[Congressional Record (Bound Edition), Volume 155 (2009), Part 10]
[Senate]
[Pages 12842-12849]
[From the U.S. Government Publishing Office, www.gpo.gov]




  NOMINATION OF GARY GENSLER TO BE CHAIRMAN OF THE COMMODITY FUTURES 
                           TRADING COMMISSION

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will proceed to the nomination of Gary Gensler, of Maryland, to 
be Chairman of the Commodity Futures Trading Commission.
  The nomination is confirmed, and the motion to reconsider is 
considered made and laid upon the table.
  The President will be immediately notified of the Senate's action.
  Under the previous order, there will now be 60 minutes of debate 
equally divided and controlled between the Senator from Iowa, Mr. 
Harkin, and the Senator from Georgia, Mr. Chambliss, or their 
designees.
  The Senator from Iowa is recognized.

[[Page 12843]]


  Mr. HARKIN. Mr. President, again, to recap what was said, we have 
voted twice, once to approve Mr. Gensler as a Commissioner of the 
Commodity Futures Trading Commission and another vote to approve him as 
the Chairman of the Commodity Futures Trading Commission. I voted yes 
on both measures. Let me share my reasoning on the nomination of Mr. 
Gensler.
  Honestly, I have had some reservations about this nominee, though 
certainly not about him as a person. Based upon my meetings with him 
and our committee hearing, I believe Mr. Gensler is a good and decent 
man with a strong personal story, and he has certainly shown his 
intellectual capability and his knowledge of the subject.
  I simply had concerns with elements of his background and philosophy, 
concerning the regulation of over-the-counter derivatives transactions 
and other financial transactions, and his views on regulations in 
general.
  Mr. President, I chaired a nomination hearing that lasted some time. 
It was a hearing of substance. Mr. Gensler answered some very tough 
questions straightforwardly.
  It is not possible to know how Mr. Gensler will decide any given 
question, but he has expressed support for much stronger, more 
effective reform in the oversight and regulation of derivatives. Of all 
the things we are doing around here, in terms of banking and bailouts 
and pronouncements coming from the Secretary of the Treasury, perhaps 
the construction of the whole thing is centered around how are we 
finally going to regulate derivatives and swaps. These are over the 
counter, hidden from view and, quite frankly, they have led to the 
debacle we have now.
  Let me read some excerpts from Mr. Gensler's testimony before the 
Senate Agriculture Committee, which gives me, again, some positive 
feelings toward his future chairmanship of the CFTC.
  Here is what he said:

       I firmly believe that strong, intelligent regulation with 
     aggressive enforcement benefits our economy and the public.
       We must urgently move to enact a broad regulatory regime 
     that covers the entire over-the-counter derivatives markets.

  Right on target, Mr. Gensler. He also said:

       The CFTC should be provided with authority to set position 
     limits on all over-the-counter derivatives to prevent 
     manipulation and excessive speculation.
       A transparent and consistent playing field for all physical 
     commodity futures should be the foundation of our 
     regulations.

  I agree with that.
  Lastly, Mr. Gensler said this:

       I believe that the CFTC must work with Congress, with other 
     regulators, and with our global financial partners to ensure 
     that the failures of our regulatory and financial systems, 
     failures which have already taken a toll on every American, 
     never happen again.

  Those are all excerpts from the extensive testimony and question-and-
answer period of Mr. Gensler before our committee. So now I am prepared 
to entrust momentous decisions to Mr. Gensler, and I am, of course, 
supporting the President's choice. Given the fragile state of the 
economy and financial markets, having a confirmed chairman at the CFTC 
is of critical importance.
  As I said at Mr. Gensler's nomination hearing, these are challenging 
times, particularly for regulators like the CFTC. Since the Commodity 
Futures Trading Commission was established 35 years ago, it has never 
faced more daunting market challenges than those that exist now. The 
unprecedented price volatility of our markets for physical commodities, 
such as energy and grains, has hurt our economy. The lack of sufficient 
regulatory authority and oversight over the derivatives and financial 
markets has proven disastrous to the entire global economy.
  Derivatives that were touted as managing or reducing risk turned out 
in practice to magnify risk--or certainly at least to allow banks, 
insurance companies, and investors to take on totally unsustainable and 
reckless levels of risk and leverage. If these financial markets and 
derivatives markets are not properly regulated, we won't have a strong 
economy. The CFTC plays a vital role in providing oversight in keeping 
these markets healthy and in keeping the players honest.
  It is imperative that we pass strong financial regulatory reform in 
the Congress, and not just piecemeal, patchwork reform, but 
comprehensive and fundamental reform that brings full transparency and 
accountability back to the markets. Earlier this year, I introduced the 
Derivatives Trading Integrity Act. Our committee will be having a 
hearing on this early next month. That bill would require all 
derivatives and swaps to be traded on a regulated exchange. Exchange-
traded contracts are subject to a level of transparency and oversight 
that is not possible in over-the-counter markets. For 60 years, futures 
contracts traded very efficiently on regulated exchanges.
  I believe the burden of proof is on those who say there must be 
exceptions and loopholes to allow derivatives and futures trading off-
exchange to continue. These are touted as customized swaps or 
customized derivatives. I have asked Mr. Gensler and others to please 
define for me what a custom swap is. No matter how you define it, it 
leaves a loophole big enough to drive a Mack truck through. Once there 
is a derivative that is off the trading boards, that no one knows 
about, that is shrouded in secrecy, what is to keep someone else from 
doing another custom derivative on that derivative, and then a 
derivative on that derivative? That is what got us into this mess in 
the first place--derivatives on derivatives on derivatives on 
derivatives, ad infinitum, with nobody knowing what was going on, 
without anybody knowing the value of each of those.
  To this day, Treasury has never been able to tell us how they came up 
with the value of those derivatives. It is a kind of voodoo. It is some 
kind of mathematical calculation that they put into a computer somehow. 
Well, I am sorry; I just don't buy that. I believe they all ought to be 
on a regulated exchange, open and above board, so anybody can look and 
see who is trading what. If it is a custom derivative, fine; put it on 
a trading exchange, a regulated exchange. Let the market decide whether 
it is customized or not, and then if somebody wants to sell a 
derivative on that, put it right back on the exchange. To me, that is 
the only way we will ever get around this.
  I keep hearing noises out of Treasury that they want to keep this 
loophole for some kinds of customized swaps. I know the swaps and 
futures industry would like to have that. I understand that. But that 
is what got us into this trouble in the first place. As I said, the 
burden of proof is on them, I believe, to show why we need this 
loophole and to somehow define a custom swap, what it really is, and 
why we don't need to put it on a regulated exchange.
  Some suggest that reforming regulations of these markets, like I am 
suggesting, will limit flexibility and inhibit the incentives of market 
participants to develop and introduce new financial products, and thus 
harm the market. Again, I reject that notion. To the extent that 
financial innovation can be shown to benefit all participants in the 
market by providing some new hedging opportunities or risk management 
capabilities, without putting other parties at undue risk, then that is 
all to the good. However, if these new products are used to obscure 
risk in the market, or elude or evade accounting rules placed on market 
participants, then they clearly don't serve the public good and should 
be prohibited.
  That is why I say no more of this behind-the-scenes, over-the-counter 
trading of derivatives. Put them on a regulated exchange. If it is 
custom, so what; put it on the exchange. Then a regulated exchange can 
put margin requirements on the buyers, clearing the floor every day. 
Other investors can look and see what is going on. It provides for the 
best transparency possible.
  Some are talking about having some kind of a clearinghouse. Again, I 
don't know about clearinghouses. There are some functions for 
clearinghouses, I am aware of that. But, again, they just don't 
function like a regulated exchange, on which we have set regulations, 
an exchange that can provide for margin calls, and which is open and 
above board to everyone. Again, these

[[Page 12844]]

financial innovations we hear about, like credit default swaps, 
collateralized mortgage obligations, collateralized debt obligations--I 
did a little history on this. None of those existed prior to 20 years 
ago. Most of them are within the last dozen years or so.
  So I asked the question of a number of people at the Treasury 
Department, and others--I asked what was the demand for these financial 
instruments? They didn't exist before, especially credit default swaps. 
They literally didn't exist before about 10 years ago. What was the 
public demand or public need for these? There wasn't any. Someone 
described it to me. It is sort of like Honey Nut Cheerios. I have been 
eating Cheerios since I was a kid. Did I demand that they put a honey 
nut inside each of those Cheerios? General Mills had a new idea, and 
they came up with Honey Nut Cheerios and marketed them with good 
advertising, and they thought everybody would like Honey Nut Cheerios 
now.
  Fine, but that is what they did with credit default swaps. Some 
brainiacs up there at MIT--the mathematicians who went to work for the 
investment houses--said we know how to slice and dice derivatives to 
the nth degree--these credit default swaps--and we can make a lot of 
money on that.
  But there was no need for that. There was no outcry by banks or 
insurance companies saying they needed this kind of financial 
instrument. But they came up with it and marketed it and sold it as a 
way of better hedging risk when, in fact, it increased and magnified 
risk. Again, if someone comes up with a financial instrument--a new 
product, as they say--let's get it out there in the open. If you want 
it out there, put it in the open and get it on the regulated exchange 
and let everybody look at it and see what it is. That is why we need 
better regulation and openness and transparency.
  I reject the idea that somehow this regulation of which I speak is 
somehow going to thwart financial instruments. If we thwart the 
development of other credit default swaps or collateralized mortgages 
or debt obligations, wonderful; we should. We should get back to 
sensible dealings in the marketplace.
  Again, no more obscuring of the risk, eluding accounting rules--get 
them out in the public.
  The free-wheeling derivatives markets contributed to a financial 
crisis from which our economy is only beginning to recover. We are at 
work in the Agriculture Committee on legislation that will ensure 
stronger regulation in order to bring transparency and integrity to the 
derivatives market.
  I want to make it clear at the outset that I am not against all 
derivatives. Certain derivatives have a functional value in hedging and 
reducing risk. But, again, they should be in the open.
  We are at work in the Agriculture Committee to do that--bring 
transparency and integrity to the derivatives markets. In the 
meanwhile, the CFTC must be at full capacity to keep watch over the 
markets. We are counting on Mr. Gensler to be a strong voice at the 
helm of this important agency.
  With that, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Georgia is 
recognized.
  Mr. CHAMBLISS. Mr. President, I will speak a minute on Mr. Gensler. 
Before I do, I thank the chairman for making sure we got this 
nomination to the floor for confirmation. We have wrestled with this 
nomination for several months now, and I will talk about that.


                       CDC'S New Expanded Campus

  I thank Senator Harkin also for coming to Atlanta last Friday. We had 
a great tour of the new campus--the fully expanded campus at the 
Centers for Disease Control, where we had the opportunity to talk with 
folks firsthand who are dealing with the H1N1 virus. We both were 
reinforced about the fact that issue is in the hands of highly skilled 
professional people at the Centers for Disease Control. Senator Harkin 
has been very much a supporter of the CDC for years in his position on 
the Appropriations Committee. I thank him for taking time to come down 
on a day that is very important to his family and to visit with us and 
to also hold the nutrition hearing on the CDC campus. We had an 
excellent hearing, and we are going to be working together to get our 
nutrition reauthorization bill to the floor in the very near future.


                       Nomination of Gary Gensler

  Mr. President, I rise to support the nomination of Gary Gensler to be 
Chairman of the Commodity Futures Trading Commission. Mr. Gensler's 
nomination comes at a critical time. Our Nation is facing very 
challenging issues in trying to address this economic downturn. Many 
businesses, as well as the economy, depend upon the commodity markets--
both physical and financial commodities--to help manage costs, to hedge 
against risk, to access liquidity, and to stay competitive. It is a 
time where we really need these markets to be performing at their best, 
to be functioning transparently and without manipulation.
  The CFTC has been operating with an Acting Chairman for approximately 
23 months now and a fully confirmed commission has not been in 
operation since 2006. This situation is largely due to the recurring 
politics surrounding the nomination process. While not all Senators 
will ever agree with everything that any nominee supports, I am very 
concerned with the need to have a fully seated Commodity Futures 
Trading Commission. The American people deserve no less, particularly 
in these difficult times.
  As Congress seeks to deal with the current economic crisis and 
examines our financial system, it is absolutely essential that the CFTC 
and the Senate Committee on Agriculture, Nutrition and Forestry are 
engaged in the debate. Given our responsibility to ensure that the 
commodity markets function properly, the CFTC must be engaged in 
discussions occurring both within the administration and within 
Congress relative to restructuring our financial system and products 
that operate within it. The need for properly functioning commodity 
markets is of utmost importance to those utilizing products based on 
interest rates, exchange rates, debt, and credit risks.
  Last year, we witnessed a major market disturbance and a subsequent 
myriad of theories as to the cause of the meltdown. Economists will 
study for years to theorize just exactly what caused the economy to 
buckle when it did. In the meantime, we owe it to the American public 
to ensure that the regulators who oversee these industries are properly 
vetted and seated with the backing of the Senate.
  Frankly, this vote has been too long in coming. One of President 
Obama's first nominations for his new administration was that of Gary 
Gensler to be Commissioner and Chairman of the CFTC. His nomination was 
announced on December 18, 2008, and we officially received this 
nomination on President Obama's first day in office--January 20, 2009.
  For the last few years, I have witnessed the troubling trend of 
stalled CFTC nominations. The process starts with the President sending 
Congress the nomination, the Senate Agriculture Committee holds a 
confirmation hearing, and that is as far as it goes. In the case of 
Gensler, two of my Senate colleagues placed a hold on his confirmation, 
which, in terms of Senate procedure, effectively stalls the nomination 
in its tracks. This has happened with almost every nominee to the 
Commission in recent years.
  With Senate approval of this nomination, our job is still far from 
complete in ensuring that the CFTC has a full slate of Commissioners. 
We currently have two Commissioners with expired terms. I would 
encourage the President to quickly send us the nominations of the two 
remaining Commissioners so that we can act quickly on both of them. It 
is my understanding that the President, if he hasn't already sent one 
of those nominations over, will be sending one over today. I urge him 
to send the second one so that we can deal with both of them at the 
same time and for the first time in several years have a fully 
confirmed and seated Commodity Futures Trading Commission.
  With respect to Mr. Gensler, I have had the opportunity to visit with 
him, to go through his hearing with him, and to observe him. He is 
qualified, he is capable, he knows the issues, and he is prepared for 
the job. I urge all of my

[[Page 12845]]

Republican colleagues to vote in favor of this nomination because I 
think this is one time where we have the opportunity in a bipartisan 
way to say to the President: If you send us reasonable and qualified 
nominees, we are not going to stand in your way. We are not going to be 
obstructionists. We are going to help you put the right kinds of people 
in place.
  I am very pleased to say--since we have had the vote today--that 
every single Republican who voted today voted to confirm Mr. Gensler.
  Let me close by talking for 1 second about the comments my colleague 
from Iowa, Senator Harkin, made with respect to the overall financial 
markets and our need to modify some of the regulatory process.
  I agree with him that we need more transparency in the market. We 
don't know--and I don't know that we will ever know--what caused this 
meltdown last year, but the one thing I do know is that as policymakers 
we have an obligation to make sure that when someone buys a product on 
a commodities market, they should have the assurance that somebody from 
a regulatory standpoint is looking over the shoulder of the individuals 
who administer those markets, so that when they buy something, they 
know it is exactly what was sold to them. They should have the 
assurance that they are going to have the opportunity--with the risks 
they have taken--to see that product either rise in value or sometimes 
go lower in value but that it will be their decision that causes that 
and not some manipulation of the market that causes that. The chairman 
and I have some disagreements over the direction in which we go, but 
there is no disagreement with the fact that there needs to be more 
transparency in the market.
  There are some customized products that are going to be very 
difficult to regulate, and we have to be careful that we don't stifle 
markets in this country. They have worked well for decades and decades, 
and they will continue to work well if we make sure that we have the 
right policies in place and that we don't let the Federal Government 
get too much engaged in the process, to the point where these 
individuals who make the decisions to trade on markets inside the 
United States get the feeling that the Government is becoming too 
engaged in the process and therefore they are going to take their 
business elsewhere, which they can do. Every product that is bought on 
the market in the United States can be bought in an overseas market. It 
can be bought from New York City or my hometown of Moultrie, GA, just 
as easily as it can be bought on the U.S. market. So we have to make 
sure we regulate those markets in the right way but that we don't 
overregulate them so that we drive those customers overseas to markets, 
because we want to continue to encourage a strong and viable 
commodities market in this country.
  As we move through the process of seeking to change our regulatory 
process, I look forward to working with the chairman, as well as any 
number of other Members of this body who have a lot of information 
about this issue. And believe you me, it is an extremely complex issue, 
but it is one we need to address, and we need to make sure at the end 
of the day that we have done our work in the right way and in a way 
that will be complementary of the markets and not in a way that is 
going to be conflicting toward the markets.
  With that, Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Udall of Colorado). The Senator from 
Vermont.
  Mr. SANDERS. Mr. President, for the past 5 months, I blocked 
consideration of the nomination of Gary Gensler to head the Commodity 
Futures Trading Commission, the CFTC. As a strong supporter of 
President Obama, I took no particular pleasure in doing that. But given 
Mr. Gensler's history as a senior executive of Goldman Sachs for 18 
years and the role Mr. Gensler played in deregulating the financial 
services industry as a senior Treasury Department official from 1991 to 
2001, I did not believe Mr. Gensler was the right person at the right 
time to help lead this country out of the financial crisis we find 
ourselves in today. In my view, we need a new vision of what Wall 
Street should be--one that is not obsessed with quick profits, bubble 
economies, and huge compensation packages for top executives. We need 
financial institutions which will invest in a productive economy and 
which will help create millions of decent-paying jobs as we rebuild our 
Nation and rebuild the middle class.
  I am happy to say that last week I had a productive meeting with Mr. 
Gensler, the second meeting I have had with him. While Mr. Gensler is 
clearly not the nominee I would have chosen for this position, nor were 
his answers all that I would have liked, there is no question in my 
mind that he is a stronger nominee today than he was 5 months ago when 
I first met him.
  In preparation for the meeting last week, I outlined a number of 
issues I wanted Mr. Gensler to respond to, and let me highlight some of 
Mr. Gensler's written replies for my colleagues.
  In terms of strongly regulating credit default swaps and other 
derivatives--something Mr. Gensler opposed in the Clinton 
administration--Mr. Gensler now says:

       I believe we must urgently move to enact a broad regulatory 
     regime that covers the entire over-the-counter- derivatives 
     marketplace. As a key component of this reform, we should 
     subject all derivatives dealers to: Conservative capital 
     requirements; business conduct standards; recordkeeping 
     requirements, including an audit trail; reporting 
     requirements; and conservative margin requirements. I believe 
     that the CFTC should be provided with authority to set 
     position limits on all OTC derivatives to prevent 
     manipulation and excessive speculation. Such position limit 
     authority should clearly empower the CFTC to establish 
     aggregate position limits.

  Mr. Gensler also wrote to me saying:

       I will work closely with Congress to pass legislation that 
     will mandate registration of hedge fund advisers. In 
     addition, I will work with agency staff to review all 
     previously granted exemptions from registration.

  Finally, Mr. Gensler told me in writing that he supports:

       . . . actions to close the ``London loophole'' and ensure 
     that foreign futures exchanges with permanent trading 
     terminals in the U.S. comply with position limitations and 
     reporting and transparency requirements that are applied to 
     trades made on U.S. exchanges.

  Mr. President, I ask unanimous consent to have printed in the Record 
all of Mr. Gensler's written responses to me dated May 14, 2009.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                Gary Gensler, Nominee for CFTC Chairman

              (Response to Senator Sanders, May 14, 2009)

       1. The CFTC should produce quarterly reports on its website 
     describing the role derivatives trading activities have in 
     influencing prices for each major energy commodity, including 
     home heating oil and crude oil.
       I believe that we must urgently move to enact a broad 
     regulatory regime that covers the entire over-the-counter 
     derivatives marketplace. This regime should consist of two 
     main components. One component is the regulation of the 
     derivatives dealers themselves. The other component is the 
     regulation of the marketplace. I believe it is best that we 
     implement both of these complimentary components to bring the 
     needed transparency, accountability and safety to the trading 
     of OTC derivatives.
       Market efficiency and price transparency for OTC 
     derivatives should be significantly enhanced by:
       requiring the clearing of standardized products through 
     regulated central counterparty clearinghouses;
       moving the standardized part of these markets onto 
     regulated exchanges and regulated, transparent electronic 
     trade, executions systems;
       requiring development of a system for timely reporting of 
     trades and prompt dissemination of prices and other trade 
     information;
       requiring that all OTC transactions, both standardized and 
     customized, be reported to a regulated trade repository; and
       requiring clearinghouses and trade repositories to, among 
     other things, make aggregate data on open positions and 
     trading volumes available to the public and to make data on 
     any individual counterparty's trades and positions available 
     on a confidential basis to the CFTC and other regulators.
       I also believe the CFTC should promote greater transparency 
     by providing more useful and comprehensive data to the 
     public. In my opinion, the rapid growth in commodity index 
     funds was a contributing factor to a

[[Page 12846]]

     bubble in commodity prices--including home heating oil and 
     crude oil--that peaked in mid-2008. The expanding number of 
     hedge funds and other investors who increased asset 
     allocations to commodities also put upward pressure on 
     prices. Notably, though, no reliable data about the size or 
     effect of these two influential groups has been readily 
     accessible to market participants. I believe the CFTC should 
     promote greater transparency and market integrity by 
     regularly providing the public with better data regarding the 
     role of non-commercial traders in energy and other markets.
       If confirmed, I will work with the Congress to provide the 
     CFTC with the additional authority it needs to improve the 
     transparency of the OTC derivatives market. I will also work 
     with the CFTC staff to use the tools at the agency's disposal 
     to protect consumers, investors, and farmers by promoting 
     transparency through more sophisticated data collection and 
     dissemination.
       2. Establish conflict of interest rules and firewalls 
     limiting energy infrastructure affiliates from communicating 
     with energy analysts and traders.
       I believe we need to adopt a comprehensive plan for the 
     regulation of over-the-counter derivatives markets. As a key 
     component of this reform, we should subject all derivatives 
     dealers to:
       conservative capital requirements;
       business conduct standards;
       record keeping requirements (including an audit trail);
       reporting requirements; and
       conservative margin requirements.
       The CFTC should have the authority to protect against 
     fraud, manipulation, excessive speculation, and other market 
     abuses within the OTC derivatives markets, including all 
     energy derivatives, and by the derivatives dealers.
       Working with the Congress, such authorities to subject 
     dealers to business conduct standards and to protect against 
     market abuses could include the establishment of rules 
     relating to conflicts of interest. If confirmed, I look 
     forward to working with other Federal agencies and the 
     Congress to achieve these objectives.
       3. (a) Work with the Federal Reserve to prohibit bank 
     holding companies from trading in energy commodity 
     derivatives markets and owning energy infrastructure assets.
       Given the recent changes in the structure and composition 
     of the financial and energy industries this is an important 
     issue. Generally, I believe the CFTC must be ever vigilant in 
     its oversight to protect the public against fraud, 
     manipulation, excessive speculation, and other market abuses 
     in the energy, agricultural and financial commodity markets. 
     As described in my answers above, we need to adopt a 
     comprehensive plan for the regulation of over-the-counter 
     derivatives--including those trading energy derivatives. This 
     should subject all dealers, including those held by bank 
     holding companies, to a robust regime of prudential 
     supervision and regulation. More specifically, I believe that 
     derivatives dealers, including those held by bank holding 
     companies, should be subject to business conduct standards as 
     described in Question 2, and speculative position limits as 
     described below in Question 3(b).
       If confirmed, I look forward to working with the Federal 
     Reserve, other regulators, the Administration, and the 
     Congress on this important issue.
       (b) The CFTC should promulgate rules to make sure that all 
     bank holding companies that engage in derivatives trading are 
     subject to speculation limits.
       A transparent and consistent playing field for all physical 
     commodity futures should be the foundation of the CFTC's 
     regulations. Position limits must be applied consistently 
     across all markets, across all trading platforms, and 
     exemptions to them must be limited and well defined.
       As part of the comprehensive plan described above, the CFTC 
     should be provided with authority to set position limits on 
     all OTC derivatives to prevent manipulation and excessive 
     speculation. Such position limit authority should clearly 
     empower the CFTC to establish aggregate position limits 
     across markets in order to ensure that traders are not able 
     to avoid position limits in a market by moving to a related 
     exchange or market.
       If confirmed by the Senate, I will ask the CFTC staff to 
     undertake a review of all outstanding hedge exemptions, to 
     consider the appropriateness of these exemptions, and to 
     evaluate potential practices for instituting regular review 
     and increased reporting by exemption-holders.
       4. Mr. Gensler should work to promulgate regulations within 
     3 months to require hedge funds that are engaged in 
     derivatives trading to register with the CFTC.
       The Administration has proposed that all advisers to hedge 
     funds (and other private pools of capital, including private 
     equity funds and venture capital funds) whose assets under 
     management exceed a certain threshold should be required to 
     register. If confirmed, I will work closely with the Congress 
     to pass legislation that will mandate registration of hedge 
     fund advisers as part of a comprehensive package of 
     regulatory reform. In addition, if confirmed, I will work 
     with the agency staff to review all previously granted 
     exemptions from registration as commodity pool operators.
       Furthermore, as part of the comprehensive reform of the 
     derivatives market, the CFTC should have the authority to 
     police all activities in the OTC derivatives markets--
     including transactions entered into by hedge funds. If 
     confirmed, I look forward to working with other Federal 
     agencies and the Congress to achieve these objectives.
       6. Mr. Gensler should support revoking all ``no-action'' 
     letters for Foreign Boards of Trade that solicit or accept 
     business from the U.S.
       I support actions to close the ``London Loophole'' and 
     ensure that foreign futures exchanges with permanent trading 
     terminals in the U.S. comply with the position limitations 
     and reporting and transparency requirements that are applied 
     to trades made on U.S. exchanges. Furthermore, I believe any 
     foreign futures exchanges that have terminals in the United 
     States to which our investors have access and whose contracts 
     are based on the same underlying commodities should have 
     consistent regulation applied, including position limits.
       If confirmed by the Senate, I look forward to working with 
     the Congress to give the CFTC unambiguous authority to 
     promulgate rules and standards to achieve these goals. Such 
     rules and standards governing treatment of Foreign Boards of 
     Trade should replace the issuance of ``no-action'' letters in 
     this regard.

  Mr. SANDERS. Mr. President, needless to say, I am encouraged by the 
commitments Mr. Gensler made to me to regulate hedge funds, to make 
sure banks are not allowed to manipulate the price of heating oil and 
crude oil, and to prevent the enormous conflicts of interest that exist 
with respect to our energy markets, among many other things.
  In addition, last week the Obama administration introduced a 
comprehensive plan to--for the very first time--significantly regulate 
credit default swaps and other over-the-counter derivatives. Exempting 
these investments from regulation was a huge mistake that led to the 
$180 billion taxpayer bailout of AIG, the collapse of Lehman Brothers, 
and greatly contributed to the worst financial crisis since the Great 
Depression.
  Last March, I and a number of other Senators asked the President to 
support strong regulations on these risky investment schemes. The 
President's proposal accomplishes many--not all but many--of the goals 
we have been advocating. While this plan is not as strong as I would 
have written and may have loopholes in it that need to be closed, I 
believe we are headed in the right direction to make sure a financial 
crisis of this magnitude never occurs again.
  As a result of the greed, the recklessness, and the illegal behavior 
of Wall Street, our country has been thrown into a deep recession which 
has caused intense suffering for millions of our people. We need to end 
the current era of financial deregulation which largely caused this 
crisis and move to a new Wall Street which understands the need for 
long-term productive investment and job creation rather than short-term 
profits, outrageous salaries, and a bubble economy. We need to break up 
financial institutions that are too big to fail. If a company is too 
big to fail, that company is too big to exist. We should do the same 
thing to the banking industry that Teddy Roosevelt did to break up the 
oil companies. And we should stand up today, on behalf of the American 
people, to our modern-day robber barons. Most importantly, we need to 
end the era of deregulation that has led to the worst financial crisis 
since the Great Depression.
  While I am still not convinced that Mr. Gensler is the independent 
leader we need at this time to head the CFTC, the strong commitments he 
has made recently in support of serious regulations of the financial 
industry lead me to believe he now understands the direction we as a 
nation have to go. Mr. Gensler certainly is a knowledgeable person and 
he has the ability to do a very fine job if he is willing, in fact, to 
stand up for the American people and assume the courage, the great deal 
of courage, he will need to stand up to the very powerful financial 
institutions which have so much control over what goes on here in 
Congress. In fact, this may be Mr. Gensler's ``Nixon in China'' moment.
  I hope this turns out to be the case, and I look forward to working 
with Mr.

[[Page 12847]]

Gensler as he assumes the Chair of the CFTC.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Washington is recognized.
  Ms. CANTWELL. Mr. President, I rise today to discuss the 
administration's truly historic announcement last week that in writing 
they supported bringing unregulated ``dark'' over-the-counter 
derivative markets under full regulation for the very first time.
  For months I have been urging the Obama administration to move 
quickly and propose strong regulatory controls on these markets, to 
require transparency in derivatives trading, and to restrict market 
manipulation.
  With the announcement last week by Secretary Geithner of these new 
regulations, the administration has come down decisively against 
dangerously unrestricted trading. They have come down on the side of 
imposing order on a marketplace whose collapse made the current 
recession much deeper and more painful for average Americans than it 
needed to be.
  The administration's commitment to bringing a ``dark'' market into 
light is very important. Congress has received a written commitment 
from the administration that they will bring the unregulated over-the-
counter derivatives market under full regulation for the very first 
time.
  This means they have correctly identified three goals of regulatory 
reform of the over-the-counter derivatives markets. First, if Congress 
and the administration push through, we will finally gain transparency 
in the ``dark'' markets. All derivatives transactions and dealers will 
be brought under prudent regulation and supervision. That means even 
those that are customized derivatives, not just the OTC market; so 
prudent regulation and supervision, including capital adequacy 
requirements, antifraud and antimanipulation authority, very clear 
transparency and reporting requirements.
  Second, standardized trading of physical commodities and derivatives 
will finally be required to trade on fully regulated exchanges.
  Third, the administration is also committed to opposing position 
limits on regulated markets to prevent any market player from amassing 
large positions that can harm markets. I have received assurances from 
the White House that the administration believes these position limits 
should be applied in the aggregate across all markets.
  I still remain concerned about Mr. Gensler's nomination to chair the 
Commodities Futures Trading Commission. Mr. Gensler was at the 
Department of the Treasury a decade ago and helped push through a bill, 
passed by Congress, that provided an ironclad protection against the 
regulation of financial products such as credit default swaps and 
derivatives at the heart of this financial crisis. The unfettered 
speculation that resulted helped bring about not only the energy crisis 
in my region but decades of other problems that contributed to the 
demise of AIG, Lehman Brothers, and Bear Sterns.
  I believe we need new blood at the CFTC and all regulatory agencies. 
We need people who will move us from a world of unregulated toxic 
assets to a world of transparency and aggressive oversight. For nearly 
three decades the financial industry has had its way in Washington, 
successfully pushing deregulation in the name of innovation. Time-
tested regulatory policies that protected investors and consumers since 
the Depression were systematically eroded. Many factors led to the 
present economic meltdown, but we know that chief among them was the 
policy advocated by Mr. Gensler of not fully regulating the derivatives 
market.
  A decade ago, at the end of the 106th Congress, in the dark of night, 
Congress passed a law known as the Commodities Futures Modernization 
Act. But instead of modernizing commodities trading, it took us back in 
time to the day when securities trading was subject to wild 
speculation. This law, backed by Mr. Gensler, provided ironclad 
protection against regulation and oversight of derivatives and has 
caused many problems. One courageous regulator at the time, then CFTC 
chairwoman Brooksley Born, warned Congress and the financial community 
that unregulated derivatives would expose the economy to serious 
dangers. But some in Washington blocked her efforts, including many on 
Wall Street. One high-ranking Treasury official charged with pushing 
these deregulation bills through Congress was Gary Gensler, a former 
high-ranking executive at Goldman Sachs. As Under Secretary of the 
Treasury, Mr. Gensler testified before Congress that he opposed 
regulating the derivatives market. Mr. Gensler, as we know, was wrong. 
Just yesterday Brooksley Born received recognition for her courage in 
standing up to the powerful financial interests in proposing tough 
rules. She was presented with the Profile in Courage award by the John 
F. Kennedy Foundation.
  Remarkably, the Senate is now considering confirming Mr. Gensler to 
serve as chair of the CFTC, the same agency Brooksley Born chaired and 
the same agency Mr. Gensler worked so hard to defang in his previous 
tenure as Under Secretary of the Treasury. That is why I oppose his 
confirmation to run the CFTC at a critically important time when we 
need more financial regulation in these agencies. In the months ahead I 
will be looking forward to working with the CFTC and the President's 
working group on financial markets and the Department of the Treasury 
to actively engage Congress on the reforms that need to be passed into 
law.
  I will be looking to the CFTC to do its job, to prevent excessive 
speculation from stopping the Nation's economic recovery.
  I will be looking to Mr. Gensler to earn the trust of Congress and 
provide oversight over the commodities and derivatives markets.
  Mr. DURBIN. I rise to support the nomination of Gary Gensler for 
Chairman of the Commodity Futures Trading Commission.
  I have a keen interest in the leadership of the CFTC, based on my 
chairmanship of the appropriations subcommittee that funds the agency 
and because the state of Illinois is home to some of the most important 
futures exchanges in the world. During this crisis of confidence in our 
economic system, the CFTC needs a Senate-confirmed chairman at the helm 
to oversee this complex and growing industry.
  Mr. Gensler's experience includes stints on Wall Street, in the 
Clinton Treasury Department, and with the Senate Banking Committee. He 
knows how the world of futures trading works, and he understands how to 
get things done at both ends of Pennsylvania Avenue.
  He is going to need that expertise. Last week, Treasury Secretary 
Geithner announced the administration's proposal for reregulating the 
over-the-counter derivatives markets. If confirmed, Mr. Gensler will be 
charged with implementing much of that vision. The proposal will 
require far more transparency and responsibility from derivatives 
traders that have long operated in the shadows. The massive derivatives 
exposures taken on by AIG and other largely unregulated financial firms 
can't continue. Mr. Gensler will be responsible for seeing to that.
  Mr. Gensler will also be charged with eliminating the excessive 
speculation in the oil and agriculture markets that helped lead to $140 
barrels of oil last summer. I worked with many of my colleagues to 
attempt to address that issue last year, and many regulatory 
improvements were included in last year's farm bill. But the CFTC can 
do more.
  I met with Mr. Gensler in my office several months ago after 
President Obama nominated him for this position. I asked him about his 
role during the Clinton administration in which he advocated weakening 
CFTC oversight over futures trading. Mr. Gensler admitted that those 
reforms had gone too far, that he had learned from those mistakes, and 
that more sensible regulation by the CFTC is needed. I expect him to 
stick to that sentiment and to aggressively monitor trading under the 
CFTC's jurisdiction.
  I look forward to working with Mr. Gensler to ensure that the CFTC is

[[Page 12848]]

adequately funded and that the agency provides strong and sensible 
regulation under his leadership. The future stability of our economy 
depends on it.
  Ms. MIKULSKI. Mr. President, I rise today in support of Gary 
Gensler's nomination to be Chairman of the Commodity Futures Trading 
Commission.
  I have known Gary for many years--when he worked in the Senate during 
the Clinton administration, and as a community leader in Maryland. I 
know him to be a man of principle and great intelligence with a deep 
understanding of all areas of domestic finance and how to turn ideas 
into workable policy. During this time of great financial turmoil and 
uncertainty, we need someone with these skills to lead the Commodity 
Futures Trading Commission.
  I enthusiastically support Gary Gensler's nomination for this 
important position on President Obama's economic team, and I applaud 
the administration for working to address my colleagues' concerns so 
Gary can finally be confirmed.
  I have three criteria for considering nominees: competence, 
dedication to the mission of the department, and integrity. Gary 
Gensler clearly meets these criteria. His experience in all areas of 
domestic finance is stellar. He has worked in the executive branch, the 
Congress and on Wall Street. He was a top economic adviser to Senator 
Paul Sarbanes on the Senate Banking Committee. And he worked under 
Larry Summers during the Clinton administration as Under Secretary of 
Treasury.
  The Commodity Futures Trading Commission is an essential part of the 
financial regulatory system. Its decisions affect everyone who 
purchases food or commodities including consumers and small businesses. 
I have always stood for strong regulation with teeth. I applaud 
President Obama for choosing an economic team that is committed to this 
kind of reform. And I am convinced Gary will be a great asset in 
carrying it out.
  We faced similar challenges in 2003. Enron had just exposed giant 
cracks in our regulations, flushed the savings of hundreds of thousands 
of people, and put our broader economy at risk. Congress needed to act 
boldly to set up new regulations, just as we do now. Those new 
regulations were called Sarbanes-Oxley. They were championed by Senator 
Sarbanes and his top economic advisor at the time--Gary Gensler. They 
rewrote the rules of corporate America. They made business more 
accountable, shined light where others were afraid to look and stood up 
to big business.
  Gary has integrity and a strong family. I have gotten to know Gary 
and his family as his wife Franchesca struggled and succumbed to breast 
cancer. I saw the strength of Gary and his three wonderful daughters: 
Anna, Lee and Isabel. He has tried to help others whose loved ones have 
cancer, and he was honored for his work on behalf of the American 
Cancer Society.
  President Obama has inherited a mess. Our economy is teetering and 
people have lost faith in the institutions that are supposed to protect 
them. We need a Chairman of the CFTC who will enforce our laws, reform 
our regulatory system and guard us against fraud and abuse. I have full 
confidence that Gary Gensler is up to this challenge. He will be a 
strong, effective and reform minded Chairman of the Commodity Futures 
Trading Commission. I urge my colleagues to support his nomination.
  Mr. DODD. Mr. Chairman, I rise in support of the President's 
nomination of Gary Gensler to be the Chairman of the Commodity Futures 
Trading Commission. I have known Gary for some time and believe he is a 
dedicated and thoughtful public servant who has emerged over the years 
as a leader within his field and a person of real integrity.
  Mr. Gensler's previous career with the investment banking firm of 
Goldman Sachs and in the Treasury Department, as well as his new work 
assisting this administration, along with his intelligence, experience 
and personal skills, will enable him to be an effective Chairman of the 
CFTC.
  I am aware of his work in connection with the Commodity Futures 
Modernization Act of 2000, a bill that contributed to deregulation of 
derivatives markets. With the benefit of hindsight, we can see the 
harms that an absence of regulation over credit default swaps, for 
example, can cause and the need for regulation in the derivatives 
markets. I have talked with him about these regulatory issues, and I 
know he recognizes the importance of an energetic, assertive regulatory 
approach.
  I fully expect Mr. Gensler to use his talents and skills to 
effectively regulate the markets, learn from the past and exercise his 
clear and independent judgment to protect and promote the integrity of 
the futures markets, and to protect taxpayers. I expect the Senate will 
continue to exercise oversight of decisions made by the CFTC that may 
impact the broader financial markets.
  Mr. DORGAN. Mr. President, I wish to address today's vote to confirm 
Mr. Gary Gensler as a Commissioner and Chairman of the Commodities 
Futures Trading Commission, CFTC. I have serious reservations about 
this nomination and am voting against it. Let me explain why.
  Mr. Gensler was a key proponent of deregulation in the late 1990s and 
he specifically advocated that swaps and other derivatives not be 
regulated. I had the opposite view. I argued at the time that such 
deregulation would result in banks making very risky bets which would 
ultimately lead to massive taxpayer bailouts to save the financial 
system.
  I regret that I was right. We now know the disastrous consequences of 
the push to deregulate. We will long regret repealing the protections 
put in place after the Great Depression of the 1930s and the view that 
the market knows best and regulation was the enemy.
  The costs for these views and actions have been monumental. Taxpayers 
and American families have paid the price. Our government has spent, 
lent or guaranteed more than $13 trillion responding to the financial 
meltdown. In addition, U.S. household wealth has decreased by almost 
$13 trillion as home values plummet and stock markets crash.
  But, that is not all. As our gross domestic product goes down, our 
unemployment rate goes up, getting close to 10 percent, and, when 
combined with those working part time who want to work full time, is 
actually higher than 15 percent.
  However, we must not forget that the real cost of these disastrous 
policies is much more than dollars and statistics. The real costs are 
lifetime savings vanished, jobs lost, careers shattered, homes 
foreclosed, neighborhoods destroyed, retirements deferred, colleges 
unaffordable and the American dream for too many of our neighbors 
devastated.
  Now that all this wreckage has happened and now that he has been 
nominated for the CFTC, Mr. Gensler has stated that he has changed his 
views on the need for and importance of regulation. I welcome those new 
views and look forward to him putting his words into action. If he 
does, I will be one of the first to come to the floor to applaud him.
  I met with him privately and Mr. Gensler was candid and forthright 
about changing his views. In our meeting and in his testimony before 
the Senate Agriculture Committee, Mr. Gensler made clear that he now 
understands how important the CFTC is as one of the key regulatory 
agencies charged with protecting the integrity of our markets.
  I stressed to him that America can no longer afford a do-nothing 
CFTC. The CFTC has to be a cop on the beat. It has to vigilantly 
monitor the commodities markets and aggressively act to ensure that 
they are not being manipulated or distorted by speculators or anyone 
else. It has to act quickly in an unbiased and nonideological manner to 
protect those markets and consumers.
  In my view, Mr. Gensler does not have to wait to put his words into 
action. Last year, the CFTC acted like the three monkeys: see nothing, 
hear nothing, and do nothing, as oil prices

[[Page 12849]]

skyrocketed from $50 to almost $150 and a gallon of gas approached $5. 
Like a parrot, the CFTC said over and over this was caused by the 
fundamentals of supply and demand, ignoring all facts to the contrary, 
including massive speculation from Wall Street pouring investment cash 
into the commodities markets.
  The CFTC must investigate whether or not speculators were able to 
manipulate and distort the commodities markets. I believe they did and 
they will do it again unless they are thoroughly investigated by an 
agency that takes its mission to protect markets and consumers 
seriously.
  While I am prepared to be surprised by Mr. Gensler and I hope I am, I 
simply cannot vote for someone to lead such an important agency after 
he had such a critical role in ensuring that derivates were not 
regulated, which caused so much devastation across our country. I look 
forward to Mr. Gensler proving my concerns unwarranted.
  Mr. CARDIN. Mr. President, I have known Gary Gensler for many years 
in both a personal and professional capacity and I believe he is an 
ideal choice to chair the Commodity Futures Trading Commission, CFTC. 
He will draw on his many years of experience to help the President 
create a 21st century regulatory framework to ensure that an economic 
crisis like the one we are experiencing will not happen again. Today, 
we face a crucial time for the commodities markets, for our financial 
system, and for our entire Nation. The failure of the regulatory 
framework that governs our financial markets helped create the current 
economic crisis.
  As we look forward to fixing the systemic problems in our Nation's 
economy, the CFTC Chairman will play a crucial role. We need someone 
with the tremendous depth and breadth of experience that Gary Gensler 
possesses. Gary served in the Department of Treasury from 1997 to 2001, 
first as Assistant Secretary for Financial Markets and later as Under 
Secretary for Domestic Finance. As Under Secretary of the Treasury, 
Gary was the senior adviser to Treasury Secretary Robert Rubin and 
later to Secretary Lawrence Summers on all aspects of domestic finance. 
The office was responsible for formulating policy and legislation in 
the areas of U.S. financial markets, public debt management, the 
banking system, financial services, fiscal affairs, Federal lending, 
and government-sponsored enterprises. In recognition for this service, 
Gary was awarded Treasury's highest honor, the Alexander Hamilton 
Award. He subsequently acted as a senior adviser to Senator Sarbanes, 
who chaired the Senate Banking Committee, on the Sarbanes-Oxley Act, 
which reformed corporate responsibility, accounting, and securities 
laws. More recently, Gary led the Securities & Exchange Commission 
Agency Review Team for the Obama-Biden Presidential Transition Team.
  Before Gary joined Treasury, he worked on Wall Street for 18 years at 
Goldman Sachs. He became a partner at the age of 30--at that time, one 
of the youngest partners in the firm's history. He joined the firm in 
the mergers and acquisitions department in 1979 and assumed 
responsibility for the firm's efforts in advising media companies in 
1984. He subsequently joined the fixed income division in the mortgage 
department and then directed Goldman's fixed income and currency 
trading efforts in Tokyo during two record years. His last role was 
cohead of finance, responsible for worldwide controllers and treasury 
for Goldman Sachs.
  Gary graduated summa cum laude from the University of Pennsylvania's 
Wharton School in 1978, with a bachelor of science in economics. He 
received a master's of business administration from the Wharton 
School's graduate division in 1979 and passed the Certified Public 
Accountancy exam. Gary is a member of the board of Enterprise Community 
Partners, the Park School, the RFK Memorial Foundation, and the 
Washington Hospital Center. He also serves as audit committee chair of 
Strayer Education, Inc., and WageWorks, Inc., and he serves on advisory 
boards for Johns Hopkins University Center for Talented Youth and New 
Mountain Capital. He previously was treasurer of the Baltimore Museum 
of Art and The Bryn Mawr School, as well as a board member of East 
Baltimore Development, Inc., and the University of Maryland Baltimore 
County.
  We all know that we face a grave time for our economy. But we also 
face a time of tremendous opportunity to learn from past mistakes and 
make certain they are not repeated. I know that Gary Gensler will draw 
on his many years of experience in the public and private sectors to 
help the new administration guide our economy through these troubled 
times to a stronger future.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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