Analysis: CFTC's Gensler stickhandles to keep influence

WASHINGTON Wed Jun 29, 2011 2:23pm EDT

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, speaks during the Sandler O'Neill + Partners global exchange and brokerage conference in New York June 9, 2011. REUTERS/Lucas Jackson

Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, speaks during the Sandler O'Neill + Partners global exchange and brokerage conference in New York June 9, 2011.

Credit: Reuters/Lucas Jackson

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WASHINGTON (Reuters) - Gary Gensler, head of the U.S. futures regulator, risks losing influence in Congress as his Wall Street reform efforts become bogged down in the details, possibly impairing progress on his ambitious agenda.

Gensler has enjoyed broad support among Democratic lawmakers while Republicans, who have never liked efforts to rein in Wall Street, have accused him of moving too quickly on a plan that could carry longer-term ramifications.

Cracks, however, are starting to show in his traditional support base. Some Democrats accuse the Commodity Futures Trading Commission of faltering in the final lap in writing new rules for the market -- especially when it comes to getting the high-flying oil market under control.

"I think he personally has a lot riding on this," said Jeff Harris, a University of Delaware finance professor who previously served as the CFTC's chief economist.

If he fails to get something done that pleases most lawmakers in Congress, "then I think he sort of truncates his career", Harris said.

Under the Dodd-Frank law enacted last year, the CFTC gained oversight of the $600 trillion market in over-the-counter derivatives, blamed for helping bring the financial world to its knees during the crisis of 2007-2009.

By most accounts, the CFTC has struggled to write dozens of complex regulations to implement Dodd-Frank, hampered in part by Republicans who aim to reduce the agency's budget.

The CFTC, overburdened and underfunded while up against a phalanx of well-paid financial lobbyists, has said it will miss a mid-July deadline for writing the new rules. It has already missed a January deadline for the all-important plan on position limits that lawmakers hope will help prevent big trading houses from manipulating oil markets.

With the CFTC set to enter the crucial, final rule-making stage on other measures as well -- everything from defining end-user exemptions to clearing -- there will be plenty of fodder for Gensler's opponents to heap on more criticism.

"When you look at the budget battle, that's a pretty money-talks indicator of where the agency stands and where he stands," said Craig Pirrong, a professor and a director for the Global Energy Management Institute at the University of Houston.

The CFTC would get $172 million under a Republican spending bill, a $30 million cut from this fiscal year, which ends on September 30. The Obama administration says the CFTC needs a hefty increase in staff and equipment so it can regulate swaps, as required by the 2010 financial reform law.

THORNS IN HIS SIDE

Most damaging to Gensler could be the broadsides coming from a handful of Democratic lawmakers.

Senators Bernie Sanders and Maria Cantwell initially blocked Gensler's nomination over doubts he would get tough on the neighborhood in which he had been so well entrenched, having become a partner at Goldman Sachs at age 30.

They have been among his most vocal critics during his two years at the CFTC. Sanders and seven other Democrats recently introduced a bill to force the agency to crack down on oil-price speculation.

"If I thought he was doing a good job, we would not have introduced legislation to essentially do what he was supposed to have done," Sanders told Reuters.

Senator Ron Wyden, another Democrat, complained that Gensler had failed to live up to his promise during the confirmation process to act expeditiously.

"I just haven't found the sense of urgency that I would have hoped that he would bring to this task," Wyden also told Reuters.

Gensler said he did not intend to finalize the position-limits plan for commodities any time soon despite the growing pressure from Congress.

The 53-year-old Gensler, a marathon runner and father of three daughters, has been forced to walk a delicate line among lawmakers.

A source who lobbies on behalf of the financial industry and follows CFTC rulemaking closely said position limits and end-user definitions would have the biggest impact on his reputation. To quell the concerns of outspoken Democrats, Gensler could help himself by acting soon to curb speculation.

"Whatever action they take, as long as they keep being active in the space, it's going to take down the tone of the fringe Democrats that are calling on him to do something," the source said.

To be sure, Gensler still has his supporters.

Barney Frank, the Democrat so crucial in shepherding the bank reform law through the House of Representatives last year, said Gensler had done an "outstanding" job.

He said in an interview that the two talk every few weeks. "I regard his advice very highly," Frank added. "I think he's been very thoughtful in his implementation, pushing where that's appropriate but also listening to the concerns of people in the industry."

Republicans say the CFTC has emphasized speed over deliberation in the rule-writing, and legislation has been proposed to slow it down.

The danger for Gensler and the CFTC reform process is that delays and growing criticism could lead to legislation that alters the scope of Dodd-Frank, which insiders say Gensler played a significant role in helping to write.

For the most part Gensler has held his own, but how successful he will be depends on how he moves to implement the reforms and keep the restive lawmakers at bay.

"He has a long way to go," the industry source said.

(Editing by Dale Hudson)

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