THE BASIS POINT

CFTC Head Gary Gensler Opposes CFTC/SEC Merger

Since Mary Shapiro was named head of the SEC and Gary Gensler was named head of the CFTC, speculation has been that the two groups would be combined. The SEC has taken hits for everything from Lehman to Bear to Madoff. Meanwhile, the CFTC was “modernized” under the leadership of then Senator Phil Gramm, if you call completely deregulating derivatives trading modernization—this action led to Enron’s fall and the rise of credit default swaps.

Shapiro is now confirmed. During his confirmation hearings, Gensler said he’s opposed to combining the two groups, saying that it’s not a panacea and shouldn’t be done just for the sake of doing it. Fair take. But they oversee $5 trillion in derivatives trading now, and would likely be the agency that oversees the CDS market—which is anywhere from $30-60 trillion according to various reports—as it moves out of it’s “modernization” phase and into a regulated phase. So at the least, the SEC and CFTC need to be coordinating.