What is in this article?:
- Even though the hearing was originally set to check in on Wall Street reform, the opportunity to grill Commodity Futures Trading Commission (CFTC) head, Gary Gensler, on MF Global’s collapse – and the subsequent discovery that customer funds, perhaps over $1 billion, had been “lost” – proved too ripe for committee members to pass up.
Non-participation or recusal?
Gensler did himself no favors by repeatedly referring to his “non-participation” in the MF Global investigation instead of simply saying “recusal.”
“I’m not too sure what the difference is,” said Kansas Sen. Pat Roberts, ranking member.
Gensler’s odd choice of words and his refusal to comment specifically on MF Global while talking about implementation of Dodd-Frank and regulations in general sent Roberts’ frustration level soaring. Gensler’s response to Roberts’ questions in past weeks “raises questions about who was in charge of CFTCs work in the early days of this event (with MF Global). According to your letter, you notified the general counsel you’d not participate in enforcement matters. Why did you come to this realization on Nov. 3? Hadn’t you been participating in official CFTC actions regarding MF Global before this date?”
Gensler: “As I mentioned, I had conversations directly with the general and my staff, the ethics officer, throughout those days. They indicated it was warranted for my involvement to stay participating.
“I indicated … that I thought it could be a distraction to the very important work of pursuing ‘where was the cash? Where was the money? Get the money back.’ And any investigation or enforcement…”
Roberts cut off Gensler and said his “non-participation” had become the true distraction. “Who was steering the ship while you were deciding what you could and could not be involved in?”
“We have talented staff, very excellent staff in enforcement and other divisions,” said Gensler.
“So, staff was in charge,” replied Roberts tartly before bringing up contact between Corzine and the CFTC last July.
“Why didn’t you recuse yourself then?” asked Roberts, before Gensler again claimed he worried his relationship with Corzine would become “a distraction for the work of the government.”
Roberts: “Well, it is now! … There’s all sorts of conjecture in the press and media about (the summer meeting with Corzine), and you’re still ‘non-participating’ -- it just raises it up as a bigger distraction. You probably should have gone ahead and said ‘Hey, I’m the (CFTC) chairman and I can make these decisions. We had two regulatory questions and you said I’m non-participating. That’s a dodge! That’s not right.”
The MF Global fallout and investigations “will go on for quite some time,” said Roberts to Gensler. “You’re going to get a lot of questions. You’re just going to say ‘well, I can’t answer because I’m not participating’? … Now, it is a distraction, Gary. Come on!”
Following the hearing, Iowa Sen. Chuck Grassley expressed his displeasure with Gensler’s inability, or unwillingness, to provide a solid timeline. “Despite an effort from several of us, there wasn’t a lot of specificity from Chairman Gensler about exactly how and when the CFTC learned of the MF Global collapse and how and when he talked to Jon Corzine about the problem. It’s surprising that Chairman Gensler didn’t have a more precise timeline to offer during his testimony. Establishing the specifics of what happened is key to figuring out how the system failed and how to fix it going forward. And that’s in addition to the immediate task of helping to minimize the damage for farmers and other investors caught in the MF Global mess. Congress will need to keep drilling down. The hearing left a lot of questions unanswered.”