Deal Book
By ALEXANDRA STEVENSON
and BEN PROTESS
12 November 2013
Timothy G. Massad swept up the mess of the last financial crisis.
On Tuesday, President Obama asked him to help prevent the next one.
Mr. Obama named Mr. Massad, a senior Treasury Department official, as chairman of the Commodity Futures Trading Commission, an agency that polices some of Wall Street’s riskiest activity. Mr. Massad, a former corporate lawyer, is an assistant secretary of the Treasury overseeing the unwinding of the Troubled Asset Relief Program, or TARP, the government’s bailout effort stemming from the financial crisis.
“I have every confidence that he is the right man to lead an agency designed to prevent future crises — because I think it’s safe to say that he never wants to have to manage something like TARP again,” Mr. Obama said at a White House news conference on Tuesday.
If confirmed by the Senate, Mr. Massad will succeed Gary Gensler, a former Goldman Sachs banker who overhauled the agency in the wake of the financial crisis. Mr. Gensler, credited with turning one of Wall Street’s laxest regulators into one of its most aggressive, must leave office at the end of the year when his term officially expires. He joined the commission in May 2009.
Mr. Massad would join the agency, which Mr. Obama described as “a small but mighty” Wall Street watchdog, at a critical transition point.
Bart Chilton, the agency’s most liberal commissioner, announced last week that he would soon depart. David Meister, the enforcement director who led actions against some of the world’s biggest banks, left last month. And Jill E. Sommers, a Republican commissioner, left in July.
The vacancies have raised the stakes for Mr. Massad’s nomination. If Mr. Chilton and Mr. Gensler leave before their successors are confirmed, the five-member commission would be down to just two members: one Republican, Scott D. O’Malia, and one Democrat, Mark P. Wetjen.
It is not a given that Mr. Massad — and Mr. Obama’s choice to succeed Ms. Sommers, J. Christopher Giancarlo — will win Senate approval. While Mr. Massad is expected to benefit from already having received Senate confirmation in 2011 for his Treasury job, the partisan environment on Capitol Hill could derail the nominees.
And some consumer advocates are skeptical of Mr. Massad, a former corporate lawyer who worked for more than two decades at Cravath, Swaine & Moore.
“We need a chairman who will prioritize the needs of Main Street over Wall Street,” Public Citizen, a consumer advocacy group said in a statement. “Timothy Massad’s views on most of the key issues before the C.F.T.C. are not known.”
Consumer groups questioned whether Mr. Massad would strike as aggressive a tone as Mr. Gensler did.
Under Mr. Gensler, the agency played a crucial role in putting in place tougher rules on derivatives and futures trading as part of the government’s Dodd-Frank financial overhaul. In the face of Wall Street lobbying, the agency created dozens of those rules.
Dodd-Frank expanded the scope of the agency’s jurisdiction, stretching it from the $40 trillion futures industry to the dark corners of the $400 trillion derivatives market. Mr. Gensler was an unapologetic supporter of the law, pushing the agency to tighten rules that Wall Street sought to loosen.
“They’ve done it all while a swarm of special interest lobbyists have done everything possible to thwart their every move,” Mr. Obama said, thanking Mr. Gensler for his “outstanding service.”
The agency, Mr. Obama noted, has also imposed record fines on financial institutions. Among its most notable actions was a wide-ranging crackdown on the manipulation of a benchmark interest rate, the London interbank offered rate, or Libor. In that inquiry, the regulator took aim at major banks like Barclays and UBS.
The agency secured its most recent victory last month, extracting a $100 million settlement and an admission of wrongdoing from JPMorgan Chase, the nation’s biggest bank, stemming from a multibillion-dollar trading loss out of the bank’s London office.
Mr. Massad — whom close friends described as a gourmet chef who used to spend vacations cooking at exclusive Manhattan restaurants like Le Bernardin — would inherit an agency with a smaller agenda. Still, Wall Street continues to press its case, seeking to unwind some of Mr. Gensler’s rules.
Supporters point to Mr. Massad’s role in ending the bailout program, a task that Mr. Obama called “thankless.”
The government says it turned a profit of almost $30 billion on these investments. During his work at the Treasury, Mr. Massad also oversaw the General Motors initial public offering and helped the Treasury exit its stake in the American International Group.
Before joining the Treasury, Mr. Massad worked for the Congressional Oversight Panel, a watchdog group that monitored the government bailout of Wall Street.
At his Senate nomination hearing for the Treasury post on May 3, 2011, Mr. Massad, who attended Harvard for undergraduate and law studies, said he was reminded of his parents’ stories of growing up during the Great Depression.
“We must never forget that this human suffering is the true cost of this financial crisis,” he said.
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