By Douwe Miedema
WASHINGTON Nov 12 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 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 Jan. 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.