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Senate to Vote on CFTC Nominee; Gensler Outlines Strategy

The field has been cleared for an up-or-down vote in the Senate this week on the administration's nominee for chairman of the Commodity Futures Trading Commission (CFTC), Gary Gensler, after two senators said last Thursday they were removing the holds they had placed on the nomination over a month ago (see NGI, March 30).

Sens. Bernie Sanders (I-VT) and Maria Cantwell (D-WA) agreed to release their holds and allow a vote on the Senate floor after the administration announced earlier in the week it was sending a regulatory reform package to Congress to crack down on excessive and speculative derivatives and commodities trading (see related story). Gensler's nomination had been voted out of the Senate Agriculture Committee, but the two senators had objected to the role the nominee played nearly 10 years ago as a former under secretary of the treasury in supporting deregulation of the derivatives market.

Cantwell noted that Gensler had recently supported stronger regulation of the financial markets but said she continued to have concerns about the appointment of the former Goldman Sachs executive to head the agency charged with leading the crackdown on the derivatives market, which was responsible for much of the recent financial meltdown.

Sanders, who also had objected to Gensler because of his past support for an unregulated market, said he was convinced by the administration's actions and also by Gensler's written responses to questions about his current convictions.

"The commitments I received from Mr. Gensler along with President Obama's strong plan to regulate financial markets demonstrate the administration's determination to make sure that the financial mess that we are in never happens again," Sanders said.

In those responses to the senator Gensler set forth his manifesto, saying regulation should encompass both the derivatives dealers and the marketplace "to bring the needed transparency, accountability and safety to the trading of OTC derivatives."

This would include business conduct standards, conservative margin requirements and record keeping and reporting requirements for derivatives dealers. It also would mean "position limits must be applied consistently across all markets, across all trading platforms, and exemptions to them must be limited and well defined."

Gensler also would support legislation requiring all advisers to hedge funds and other private pools of capital, including private equity funds and venture capital funds above a certain threshold be required to register. The CFTC also should be granted the authority to police all activities in the OTC derivatives markets, including those entered into by hedge funds.

As to transparency, Gensler said this would be achieved by:

The prospective CFTC chairman also said he would support actions to close the "London Loophole," ensuring that foreign futures exchanges with permanent trading terminals in the U.S. comply with the position limitations and reporting and transparency requirements that are applied to trades made on U.S. exchanges.

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