New swaps regulator must prove mettle in Wall Street reform
WASHINGTON (Reuters) - President Barack Obama on Tuesday named Timothy Massad, a lawyer who oversaw the U.S. government's $700 billion bank bailout program, as the next head of one of Wall Street's most powerful supervisors.
If confirmed by the Senate as chairman of the Commodity Futures Trading Commission, Massad would lead an agency that was given vast new regulatory powers after the 2007-09 crisis, and is now tasked with reining in the relatively uncontrolled trading of complex derivatives - a $630 trillion global market.
The nomination solves a looming leadership vacuum at the regulator, since current CFTC Chairman Gary Gensler's term expires on January 3, 2014.
"Tim's a guy who doesn't seek the spotlight, but he consistently delivers," Obama said at a ceremony at the White House. "I have every confidence that he's the right man to lead an agency designed to prevent future crises."
The CFTC, long an unexciting agency overseeing agriculture futures, has only just been put in charge of the swaps markets, and has yet to write some of its planned rules.
Little is known about Massad's views on the highly technical issues with which the CFTC deals, and a crucial task will be for him to convince the political left the agency won't soften on the banks once he is in charge.
Gensler has rushed through thousands of pages of new regulations in recent years, and the world's largest investment banks such as JPMorgan and Bank of America are now registered with the agency.
"Gary Gensler set a very high standard," Senator Elizabeth Warren said. "I look forward to hearing more from Tim Massad about what steps he thinks the CFTC can take to further reduce the risk of future crises," said Warren, a Massachusetts Democrat fiercely critical of Wall Street.
The CFTC has reaped billions of dollars in fines - easily the highest in its history - in the Libor interest rate rigging case from a range of large banks including Switzerland's UBS and Britain's Barclays and RBS.
It has also charged Jon Corzine - the former New Jersey governor and U.S. senator who headed futures brokerage MF Global when it collapsed in 2011 - in a civil lawsuit, blaming him for being a key actor in the bankruptcy.
Massad, 57, was born in New Orleans and spent most of his career as a lawyer at Cravath, Swaine & Moore LLP, working on a wide variety of corporate transactions. He joined the firm in 1984 and was made a partner in 1991.
An amateur chef, he talked his way into a job as a volunteer apprentice at New York's Michelin-starred Bouley in his early days at the law firm, according to a person who has known Massad for a long time.
"His dinners...are legendary at the Treasury department," a former senior Treasury official said.
Massad also has an ability to get people to agree, a former colleague at the firm said, something that could set him apart from Gensler, who riled some on Wall Street because of the fast pace with which he adopted rules.
"It's one thing to stomp your feet and say 'I'm the government and I'm right.' It's another thing to explain why you're right, and he was really good at that," said Rodgin Cohen, a lawyer who often negotiated with Massad on behalf of banks during the crisis.
"I've never really seem him get angry, but he can be quite firm in his views," Cohen said.
It may be precisely that conciliatory tone the left fears most: "It is the Senate's duty in the confirmation process to determine whether Mr. Massad has the qualifications and guts for the job," said Dennis Kelleher, the head of Better Markets, a lobby group critical of big banks.
Still, Massad - who has described how his Lebanese grandparents came to America as teenagers, barely able to speak English - has shown himself to be a loyal defender of the Dodd-Frank reforms before the U.S. Congress and in the media.
Massad has also had some direct experience in the highly technical world of derivatives trading, the person said, as the two had drawn up legal documents to regulate trading when the swaps market kicked off in the late 1980s.
But he is likely less of an expert than Gensler, a former Goldman Sachs banker who helped write large parts of the Dodd-Frank law that the CFTC was then told to implement.
Massad joined the Treasury in May 2009 after a brief spell at the Congressional Oversight Panel, the political body that oversaw TARP, the Troubled Asset Relief Program that created bank bailouts. He was closely involved and then headed the program from June 2011, when the Senate confirmed him as Assistant Secretary for Financial Stability.
Sharon Bowen, another New York lawyer, is being vetted to fill a second open Democratic position at the CFTC after Commissioner Bart Chilton last week said he would leave, observers have said.
Obama has already nominated Chris Giancarlo, a senior executive at New York derivatives broker GFI Group for a third spot, and is widely expected to ask the Senate to confirm the three in their new roles in one hearing.
Massad has also often worked for charities, representing the youth shelter Covenant House in 1990, to assess financial irregularities after a child abuse scandal forced out its head - a Franciscan father - according to press reports.
Massad has also been a major financial supporter of the Democratic Party and some of its most prominent members.
According to the OpenSecrets.org website, he donated a total of $118,650 between 1990 and 2008. Most of the money went to the Democratic National Committee, but he also gave to Obama and U.S. Representative Jim Himes of Connecticut.
(Reporting by Douwe Miedema, Additional reporting by Casey Sullivan in New York, editing by Karey Van Hall, G Crosse and L Gevirtz)