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Regulation and Compliance > Federal Regulation

Swaps Cop Massad Will Step Down, Letting Trump’s CFTC Take Shape

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Timothy Massad said he plans to step down as Commodity Futures Trading Commission chairman on Jan. 20, clearing the way for Republican control of the top U.S. swaps regulator as President-elect Donald Trump takes office.

Massad will stay on as a CFTC commissioner for a few weeks “to close out his office and handle administrative matters,” the agency said in a statement Tuesday.

A former Treasury Department official and corporate lawyer, Massad took over the CFTC in 2014 as it was being transformed after the financial crisis from a sleepy regulator of agricultural futures to a front-line Wall Street cop. He continued the progress of his sharp-elbowed, better-known predecessor Gary Gensler, completing Dodd-Frank Act rules that brought swaps under broad government oversight for the first time.

During Massad’s tenure, the agency passed stepped-up collateral requirements for swaps, increased oversight of clearinghouses that sit at the heart of the market and worked to ease the burden of certain rules on agricultural, energy and other end users of derivatives. But on one of the key provisions of the 2010 law, curbing speculation in commodities, Massad failed to muster support to complete a final rule, leaving any resolution to his successor.

Boost Transparency

Throughout, Massad has remained a strong backer of Dodd-Frank and the rules it required to boost transparency to the market for over-the-counter derivatives, products that were at the heart of the 2008 meltdown. In a Dec. 6 speech in New York, he urged the incoming administration to reconsider its pledge to undo parts of the law.

“There’s a wide consensus that the reforms made to bring transparency and oversight to the swaps market made sense, and therefore it would be a mistake to significantly change them,” he said at the Economic Club of New York. “Those who supported President-elect Trump because of his promises to working-class voters, many of whom may believe the government has been captured by powerful interests, will have been sold a bill of goods if wholesale repeal of Dodd-Frank is made out to be a critical part of the solution to concerns about economic stagnation or lack of opportunity.”

In announcing his resignation, Massad, 60, is following a standard track for heads of independent federal agencies who typically step down when a president from a different party is inaugurated. He follows Securities and Exchange Commission Chair Mary Jo White, who said in November she would leave at the end of the Obama administration.

Languishing Budget

Aside from the new regulations, Massad’s other legacy may be his inability to persuade Congress to significantly raise the CFTC’s languishing budget — a longstanding problem that he often complained about in public speeches.

While Congress did increase the budget to $250 million from $215 million for fiscal year 2015, it was far short of what the Obama administration requested. The financial straits contributed to poor morale and labor unrest at the agency at the same time it gained new policing powers and extra responsibilities for its roughly 700 staff members.

Though he inherited much of the employee angst, Massad wasn’t able to assuage their concerns. CFTC workers voted to unionize several months after Massad — who was an AFL-CIO intern early in his career — became chairman. A 2016 Partnership for Public Service report on the best places to work in the federal government ranked the CFTC last among eight financial regulators.

Negotiations with the union chapter are ongoing and have been testy. The union recently filed an unfair labor practice complaint against the agency, accusing Massad and the management of stonewalling on negotiations for a collective bargaining agreement.

Commissioner Conflict

Massad also has had some disagreements with his two fellow commissioners, fellow Democrat Sharon Bowen and Republican J. Christopher Giancarlo, who joined the agency when he did in June 2014.

Bowen, at times, pushed Massad to make regulations tougher. In December 2015, she voted against margin rules for uncleared swaps, saying the Massad-backed plan seemed “to reflect a forgetfulness” about the causes of the financial crisis and marked a “return to blindly trusting in large financial institutions’ ability and willpower to manage their risks adequately.”

In November, Massad publicly sparred with Giancarlo over a proposal to provide a new way for the CFTC to access high-frequency traders’ secret algorithms without a government subpoena. The plan, which is expected to be dropped during Trump’s administration, was part of a high-profile push by the commission to keep better tabs on speed trading.

Giancarlo, who was an executive at a swaps brokerage firm before joining the agency, is expected to be named acting chairman after Trump takes office; he is also considered to be a leading candidate to be nominated for a full term in the post. In a 2015 paper, Giancarlo praised some parts of the Dodd-Frank law but was critical of others, especially the CFTC’s swaps trading regulations.

Massad had come under political pressure to leave before his term ends in April, to avert an unusual situation in which the CFTC could have had a Democratic majority with a Republican in the White House.


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