WASHINGTON (Reuters) - Gary Gensler, who once supported market deregulation blamed for the recent financial meltdown, has been winning over members of Congress who had been skeptical of his ability to rein in Wall Street as the top U.S. futures regulator.
A former partner at Goldman Sachs, Gensler has quickly become a go-to guy for Congress as it navigates a sea of complex proposals to regulate the $300 trillion swaps market.
The biggest test of his influence as chairman of the Commodity Futures Trading Commission will occur next week when key Senate committees hash out landmark derivatives reforms that will go a long way toward steering the future of financial reform in Washington.
“People on the Hill want to hear what he has to say,” said Michael Greenberger, a law professor at the University of Maryland and a former CFTC official.
“He has been very, very persuasive in altering the contours of legislation,” he said.
Earlier this month, just a day before jetting off to meet European lawmakers -- and fresh from doling out a scolding to Wall Street for resisting his message -- Gensler was a wanted man on Capitol Hill.
Sen. Christopher Dodd, on the verge of releasing his own financial regulatory overhaul plan, wanted to talk.
“He’s a very knowledgeable guy who’s well respected,” said Dodd.
Lawmakers and staffers who have worked closely with Gensler describe him as articulate, well respected, fluent in the regulatory lingo, yet able to gracefully use his past experience on Wall Street to explain a complicated subject.
“He’s been a pretty good chairman. He stays in constant communication with us,” said Saxby Chambliss, the Republican leader on the Senate Agriculture Committee, who said Gensler has regularly called to ask to visit and has made himself available when the committee needs to talk financial reform.
“We don’t always agree on everything, but he’s been very open, very direct and he’s been very forceful,” he said.
Since he was first nominated by the Obama administration to head up the once low-profile CFTC, Gensler has consistently argued the government needed to do more to help the public understand Wall Street. The way to do that, he said, was by increasing market transparency.
But his regulatory fervor was initially met with skepticism by some in Washington.
Gensler worked on a 2000 law that exempted most over-the-counter derivatives, such as credit default swaps, from oversight during a Clinton-era stint in the Treasury Department.
The law, later called the “Enron loophole,” is now blamed for contributing to the meltdown of the U.S. financial market.
His confirmation was blocked for months by Sens. Bernie Sanders, an independent, and Democrat Maria Cantwell, who expressed doubts Gensler was ready to get tough on the financial sector he was entrenched in years earlier.
Gensler, an avid marathon runner, was finally approved in May after the Obama administration proposed a plan to reform the over-the-counter derivatives market and prevent a repeat of the recent economic meltdown.
Steve Adamske, a spokesman for Massachusetts Rep. Barney Frank who was instrumental in getting reform passed by the House last December, said Gensler “is a very, very effective advocate for the regulation of derivatives” and is a chairman who “certainly knows his stuff.”
“He seems very dedicated to getting derivatives under regulatory control and working with us to do so,” he said.
Gensler has not minced words about the House bill, which he thinks should have been a lot stronger.
Earlier this month, he encouraged Rep. Collin Peterson, chair of the House Agriculture Committee, to take another look at potential loopholes for large financial firms when House and Senate negotiators write a final version of swaps reform.
“I‘m going to investigate this some more, whether there is a possibility they could get around this,” Peterson told reporters after an exchange with Gensler at a hearing. “If there is, we should tighten it up.” [ID:nN0358369]
Gensler has pushed the Senate to come up with tougher rules for swaps users than the House did, including clamping down on exemptions for exchange trading and clearing the trades.
The Senate banking and agriculture committees are expected to unveil further swaps reforms measures this week in their deliberations over the financial regulatory reform package.
“If he were not there, the forces for obtaining tighter regulatory controls on (the OTC) market would be vastly weaker and I‘m not sure would have had any success at all,” said Greenberger.
For his part, Gensler is reluctant to speculate on his role in Congress’ push for reform.
“I’ll leave it to others to judge whether I’ve been effective, but I am working with them on nearly a daily basis,” Gensler told Reuters Insider.
Despite making inroads on the Hill, Gensler may still have work to do to sway some skeptics.
Sen. Cantwell, who held up Gensler’s nomination last year, praised him for offering useful insight on how to improve oversight of derivatives.
But when asked if he’s exceeded her expectations while at the CFTC, she said with a smile: “I want him to be even tougher.”
Additional reporting by Niclas Mika in Brussels; Editing by Roberta Rampton and Lisa Shumaker