WASHINGTON (AP) — In a story Nov. 12 about President Barack Obama's nomination of Tim Massad as chairman of the Commodity Futures Trading Commission, The Associated Press reported erroneously that the Senate Banking Committee must approve Massad's nomination. It is the Senate Agriculture Committee that must approve it.
A corrected version of the story is below:
Treasury official Massad nominated as CFTC head
With Treasury official Massad named as CFTC chairman, advocates hoping for his independence
By JULIE PACE and MARCY GORDON
WASHINGTON (AP) — Now that Tim Massad has been tapped to lead the federal agency that regulates futures and options markets, a key question has surfaced: Will he prove as aggressive as his predecessor in holding big Wall Street banks to stricter standards?
President Barack Obama on Tuesday nominated Massad to be the next chairman of the Commodity Futures Trading Commission.
The 2010 financial overhaul law gave the independent agency the task of laying down rules for oversight of derivatives, the complex instruments traded in a $700 trillion worldwide market that had been unregulated and contributed to the 2008 financial crisis.
For the past three years, Massad has overseen the Treasury's Troubled Asset Relief Program, the bank bailout program launched in response to the crisis. If confirmed by the Senate, he would succeed Gary Gensler, who plans to step down when his term ends in January.
Gensler was a 20-year veteran of Wall Street when he took over at the CFTC in 2009. But he surprised many by becoming a tough regulator who pushed for stricter rules that the largest banks had lobbied against. And he wasn't afraid to take positions that clashed with the administration.
Massad, who has worked for the Treasury since Obama took office in 2009, has been an advocate for the administration's policies.
"The question is whether he has the guts, independence and commitment ... to stand up to Wall Street," said Dennis Kelleher, the president of Better Markets, a group that advocates strict financial regulation. "It's a dramatically difficult job at an independent agency at a critical time."
Obama praised Massad as someone who doesn't seek the spotlight but consistently delivers good results. The president cited the nearly $30 billion in returns for taxpayers that the TARP program secured.
Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee, called Massad "an excellent selection" for the job.
"He is exactly the type of leader the CFTC needs as the commission works to implement the new Wall Street reform rules (and) strengthen the agency's ability to hold wrongdoers accountable," Johnson said in a statement.
The Senate Agriculture Committee must approve Massad's nomination and send it to the full Senate.
Under Gensler, the agency completed 43 of the 60 rules it was charged with putting into motion under the overhaul law. By comparison, other regulators, including the Securities and Exchange Commission, have adopted roughly a third of their rules.
Massad would be tasked with crafting the final CFTC rules, some of which are the thorniest and most critical rules.
They include the so-called Volcker Rule, which would prohibit banks from trading for their own profit. Its latest version includes an exemption for banks to make such trades when they are used to offset other risks taken. Adoption of the rule has been delayed largely because of Wall Street banks' objections and the need to get a handful of federal agencies, including the CFTC, to agree on its final form.
The value of derivatives is based on a commodity or security, such as oil, interest rates or currencies. They are often used to protect businesses that produce or use the commodities, such as farmers or airlines, against future price fluctuations. But they also are used by financial firms to make speculative bets.
Sen. Elizabeth Warren, D-Mass., a member of the Senate Banking Committee, said in a statement, "I look forward to hearing more from Tim Massad about what steps he thinks the CFTC can take to further reduce the risk of future crises and level the playing field for middle-class families."
Obama also urged Congress to fully fund the CFTC, one of the smallest and most thinly funded U.S. agencies. He said budget cuts have left the agency "undermanned" and "outgunned", to the point of having to drop some open enforcement cases for lack of resources.
That, Obama said, is like not having enough cops on the beat. For the CFTC, the beat is policing Wall Street.