory and industry initiatives have taken place to increase
the safety of customer funds, including increased reporting requirements, notification
requirements for large transfers of customer funds out of protected accounts, changes to
permissible investments that may be made with customer segregated funds, and a prohibition
against internal transactions among affiliates with customer funds.224 We were not asked to
make recommendations, and make none here.


Nevertheless, we do have observations based on our fieldwork. In some instances, our
fieldwork raised or revealed issues that could not be addressed in the context of our response to
Examinations Branch. There were no manuals. The reports created by the Examinations Branch
did not conform to audit standards, and it does not appear that the Examinations Branches were
subject to peer reviews or other detailed internal examination. This does not ipso facto mean that
the Examinations Branch performed poorly; we stress that we did not formally audit or review
the Examinations Branch’s overall operations in the course of our fieldwork, and we understand
that improvements in Examinations Branch processes are ongoing.


In retrospect, it is clear that customer funds were in jeopardy even while CFTC staff was
on site at MFGI Offices in New York and Chicago during the firm’s final days. We are
concerned that CFTC staff were not able to obtain same day access to all documentation for
MFGI’s cap, seg, and secured statement on October 27. With CFTC’s higherranking
supervisory auditor in Chicago teleworking on both Thursday and Friday of MFGI’s final week,
we wonder if the request was not taken as seriously as it might have been had she been on site
with staff (especially on Friday after failing to obtain the requested documents on Thursday),
both by virtue of her position and because she took a leadership role in the MFGI Chicago Office
on Sunday. Her absence did not alter MFGI’s obligations under Commission regulations nor did
it alter any other legal obligations. However, for a matter of this importance, we believe the
attendance of the higherranked supervisory auditor would have conveyed a stronger message to
MFGI. We are also concerned at the lack of procedure (formal or informal) in place to guide the
process of requesting documentation of a cap, seg, and secured statement, and to address delays
in production. We are concerned that the staff document request, in the end, was not an effective
mechanism to assure the Commission that customer funds were protected. We are concerned
that CFTC staff and management did not learn that MFGI was experiencing a run on the bank
until after the fact.


During the final days of MFGI, it appears that multiple regulators were making
duplicative requests for status and information from MFGI, and from each other. Better
coordination likely would not have changed the eventual fate of MFGI, but certainly would have
been desirable. We are concerned that the lack of coordination wasted both time and effort by all
involved.


We are concerned at the lack of communication between CFTC and CME. We learned
that CME and CFTC did not formally coordinate efforts during the last week of MFGI, and that
they were both on site on Thursday and over the weekend apparently by coincidence. That better
coordination could improve performance is an obvious observation.


We are also concerned with the lack of communication between CFTC and SIPC. But
for a conversation overheard on site at MFGI on Monday October 31, CFTC staff would not
have known that the SIPC trustee was on the way to the courthouse, and the SIPC filing as
drafted did not protect the interests of MFGI’s FCM customers.

We are concerned with the Chairman’s use of personal email to conduct official business.
Our review of the Chairman’s personal email was limited; we examined email related to MFGI
as necessary to address the issues raised by Senator Shelby.


Finally, we are concerned with the Chairman’s determination to withdraw from
participation. Because OGE regulations as interpreted by the General Counsel and Designated
Agency Ethics Official did not require a recusal in this situation,225 whether to refrain voluntarily
from participation in order to avoid improper appearances involved a significant judgment call,
as prominent voices expressed support for both continued involvement and immediate recusal at
the time. Therefore, a decision to participate or to recuse would subject the Chairman to
potential criticism.


Nevertheless, seeking ethics advice only when the matter became a public sensation –
after both leading the Agency’s response to the ongoing crisis and voting to authorize the
Enforcement investigation – was not the most desirable course. While seeking guidance at the
outset would have been preferable, we agree with the General Counsel and Designated Agency
Ethics Official that the Chairman violated no OGE regulations by waiting until after he began to
participate to seek advice. It is the extent of his participation prior to requesting advice that is
troubling.


Moreover, after requesting guidance from the General Counsel and Designated Agency
Ethics Official, the Chairman’s actions ran counter to the legal advice he received. Determining
to withdraw from participation on November 3 disadvantaged the Commissioner who now had to
take on this work at a late stage, possibly without the same level of industry experience as the
Chairman. Moreover, the Commissioner was not as involved as the Chairman in the intricacies
of the MFGI situation. A learning curve potentially loomed. We stressthis was a potential
possibility rather than a certainty.