Budget woes may cause swap rule delays: Gensler
WASHINGTON (Reuters) - Gary Gensler, the Washington regulator Wall Street fears the most, is confident he'll get a complex morass of rules in place to lessen risk in derivatives trading and curb speculation in commodities.
The chairman of the Commodity Futures Trading Commission has a color-coded flowchart big enough to cover a desktop in his office tracking the overlapping timelines to issue what could be 50 to 60 rules to overhaul the $615 trillion over-the-counter derivatives business.
The agency wants to figure out the first draft of its rules by mid-December, and is required by law to finish them all by July 15.
"It's doable," Gensler said on Friday in an interview with Reuters.
"Like so many things in life ... it's really just about breaking it down into its component parts," said the 53-year-old widower, likening his approach to the advice he gives his three teenage daughters on their math homework.
Gensler, who spent almost two decades at Goldman Sachs, is energized to overhaul the market. It's a momentous task as the business is complex web of tailor-made trades in financial instruments that is major profit center for Wall Street and has been blamed for exacerbating the recent financial crisis.
"The opportunity here is enormous," he said, just ahead of a 5 p.m. meeting with "the swap dealers definition team," a half-dozen staffers carrying in stacks of documents.
"This is like the 1930s for the Securities and Exchange Commission. I mean, I am just tickled pink," he said, as he dismissed any ideas that he might have his eyes on an even bigger prize of becoming the next Treasury secretary.
Gensler has headed the Commodity Futures Trading Commission - a once sleepy agency that dealt with overseeing exchange-traded futures -- since May 2009.
He helped convince Congress to push most OTC derivatives to trade on market places and go through clearinghouses, which guarantee traders meet their obligations and require down payments.
The obstacles are many, from reporting complicated tailor-made trades between multiple parties around the world to processing the information and policing it.
Now, he must again convince Congress -- this time to give his agency enough money.
Gensler, a self-professed "numbers guy" who grew up in Baltimore helping his father count nickels from vending machines, knows exactly how many staff he has -- 688 -- and how many he'll need -- 1,143.
He has plenty of takers in the economic downturn: Some job postings attract as many as 100 resumes.
The problem is getting the $261 million annual budget he needs from Congress where skeptical Republicans are expected to gain power in the November 2 elections, and may even win control of the House of Representatives.
"I'm still hopeful," Gensler said.
He warned of delays in registering 300 new swaps dealers, trading venues, and data facilities.
"We've got ... to do something more than just 'robo-sign' them," Gensler said.
That's the right thing to do, says Michael Gorham, a professor at the Illinois Institute of Technology and former director of the CFTC's division of market oversight.
"I admire the fact that he said ... that we're not going to speed up the whole process to accommodate the huge demand," Gorham said.
A YEARBOOK OF FANS
Gensler's oft-preached mantra about how clearing and exchange-trading OTC derivatives will prevent another financial melt down has become conventional wisdom in Washington -- much to the chagrin of Wall Street, which fears increased recordkeeping and legal compliance that does little to limit risk.
The agency has tried to pull along the industry in more than 300 meetings and puts details of the proceedings on the CFTC website, including who's there and what's being discussed. Lawyers, bankers and traders who visit Gensler and his staff say that discourages free sharing of information.
"If they don't say what they think, shame on them," Gensler said, adding he feels he's getting the data he needs.
The agency likely will stagger deadlines for traders to become compliant with the new regulations -- including speculative position limits, Gensler said, declining to give any details about a long-awaited proposal that the agency will unveil in the next month.
Investment funds, which make up as much as quarter of trade in markets like cattle, have already looked for alternative ways to buy commodities, with some buying physical products instead of futures and swaps.
That's OK by Gensler.
"Congress asked us to do a job, we gotta do what Congress asked us to do," he said, adding cash markets are not part of his mandate.
"He's positioning himself for potential conflicts with a very different Congress, and putting the onus on any unintended consequences on Congress, said Craig Pirrong, a University of Houston academic who has been critical of Gensler's approach.
Gensler seems unperturbed - and enjoying himself. He proudly displays a dog-earned copy of the Dodd-Frank law on his desk, its cover signed by a who's who of U.S. regulation: Ben Bernanke, Paul Volcker, Tim Geithner, Sheila Bair, Mary Schapiro and Elizabeth Warren, among others.
"It's like my high school yearbook!" Gensler exclaimed.
(Additional reporting by Christopher Doering, Lisa Shumaker and Emily Stephenson; Editing by Tim Dobbyn and Jackie Frank)
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