Chairman of the Commodity Futures Trading Commission (CFTC) Gary Gensler seemed to be overall satisfied with the CFTC’s current progress and future plans as he spoke in front of the International Group of Treasury Associations and the U.S. Chamber of Commerce recently.
Beginning his speech, Chairman Gensler recalls the state of the U.S. economy in 2008, putting the majority of the blame for the financial crisis on the swaps market.
Gensler feels that since President Obama and Congress placed the responsibility of reforming the swaps market onto the CFTC in 2009, many of the initiatives they sought to put in place to create more transparency in the marketplace are being implemented. According to Gensler, these initiatives will create a safer marketplace for investors and consumers, as well as allowing companies unburdened from risk to focus on innovation, productions, and the creation of job. Gensler is aware that this shift will not be seamless, and promises to work with marketplace participants to ease into these changes, just as they have done in the past.
Again recounting the crises of 2008, Gensler discussed the lack of swaps regulation between the U.S. and other countries, and cites the downfall of several large institutions as the result of this unregulated trading.
According to Gensler, since the CFTC began its regulation of the swaps market, 82 swap dealers have been registered, including the 16 largest financial institutions, known as the G 16 dealers. Gensler says that this regulation not only protects the public as well as job providers, but also lowers risk, and gives the market integrity.
Currently, The US, Europe, Japan, and Canada are all moving forward with coordinating international market reform, and the CFTC has completed its guidance on international application of the Dodd-Frank Act. Gensler feels this reform will protect U.S. companies from failures in swap dealers’ offshore affiliates.
Gensler also pointed to the recent and continued manipulation of the LIBOR interest rate as obvious reason for future reform, and stated that U.S. and foreign regulators are in the beginning stages of finding and implementing alternative options.
Ending his speech, Gensler noted that, even with all the CFTC has done, the organization is very much underfunded. Stating that the current budget is not sustainable, and that without proper funding, the CFTC will be unable to perform all the duties necessary to protect customers and businesses from future crises.
A full transcription of Chairman Gensler’s speech can be found at CFTC.gov.