PROFILE-Swaps regulator Gensler: banker turned Wall Street scourge

WASHINGTON Fri Jan 3, 2014 12:37pm EST

WASHINGTON Jan 3 (Reuters) - As Gary Gensler wraps up his last day as the head of the U.S. Commodity Futures Trading Commission on Friday, he leaves behind a long list of ardent admirers of his tough-nosed reforms and passionate critics who believe he has injured well-functioning markets.

Once a swaps trader at Goldman Sachs and then a Treasury Department official known for his role in rolling back bank rules in the late 1990s, the 56-year-old surprisingly became the regulator Wall Street feared most in the wake of the financial crisis.

"He's been one of the best regulators I've ever seen," said Barney Frank, the former Democratic U.S. Congressman who lent his name to the 2010 Dodd-Frank Wall Street reform law.

"With regards to members of the Senate who support regulation, he's made a bunch of friends. He's clearly alienated a lot of the bankers."

During his five-year tenure at the helm of the agency, once a little-watched overseer of commodity futures markets, Gensler spawned major lawsuits from bank groups, a major dispute with regulators in Brussels, and a frequent lack of consensus among fellow commissioners.

"The Street hates him," said one bank lobbyist, asking not to be named in order to be able to speak more freely.

The CFTC has reshaped the opaque world of derivatives trading, one of Wall Street's most lucrative businesses that escaped regulatory scrutiny for decades, but played a central role in the credit meltdown.

Gensler has finished most of the new rules required by Dodd-Frank, giving his successor Timothy Massad - a former Treasury official - little leeway for a policy change.

"The Street's big hope for an incremental rollback of what Gary has done is going to prove to be misguided," said Dennis Kelleher, the head of Better Markets, a pressure group critical of Wall Street's large investment banks.

ALIENATED BANKERS

During Gensler's term at the CFTC, it finished 70 percent of the rules it was required to write, far more than other U.S. regulators, and putting it years ahead of a similar process in Europe.

Only weeks ago, Gensler pushed through a plan requiring foreign banks to comply with the CFTC's rules if they deal with U.S. clients, despite years of pressure from foreign regulators who want greater reliance on their own rules.

He also took the strictest position on rules to bring swaps trading onto exchange-like platforms, though these were watered down after two members of the commission thought they were too tough on the industry.

His intense drive to write tough versions of Dodd-Frank rules marks a reputational change for Gensler. When former U.S. President Bill Clinton signed into law a plan to free banks from Depression-era shackles in 1999, he explicitly thanked Gensler - then a senior Treasury official - for his work on the deregulation legislation.

It made Wall Street critics wary of Gensler when President Obama nominated him to the job. "Looking back (at) what we know now, I think those of us involved in the late 90s, you know, ought to have done more," Gensler said in a recent interview.

He also went through major changes in his personal life between his time at the Treasury Department and his tenure at the CFTC. Gensler, who is from Baltimore, raised his three teenage daughters on his own after his wife Francesca Danieli - an artist - died of cancer in 2006.

He frequently mentions the experience, and also likes to refer to his father, who had a vending machine business, particularly when arguing why large banks should not enjoy privileges not afforded to small businesses.

While speculation about his future has abounded, Gensler has consistently declined to answer questions as to his plans. He did unveil, though, in the recent interview he would not travel for a new position.

"I don't know what I'm going to do next. I know one thing, my youngest daughter is in 11th grade and I'm staying in the Baltimore or Washington area," he said.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article