The far-ranging financial reform package currently being negotiated for passage in Congress must beat back Wall Street's press for exceptions, U.S. Commodity Futures Trading Commission chairman Gary Gensler told CNBC Thursday, noting that the "American public needs a strong bill."
“Both the House and the Senate passed strong bills—we don’t want to see at this critical moment that this gets weakened,” Gensler said.
As head of the agency responsible for regulating commodity, futures and options markets, Gensler has been closely watched for his take on Congress's plan to require standardized derivatives, such as credit default swaps, to trade openly on platforms.
While indicating his support for Congress's plan—particularly in trade between financial institutions—Gensler noted that both the Senate and the House financial reform packages allow exceptions for non-financial companies wishing to trade standardized derivatives off-platform. However, Genseler added, “we shouldn’t allow insurance companies, we shouldn’t allow hedge funds, we shouldn’t allow leasing companies out of these new transparent reforms.”
In making a case for greater transparency in derivatives trading, Gensler said US taxpayers shouldn't be left "standing behind" the high-margin operations of Wall Street's financial players. Still, he said he remains unsure whether clearinghouses will ultimately be allowed access to the Federal Reserve's discount window, a backstop of funds that can be drawn by depository institutions. The current version of the Senate's bill contains two opposing requirements for access to Fed funds.
“That needs to be addressed in conference,” Gensler said. “I think that these clearinghouses should only have emergency access—as they have had for seven or eight decades—but not daily, regular access."