How the Bank Lobby Loosened U.S. Reins on Derivatives
By Silla Brush & Robert Schmidt - Sep 4, 2013 12:01 AM ET
How the Bank Lobby Loosened U.S. Reins on Derivatives - Bloomberg
One by one, Gary Gensler
’s supporters deserted him. Now the chief U.S. regulator of derivatives was being summoned by Treasury Secretary Jacob J. Lew to explain why he refused to compromise.
Banks and lawmakers, as well as financial regulators from around the world, had besieged Lew with complaints about Gensler’s campaign to impose U.S. rules overseas.
The July 3 meeting in Lew’s conference room with a view of the White House grew tense, according to three people briefed on it. Gensler argued his plan was vital if the U.S. hoped to seize meaningful authority over financial instruments that helped push the global economy to the brink in 2008, taking down American International Group Inc. (AIG)
and Lehman Brothers Holdings Inc. and igniting the worst recession since the 1930s.
Lew insisted that Gensler coordinate better with the Securities and Exchange Commission, whose new chairman, Mary Jo White, was also present. Gensler, who was deep into negotiations with his European counterparts, was surprised by Lew’s demand. He’d been hearing the same request from lobbyists seeking to slow the process, and he told the Treasury chief it felt like his adversary bankers were in the room, the people said.
Gensler subsequently apologized to Lew for the outburst. He also softened his demands, cutting a deal with the European Union a week later. Gensler, chairman of a historically obscure agency called the Commodity Futures Trading Commission, had again pushed an idea to the brink until forced to settle.