Gary Gensler, the chairman of the Commodity Futures Trading Commission, is trying hard to convince Congress not to leave too wide a loophole in derivatives regulation, and his performance yesterday was itself a point towards his argument.
Gensler told the House Financial Services Committee that its derivatives bill, which would grant broad authority the CFTC and the Securities and Exchange Commission to determine whether individual derivatives contracts should be centrally cleared, put too much of the decision in regulators’ hands without providing enough legal structure. And Gensler’s own method for preparing his testimony yesterday could serve as an example of the dangers of granting regulators too much discretionary power. He delivered his testimony without running it by any of the four CFTC commissioners first.
There’s an explanation: Financial Services’ derivatives bill came out late Friday, leaving Gensler’s staff to scramble over the weekend to prepare his testimony, which they finished only at midnight the night before Wednesday’s hearing. There simply wasn’t time to have the CFTC commissioners read and approve it.
But the word still got around: Gensler was going solo, bypassing a procedural norm inside his agency. It was only a bit of testimony—but what if it had been something else? A rule-writing effort? And what if Gensler weren’t the regulatory evangelist he is today but the opponent of derivatives regulation he was ten years ago?