WASHINGTON (Reuters) - A leadership vacuum at the top U.S. derivatives regulator could weigh down the Commodity Futures Trading Commission’s efforts to police financial markets using vast new powers Congress gave it after the financial crisis, lobbyists and people inside the regulator said.
The White House has yet to nominate a candidate to replace CFTC Chairman Gary Gensler, who will end his five-year term at the end of the year.
That leaves three options for President Barack Obama. He could come up with a last-minute name, ask Gensler to stay on for another term or let the seat remain empty, in which case the commission would elect an acting chairman from its midst.
A chairman elected by the commissioners would not be as powerful as a presidential appointee. This could hinder the CFTC’s attempt to implement crucial elements of new rules written to make complex financial instruments less opaque and prevent another credit market meltdown like the one in 2007-09.
The CFTC also faces crucial negotiations with Europe and other regions about how to apply its rules abroad and a court battle with banks about commodity speculation. The regulator also is stepping up the number of high-profile probes into financial benchmarks.
“The White House hasn’t paid enough attention to it so far ... really, they haven’t turned up with an appropriate candidate,” one person said.
The White House, the CFTC, and the Senate Agriculture Committee, which oversees the CFTC, declined to comment on who the next chief might be.
Reuters and other media outlets reported in March that Obama had asked Gensler to serve a second term. Gensler never commented on the reports, and it was widely thought at the time that he hoped for a more prominent position.
The CFTC, once a sleepy agency overseeing agriculture futures, saw its clout vastly increased after the financial crisis. The Dodd-Frank reform law gave it power over the $630 trillion swaps market, dominated by Wall Street’s banks.
The lobbyists and people in the agency Reuters spoke to, asked not to be named because they were not authorized to speak to the press, or so that they could speak more freely.
The latest name to come up as a possible successor to Gensler is Elizabeth Ritter, who works for Democratic Commissioner Bart Chilton at the CFTC.
Ritter, also a professor in derivatives law, is a CFTC veteran who has worked for a long list of commissioners, as well as in the office of the general counsel. She declined to comment through a spokesman.
Ritter was widely praised as an expert by the people Reuters spoke to, who described her as “smart”, with extensive knowledge of laws that constitute the CFTC. They said she also offers Obama a chance to appoint a high-profile woman.
But she has never headed a department at the CFTC, and some of the people doubted whether she had enough support to lead the agency in what is expected to be an uphill struggle with bank lobbyists and their allies in Congress.
As late as July, Amanda Renteria, a former chief of staff for Senator Debbie Stabenow, who heads the Senate Agriculture Committee, withdrew her candidacy from the race to head the CFTC, saying she was returning to California.
In June, Washington policy-watchers widely assumed that Renteria would get the job, but last-minute questions about her perceived lack of experience got in the way, the people said.
Similar doubts about Ritter’s ability to run the CFTC could get in the way of her nomination as the next chair, the people said, though she could in that case still be a candidate to take over from her current boss Chilton.
If there is no White House nominee, it would be traditional for the most senior Commissioner to be voted in as acting chairman. This would make Democratic commissioner Bart Chilton the CFTC chief when Gensler leaves in December.
But the process is outside the White House’s control. Mark Wetjen, a Democrat once mooted as the agency’s next head, might vote for himself, the people said, leaving the casting vote in the hands of Scott O’Malia, a Republican.
The White House has nominated Chris Giancarlo, a manager at New York based derivatives broker GFI Group Inc to fill another open spot for a Republican Commissioner, news first reported by Reuters.
The White House ordinarily presents such positions to the Senate for confirmation in pairs of one Democrat and one Republican, meaning that Giancarlo’s first day at the agency is on hold as long as there is no new chairman.
With a lack of a clear candidate, a growing chorus of people says Gensler may get renominated, something long deemed improbable because he has few political friends who are not critics of Wall Street.
If it looks like Gensler would not be approved by the Senate, Obama could reappoint him when Congress is in recess in December. Such a step would generate controversy, but would leave the CFTC with a fully empowered chairman.
“The longer you wait the fewer options there are,” the first person said. “Don’t bet against Gary Gensler ... if he wants to come back, he probably will come back.”
Reporting by Douwe Miedema; Editing by David Gregorio