(Adds detail from conference call)
By Douwe Miedema
WASHINGTON, July 23 A top official will leave
the U.S. Commodity Futures Trading Commission to become the head
of a banking group 10 days later in a spin through the revolving
regulator-to-lobby-group door that is striking even by
Scott O'Malia announced on Monday he would leave the CFTC on
Aug. 8. The International Swaps and Derivatives Association said
on Wednesday that he would become the trade group's next chief
executive on Aug. 18.
The CFTC has played a crucial role in curtailing Wall Street
risk-taking since the financial crisis. O'Malia is a Republican
commissioner who often voted against tough reforms during his
four and a half years at the agency.
Career moves between regulators and those they regulate are
common in Washington, but the speed of it and ISDA's high
profile made the move stand out. ISDA is fighting the CFTC in
court over how its swaps trading rules will apply overseas.
Government rules will largely prohibit O'Malia from working
on CFTC matters for a period of two years, but the announcement
of the appointment while in government office sparked criticism
of a possible conflict of interest.
"The rules are very weak in prohibiting what we call
behind-the-scenes lobbying," said Michael Smallberg, an
investigator for the Project On Government Oversight watchdog.
"Even if he isn't the one personally making the call to his
former colleagues, he can provide pretty invaluable insights
about how to frame an argument, how to be the most effective in
lobbying on the potential rules," Smallberg said.
O'Malia is likely to be in for a big pay raise. His
predecessor at ISDA, Bob Pickel, was paid $1.8 million in 2012,
according to a tax filing. O'Malia's current salary at the CFTC
is $155,500, the agency said.
New York-based ISDA is a global lobby group for non-listed
derivatives, counting the world's largest investment banks among
its members. It has frequently fought regulatory efforts to
reform the market after the financial crisis.
It is one of three banking groups that sued the CFTC in
December, hoping to beat back tough trading guidelines for U.S.
companies doing business overseas, which they fear could hurt
markets and cut profits.
The two sides are set to face each other in a first hearing
in a federal court in Washington next week.
The speed of O'Malia's move is not unprecedented. In 2011,
David Stevens was heavily criticized for agreeing to take the
top job at the Mortgage Bankers Association, before he had
officially left his post as a commissioner at the Federal
A Republican appointee of President Barack Obama, a
Democrat, O'Malia was an outspoken critic of the rule-making
process mandated by the 2010 Dodd-Frank financial reform law,
which he said had been rushed, confused and lacked transparency.
He is subject to a two-year cooling-off period, during which
he may not talk to the CFTC on behalf of any other person, the
CFTC said, part of an ethics pledge for administration officials
introduced by Obama.
The law prohibits him from representing anyone to the CFTC
for life in such matters as enforcement or registrations and
from lobbying on policy matters he was involved in for two
"I did sign the pledge when I joined this administration and
will abide by it," O'Malia told journalists on a conference call
on Wednesday. "ISDA already has a very competent government
affairs team ... and I will have plenty to work on in other
matters outside of the CFTC."
A staffer for Republican Senator Mitch McConnell - now the
Senate minority leader - from 1992 to 2001, O'Malia focused on
energy policy during much of his career.
At the CFTC, he chaired the Technology Advisory Committee,
which drives the agency's efforts to better cope with the vast
amount of data it has to handle.
O'Malia said he would continue in that vein, and that ISDA
could play an invaluable role in improving the quality of data
provided by market operators, which have in the past fought each
other over data formats.
He said he would look closely at new rules that require
buyers and sellers to put up more collateral for certain types
of swaps that are too complicated to be routed through clearing
houses, making them far more costly.
The industry has been complaining that the CFTC's rules have
caused derivative markets to fracture, with European and U.S.
banks doing business only in their respective regions, another
focus for O'Malia, he said.
(Additional reporting by Michelle Price in Hong Kong; Editing
by Karey Van Hall and Howard Goller)