« Double-Down on the Double Standard | exjournalist's Blog | TIME Using Republican Catchphrase, Again »

How to react?


   I'm not one of those to overtly question Obama's picks and his transition. Given the circumstances, I guess some hard choices have to be made, and I suppose there are not really that many people qualified to hit the ground running.
   But this is ridiculous. I don't know what else to say. It lends a lot of credence to Nader's arguments, as well as those of other people who think the Federal Government is a rotating cabal of people who do NOT have our interests at heart.
   This post is written by someone who is outside the gates anyway, and looking up at the bright shining tower wondering what the Hell is going on, but hopeful just the same that the victory in November will bring change.
   Telling myself: ignore the Gensler story. Ignore the Gensler story.

1 Comment

| Leave a comment
user-pic

In the article you linked to, ProPublica claimed that Gensler as a Clinton administration assistant Treasury secretary:

  • helped oppose regulation of the exotic derivatives at the center of the financial crisis
  • was a top negotiator for the White House in discussions with Congress in support of the now-controversial Commodity Modernization Futures Act of 2000
  • played a prominent role in batting down an effort by the CFTC to regulate...derivatives

Citations backing up these claims are extremely weak though. It consists of just one previous ProPublica article:
Sharona Coutts and Jake Bernstein, "Former Clinton Official Says Democrats, Obama Advisers Share Blame for Market Meltdown", ProPublica, October 9, 2008

That article does not strongly support their heaping all that blame on Gensler.
Staffers at the Commodity Futures Trading Commission, whose original purpose was to regulate agricultural trade, had watched with alarm the growth in derivative trading, some of which involved agricultural commodities.
Led by Chairwoman Brooksley Born, the commodity commission began working on a document that raised the idea of possibly regulating derivatives. The document was framed as a beginning point to discuss what a rule might look like.

The CFTC started out as strictly an Agriculture Commodities Trading Regulating Agency. It's role has been expanded since it creation, but this expanded role caused legal uncertainties, as to whether they or the SEC controlled certain financial trades. Even in the face of today's economic nastiness, it's easy to understand why this would raise flags. If a regulatory agency were to broadly overstep their legislated mandate today, both Houses would block it from acting, even with a Democratic majority. Any rules that this agency were to promulgate would be instantly challenged, and quite possibly be shot down as illegitimate legislating from the Federal Bench. an even worse possibility would be differing Federal circuits issuing differing opinions. There need be certainty in law. Individuals and entities should be able to know if their present lawful acts, will remain lawful in the future. The Oct. 2088 ProPublica cited by me above mentions Gensler in one paragraph only, which in its entirety reads:
“There was a legitimate and widely held view that this aggravated that very question of legal certainty,” said Gary Gensler, assistant secretary of the Treasury at the time. “All it took was one judge in some jurisdiction to determine this and it would throw a great deal of uncertainty into this interconnected world.”

In November, 1999, a Presidential working group, clearly stated that the CFTC did not then possess statutory authorization to be a broad-spectrum regulator over derivatives. The "Treasury Amendment" to the 1974 amended Commodity Exchange Act (CEA), created uncertainty as to which agency had control over securities-based derivative instruments, The CFTC or the SEC. 1982 and 1983 amendment to the CEA gave the SEC a bit greater authority, yet did not clear up all uncertainties. The 1989 "Swap Policy Statement" issued by the CFTC stated that most swap transactions could not be properly regulated under the CEA. The Futures Trading Practices Act of 1992 muddied the water by granting the CFTC authority to grant exemptions to the CEA without defining all of the transactions it could exempt as futures. The act did not assert that in the absence of exemption the the CEA had statutory oversight over swaps. In 1998 the CFTC issued a "Swap Exemption". The CFTC had been legislated the power to exempt swaps from the CEA, but not the power to regulate them under the DEA. When the CFTC started to intimate that they were about to begin regulating them, the uncertain legal ramifications cause much consternation. See:

Over-the-Counter Derivatives Markets and the Commodity Exchange Act Report of The President’s Working Group on Financial Markets, November 1999
  • Lawrence H. Summers, Secretary, Department of the Treasury
  • Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System
  • Arthur Levitt, Chairman, Securities and Exchange Commission
  • William J. Rainer, Chairman , Commodity Futures Trading Commission
In the right column of the Oct. 2008 ProPublica article, there are links to many documents. I did not discover one that mentions Gensler. The link to "Public Comments and Meetings Regarding the CFTC Proposal to Change Oversight", leads to many documents. Aside from the expected criticisms from heavy hitter institutions (many now known as pariahs, BTW); two interesting letter stood out:
The appropriate place for Congress to wrestle with these complex issues is within the context of CFTC reauthorization. therefore, it is imperative that the CFTC resolve the instant controversy as soon as possible, in a manner that will allow this and other issues to be considered comprehensibly next year, without prejudice from CFTC's activities in the balance of 1998.

Senator Mary L. Landrieu (D-LA), "Letter to Brooksley Born, Chairwoman of the Commodity Futures Trading Commission", July 16, 1998

Another July 16, 1998, letter to Brooksley Born, from Leonard Boswell (D-IA 3rd) also expressed concern about the DFTA overreaching it legislated powers. I must have missed ProPublica's

An advanced site specific to propublica.org Google search using the string: "Landrieu OR Boswell" returned one record having nothing to do with any of this. So why is ProPublica blaming Gensler without offering any substantiating citation? Could it be they believe their stated goal of "journalism in the public interest", relieves them from journalistic standards of factual based reporting, grounded with documentary evidence

Leave a comment

Share
Close Social Web Email

"To" Email Address

Your Name

Your Email Address