Revolving door at Commodity Futures Trading Commission

By Laurie Bennett

December 13, 2011 at 10:38am

Jon Corzine and his top execs are not the only ones on the hot seat because of the bankruptcy of his firm, MF Global.

Gary Gensler, chair of the Commodity Futures Trading Commission, was grilled last week about the commission’s failure to properly regulate the firm.

Gensler has been criticized for his multiple connections to Corzine. The two men worked together at Goldman Sachs in the late 1990s, in the Senate, on the Sarbanes-Oxley reform act of 2002, and as bundlers for Hillary Rodham Clinton’s presidential campaign.

Gensler told the Senate Banking Committee last week that he had recused himself from the MF Global investigation in early November to avoid the appearance of a conflict of interest.

Gary Gensler
Gary Gensler

When panel members asked why he had not seen any conflicts before the company’s bankruptcy, he responded that it wasn’t an enforcement matter then.

Is this yet another case of the regulators being too close to the regulated? After taking a look backward, at former chairs, we would have to say yes, but not always.

Here’s what former chairs are up to:

    Sheila C. Bair - Served as a commissioner (1991-1995) and, for a time, acting chair. Bair went on to chair of the Federal Deposit Insurance Corporation. Bloomberg reported Thursday that she’s a top candidate to monitor settlement of a nationwide probe of bank foreclosures. She currently serves as a senior adviser to the Pew Charitable Trusts.

    Brooksley E. Born - After her appointment as chair in 1996, Born called for more oversight of derivatives trading. After receiving little support from the Clinton administration, let alone the financial world, she resigned in 1999. Born was a partner at Arnold and Porter and served on the Financial Crisis Inquiry Commission, which investigated the causes of the 2008 financial crisis. She currently chairs the National Women’s Law Center.

    Wendy Lee Gramm - As chairman from 1988 to 1993, Gramm was one of the commission’s most politically connected leaders. Her husband, Phil Gramm, was a U.S. congressman and senator from Texas who made an unsuccessful bid for the presidency in 1996. Wendy Gramm was also a director of Enron. Gramm is now a senior scholar at George Mason University’s Mercatus Center.

    Reuben Jeffery III - Jeffery chaired the commission from 2005 to 2007, before George W. Bush named under secretary of State. A former managing partner of Goldman Sachs, he was a supporter of Bush’s candidacy in 2000. After Bush’s election, he served as special advisor to L. Paul Bremer, head of the Coalition Provisional Authority in Iraq and later as a member of the National Security Council. In 2010, he was named CEO of Rockefeller Financial, a management company for affluent investors.

    Walter Lukken - Lukken is former counsel to the Senate Agriculture Committee, one of the congressional panels investigating MF Global’s collapse. He was acting chairman of the trading commission from 2007 to 2009. He went on to work as a senior vice president of NYSE Euronext and is now CEO of New York Portfolio Clearing, a joint venture that clears futures contracts.

    James E. Newsome - President Clinton named Newsome to the trading commission in 1998. He became chairman during the Bush administration. Newsome went on to be president and CEO of the New York Mercantile Exchange and then founded his own consulting firm, Delta Strategy Group.

    William Joel Rainer - Rainer served as chairman from 1999 to 2001. He went on to head OneChicago, retiring in 2004.

    Mary L. Schapiro - Chair of the commission from 1994 to 1996, Schapiro is probably the best known and most powerful of the group. President Obama appointed her in 2009 as chair of the Securities and Exchange Commission. Schapiro previously headed the Financial Industry Regulatory Authority, a self-regulatory organization for securities firms.

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