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Goldman deal-maker now a regulation buff

business Updated: Mar 11, 2010 21:22 IST
Goldman deal-maker now a regulation buff

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.

It may seem an unlikely conversion, but it is one that has won the approval of Brooksley E. Born, of all people, a former outspoken head of the commission. She sounded alarms more than a decade ago about the dangers hiding in the poorly understood derivatives market and was silenced by the same Washington power brokers that counted Gensler as a member.

Gensler opposed Born, according to people who worked at the commission in the 1990s, and in 2000 played a significant role in shepherding through Congress deregulation measures that led to explosive growth of the over-the-counter derivatives market.

That was then. These days, Born is convinced of Gensler’s reformist zeal, as he takes on Wall Street in what is becoming one of the fiercest battles over regulation in the postcrisis era.

“I think he is doing very well,” she said in an interview. “He certainly seems to be committed to robust oversight of derivatives and limiting excessive speculation and leverage.”

The proposals championed by Gensler, if adopted by Congress, would substantially alter what is now a largely unregulated market in over-the-counter derivatives, financial instruments used by companies and investors to protect themselves and bet on moves in variables, like interest rates or currencies, and to speculate.