Hooray — we’ve made the troublemaker monitor

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There’s something delicious about Gary Gensler, once among the biggest machers at Goldman Sachs, stomping for stiff regulation of the very financial instruments that made tons of money for his former firm (and of course for him).

If you’re detecting sarcasm here, read again. I mean it. Cliches become cliches because they’re true — which is why the old business about making troublemakers monitors in school still works so well.
Gensler is a coup for my side:

For 18 years, Gary G. Gensler worked on Wall Street, striking merger deals at the venerable Goldman Sachs. Then in the late 1990s, he moved to the Treasury Department, joining a Washington establishment that celebrated the power of markets and fought off regulation at almost every turn.
Today, he is emerging as one of the nation’s archreformers, pushing to impose some of the most stringent new financial regulations in history. And as the head of the Commodity Futures Trading Commission, the leading contender to oversee the complex derivatives contracts that played a central role in the financial crisis and, in turn, the Great Recession, he is in a position to influence the outcome.

What makes this so delicious is Gensler was one of the folks who successfully pressed Congress to deregulate — or not regulate in the first place — derivatives and other exotic financial instruments that helped Wall Street fortunes soar, and ultimately helped our entire economy plummet. Talk about an about face — Genslers proposals are diametrically opposite what he successfully fought for a decade or so ago:

The proposals include forcing the big banks that sell derivatives to conduct their trades in the open on public exchanges and clear them through central clearinghouses, so that any investor can see the prices that dealers charge their customers. Today, those transactions are bilateral and private.

The banks and their customers might have to post collateral or guarantees to prevent the kinds of panics seen during the financial crisis, in which some investors worried that trading partners might have trouble keeping their side of the contract.

Of course, the banking lobbies are crying foul, predicting the demise of finance as we know it if transparency and such goes through. (And this would be a bad thing…why?)

Non-financial companies — Coca Cola and the like — are also worried. They want to use derivatives and such as hedges, or investments, or whatever they use them for. Sorry, I don’t shed a tear for their missed opportunities. Let them use the money to make and advertise and improve their products. If they have excess cash, well, that’s what dividends and stock buybacks (and acquisitions and capital expenditures) are there for.

But interestingly enough, Goldman is pulling its punches a bit:

Lucas van Praag, a spokesman for Goldman, said on Wednesday that the company supported letting regulators see derivatives trades and prices in real time, with a delay built in for public disclosure. Goldman also does not oppose a clearinghouse for trades, he said.

Of course, there’s always this fear that if Goldman is for it, there must be something in it that I’m missing. But hey, Goldman’s role as bad guy is fairly recent, this was traditionally a good, charitable and aggressive company. Maybe we’re returning to the old days — and maybe this troublemaker can serve as monitor, too. One never knows, do one…