Obama leaves foxes in the Commodity Futures henhouse
Sommers, 40, is a former policy director for the International Swaps and Derivatives Association, a New York City-based group that represents derivatives market participants.
In yet another win for the anti-regulation effort in general and banks like Goldman Sachs in particular, President Barack Obama has just re-nominated Jill Sommers to a spot as one of five commissioners on the Commodity Futures Trading Commission, the body that oversees derivatives and commodities trading.
First nominated to the CFTC by Bush last year, Sommers last worked outside government at the International Swaps and Derivatives Association, a powerful trade group that represents banks and other players in the derivatives market. To give you an idea of where the ISDA is at on the regulatory curve, it recently hired a high-powered lobbyist named Ed Rosen from Cleary Gottlieb Steen and Hamilton LLP to lobby against reform of the derivatives market, where almost wholly unregulated trading (since passage of the deregulatory Commodity Futures Modernization Act in 2000) helped cause both the housing crash and the insane speculative run-up in oil and other commodities prices last year. The ISDA has 25 directors, but it’s largely dominated by just a few players on Wall Street, in particular Goldman, JP Morgan, and Credit Suisse.
Prior to her policy director job at the ISDA, Sommers worked at the Government Affairs desk at the Chicago Mercantile Exchange, home (among other things) of the Goldman Sachs Commodities Index, the preferred gaming table for the speculative index traders who ran up the price of your gas and home heating oil last year.
Although technically Obama nominated Sommers, this is really a Republican nomination; the seats on the CFTC (like the SEC and FTC) are divided up between the two parties, and the minority Republicans are entitled to two seats to the Democrats’ three. Sommers now represents one of the Republican seats. Another Republican seat will soon be opening, with the resignation of former acting chairman Walt Lukken, who is going on to NYSE Euronext. And since that seat, too, will likely be filled “by someone from Goldman Sachs or its ideological equivalent,” according to someone I know who follows this world closely, that means bad news for the much-ballyhooed Obama effort to impose tough new reforms on the worldwide derivatives market — which now impacts, according to one estimate, over $592 trillion in underlying securities.
That Obama rubber-stamped the Sommers nomination is not particularly surprising, as the parties by custom have a sort of non-aggression pact in place with regard to these regulatory commissions, and the approval of the majority party for the minority nominees is considered pro forma. Given everything that’s happened in the last few years, however, one might have expected that President Obama might want to break with custom just a little bit and stack the regulatory deck, if he sincerely intended to impose derivatives laws that are “hard to evade,” as Tim Geithner recently put it. Then again, if Obama had been serious about reform, he probably wouldn’t have nominated a former deregulatory zealot and Goldman Sachs banker like Gary Gensler to be the CFTC commissioner in the first place.