Yesterday, the Senate Committee on Agriculture, Nutrition and Forestry held a confirmation hearing for Gary Gensler, the Obama administration’s nominee for Chairman of the Commodity Futures Trading Commission (CFTC). Mr.. Gensler served as Undersecretary of the Treasury from 1999 to 2001 and as Assistant Secretary of the Treasury from 1997 to 1999.

In his opening remarks, Gensler stressed his “four priorities,” should he be confirmed as Chairman:

  1. Fulfilling CFTC mandates, such as enforcing laws, protecting market integrity and guarding against fraud;
  2. Guarding against excessive speculation in energy and agriculture;
  3. Developing a broad regulatory regime for OTC derivatives with mandated clearing and mandated exchanges; and
  4. Working with Congress and the CFTC’s global counterparts to avert a similar financial crisis in the future.

Committee Chairman Tom Harkin (D-IA) established a cordial tone for the hearing, but raised questions about Mr. Gensler’s previous appearance before the committee in 1999 when he advocated removing all CFTC authority over OTC derivatives. Mr. Gensler responded by noting the dramatic changes in the OTC derivatives marketplace over the past decade. He also articulated his support for centralized clearing and exchanges, and for a statutory regime that includes capital rules, reporting rules and business conduct rules. Sen. Harkin also questioned Mr. Gensler on the 2008 spike in oil prices. Mr. Gensler argued that the spike was largely caused by excessive speculation, but conceded that speculators do perform an important role in establishing reliable prices for commodities.

Ranking Member Saxby Chambliss (D-GA) focused his questioning on the possibility of a CFTC/SEC merger. Mr. Gensler indicated that he opposed the idea, stating that the role of the CFTC is “fundamentally different” from that of the SEC. Senator Chambliss also asked about the risk of investors' moving offshore in the face of possible overregulation. Gensler promised to “work feverishly” with global regulatory bodies to create a “consistent international regime.”

Responding to a lines of questioning from Senators Amy Klobuchar (D-MN) and Richard Lugar (R-IN), Mr. Gensler stressed the CFTC’s need for more authority and resources, noting that the CFTC today has the same same number of employees as it did in 1974, and that over that 35-year period the market has grown “fifty fold.”