The Trump administration has chosen Christopher Giancarlo, a Republican member of the Commodity Futures Trading Commission who has supported less stringent regulations for some of the markets the agency oversees, to become the regulator's next chief.
Giancarlo, 57, who has been at the agency since 2014, is the only Republican among two current commissioners and will be the first GOP chair to wield new powers the regulator was given after the 2008 financial crisis. Typically, the agency is run by five commissioners who are appointed by the president to staggered five-year terms. Giancarlo's appointment was expected by many on Wall Street and in Washington. He will still need to be confirmed by the Senate for the position, but most observers don't expect significant opposition.
The CFTC, which has little name recognition on Main Street, was created in the 1970s to supervise markets in commodities futures such as corn and wheat that had been actively traded since the mid-19th century. After the crisis, its charter was expanded to include the multitrillion dollar market for swaps, derivative contracts that allow financial institutions to hedge against such events as changes in interest rates or credit losses.
In recent weeks, Giancarlo has provided some guidance about his priorities for the agency, which include dismantling parts of the post-crisis Dodd-Frank Act. Bank capital requirements in recent years have "prioritized bank capital reserves" over "investment capital," he said Wednesday in a speech before the Futures Industry Conference in Boca Raton, Fla.
Giancarlo urged the Financial Stability Oversight Council, an interagency council designed to identify systemic risk, to consider whether the amount of capital banks have been asked to take out of the trading markets, and keep as buffers, is calibrated to supply what U.S. markets need to support lending and economic growth. The comments suggest that Giancarlo, who will become a full-time member of the council once confirmed, will pressure other panel members to reduce big bank capital requirements.
Last year, Giancarlo pushed for a major rewrite of derivatives-trading rules, arguing that Dodd-Frank standards have harmed the U.S. derivatives market by pushing international trading away from financial institutions subject to the country's rules.
Such comments are expected to be met favorably by the largest financial institutions, including Bank of America (BAC - Get Report) , JPMorgan Chase (JPM - Get Report) , Wells Fargo (WFC - Get Report) , Citigroup (C - Get Report) , Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report) .
Critics, such as Michael Greenberger, a top CFTC official from 1997 to 1999, are worried. Greenberger said he's particularly concerned about a lack of U.S. oversight of swaps trading by banks' overseas subsidiaries.
Swaps trading aggravated the 2008 crisis, which forced the government to spend billions on taxpayer-backed bailouts to shore up the U.S. financial system. American International Group (AIG - Get Report) , which became a poster child for financial market risk-taking, received $182 billion, in part to fund payments from its derivatives business to U.S. banks.
Greenberger said he expects Giancarlo to take an already too bank-friendly CFTC and make it even more accommodating. "He's the most openly hostile commissioner to Dodd-Frank," Greenberger said.
Prior to joining the CFTC in 2014, Giancarlo was an executive vice president at GFI Group, a financial services firm. Between 1997 and 2000, he was a partner at Brown, Raysman, Millstein, Felder & Steiner.
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