Obama nominates Treasury's Timothy Massad as CFTC chairman amid banking regulatory woes

Nov. 12 (UPI) -- The White House announced Tuesday that Treasury official Timothy Massad will be nominated as chair of the Commodities and Futures Trading Commission. The new chair will have a large role in Wall Street reform, replacing current Chairman Gary Gensler.

Gensler, a former Goldman Sachs executive, is known to be tough on banks and has been called "the toughest regulator in the Obama administration." He worked toward massive oversight of the unregulated $700 trillion derivatives market that was tagged as a catalyst of the 2008 financial crisis.

Gensler's term as CFTC chair ends Jan. 3. The Senate has to approve Obama's nomination before Massad can be made chair, and the nomination is likely to face congressional debate.

Massad has been an assistant Treasury secretary since 2011 and has worked with the Treasury since 2009 implementing the Troubled Asset Relief Program (TARP) that loaned billions to banks and automobile companies to help the economy rebound from the 2008 financial crisis. In 2008, he assisted Sen. Elizabeth Warren (D-Mass.) in a Congressional Oversight Panel to roll out TARP.

And while TARP has been controversial in using taxpayer money to bail out companies, Massad said it has been effective.

The White House said in a statement that Massad's expertise in the derivatives industry comes from his work at New York-based law firm Cravath, Swaine and Moore LLP as a legal adviser overseeing TARP prior to working for the government.

The CFTC is responsible for implementing key aspects of the 2010 Dodd-Frank Wall Street Reform Act. Regulators across government agencies have been criticized for the slow pace of Dodd-Frank implementation, as less than 40 percent of the almost 400 rules have been finalized.

Some of the challenges the board faces include implementation of the Volcker rule, which separates proprietary trading and investment activities of banks from their consumer lending.

The commission will also face challenges regulating the derivatives market at home and overseas, which deals with trading commodities such as aluminum, corn and oil, as well as financial instruments and interest rates.

While Gensler has implemented a number of regulations regarding derivatives transactions, including a rule ensuring that derivatives trades are cleared on exchanges, the commission has seen a lack of funding in recent years. The under-funded CFTC recently let go of a settlement with JPMorgan regarding the London Whale debacle, where one JPMorgan trader manipulated derivative transactions and caused in billions in losses.

The commission must fill a number of positions on what is designed to be a five person board. Democratic Commissioner Bart Chilton announced that he would step down before next year, and Republican Commissioner Jill E. Sommers stepped down from the board in July.

Gensler has consistently pressured Congress for funding, and Obama is to ask Congress Tuesday to fully fund the commission.