CFTC CHAIRMAN GENSLER SPEECH AT FAREWELL EVENT

FROM:  U.S. COMMODITIES FUTURE TRADING COMMISSION 
Remarks of Chairman Gary Gensler at Farewell Event
December 19, 2013

John F. Kennedy once said: “Let the public service be a proud and lively career.”

What I’ve been most struck by these last five years is how all of you – the exceptional people of the Commodity Futures Trading Commission (CFTC) really embody this sense of public service as expressed by President Kennedy.

Being with you at our last “town hall” meeting, I wish to thank all of you for welcoming me into the CFTC family these last five years.

I’d like to thank Secretary Jack Lew, Senator Elizabeth Warren, Commissioner Mark Wetjen, former Chairs Sheila Bair and Brooksley Born, and our former Director of Enforcement David Meister for your kind words.

I’m humbled to see Secretary Lew; Director of the National Economic Council and Assistant to the President for Economic Policy Gene Sperling; the Chairman of the Federal Reserve Ben Bernanke; the Chair of the Securities and Exchange Commission (SEC) Mary Jo White; the Chairman of the Federal Deposit Insurance Corporation Marty Gruenberg, the Director of the Federal Housing Finance Agency Ed DeMarco, the Chair of the National Credit Union Administration Debbie Matz, and so many others here at our town hall meeting.

In addition, it’s wonderful to welcome back seven former Chairs of this agency – in addition to Sheila and Brooksley – Jim Newsome, Mary Schapiro, Mike Dunn, Walt Lukken, and Sharon Brown-Hruska.

Five years ago, when the President was formulating his financial reform proposals, he placed tremendous confidence in this small agency, which for eight decades had overseen the futures market.

This confidence in the CFTC was well placed.

And I’m so honored that the President asked me to serve at this agency, particularly at this moment in history.

This amazingly talented staff along with Commissioners – Mike Dunn, Jill Sommers, Bart Chilton, Scott O’Malia and Mark Wetjen – has transformed a market.

As President Kennedy said, you all have much to be proud of. And no doubt, it’s been pretty darn lively.

Based on your work, bright lights of transparency now shine on the nearly $400 trillion swaps market.

You’ve made central clearing of swaps a reality and comprehensively reform the customer protection regimes in our markets.

You brought oversight to the world’s largest swap dealers.

You’ve changed the world’s conversation about LIBOR and Euribor and the real need to bring integrity to benchmark rates.

You’ve worked tirelessly to coordinate with our fellow regulators here at home and abroad.

And to boot, you’ve gotten us through five clean audits, restructured the agency, started a new Weekly Swaps Report, all while reviewing 60,000 public comments, and taking over 2,200 meetings with the public.

You’ve helped the Commission sort through over 170 Dodd-Frank actions – nearly one a week since it was signed into law.

And I want to thank you for those wonderful murderboards for the 54 congressional testimonies. More seriously, I do want to thank Congress and so many members and their staffs for their leadership on reform and supporting the efforts of this agency.

I have worked with some remarkable people in my career – when on Wall Street, at the Treasury Department, and on political campaigns.

The CFTC staff is among some of the most professional and productive that I’ve worked with in my life.

You’ve shown how when faced with real challenges – we can come together as a nation to solve them.

None of this would have been possible without the help and collaboration from others across the Administration and the regulatory community.

Thanks to the leadership of Mary Schapiro and Mary Jo White, we’ve formed a true partnership between our nation’s two market regulators.

Just to mention one of many areas of collaboration – it was no small feat for the staffs of our two agencies came together on joint definitional rules.

Financial reform would not have been possible without the leadership of Treasury and the Federal Reserve. In the wake of the nation’s worst financial crisis in 80 years, Secretary Geithner, Chairman Bernanke and their teams deserve our debt of gratitude. Looking back now, you have to wonder how they made it through their days ... livelier maybe than President Kennedy hoped for any public servant.

I particularly want to thank Secretaries Geithner and Lew, Neal Wolin, Mary Miller, Lael Brainard and Michael Barr at Treasury. In addition to Chairman Bernanke, I want to thank Dan Tarullo, Scott Alvarez and Pat Parkinson.

As the crisis was global, so too has been our reform journey. I want to give a warm thank you to Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board; Martin Wheatley, Chief Executive of the Financial Conduct Authority; Commissioner Michel Barnier, European Commissioner for Internal Market and Services; Jonathan Faull, Director General of the European Commission; and Masamichi Kono, Vice Commissioner for International Affairs of Japan’s Financial Services Agency.

I also know how hard market participants have worked – with real costs and against deadlines – to implement reforms that truly are transforming the markets.

Looking forward, the public is very fortunate to have such talented and dedicated public servants as Mark Wetjen and, subject to Senate confirmation, Tim Massad taking the helm here at the CFTC.

Much will be in your hands my friends, and the journey will continue to evolve. Just one thing beyond the personal note I’m going to leave in the top drawer: this agency really does need more resources.

Lastly, I want to introduce and thank each one of my daughters: Anna, Lee and Isabel.

I am so proud of each of you growing up to be such beautiful and accomplished young ladies. It’s a testament to each of you that not only have you put up with me but also allowed me to devote so much time to my professional life these last five years. I know how much your mom would be beaming at the three of you today, though she certainly would be laughing a bit at your dad.

I would not be here today if it weren’t for Francesca’s encouragement to follow my dreams and to pursue public service.

Your mom and your Captain Grandpa, a Pearl Harbor survivor and appointee of President Johnson, taught us about public service.

Once again, I want to thank President Obama for the opportunity to serve at such a lively time.

And I just want tell everybody, once again, how darn proud I am of all of you.

CONGRESSMAN RON PAUL COMMENTS ON EUROPEAN BANK BAILOUTS

The following excerpt is from a Congressman Ron Paul e-mail:
A Fistful of Euros
This week, my congressional committee will hold a hearing to examine how the Federal Reserve bails out European banks, propping up spendthrift European governments in the process.  Unfortunately this bailout comes at the expense of American citizens, in the form of higher prices and diminished savings down the road.

A good analysis of the Fed’s “swap” scheme first appeared in the Wall Street Journal back in December, in an article by Gerald O’Driscoll entitled, “The Federal Reserve’s Covert Bailout of Europe.”  Essentially, beginning late last year the Fed provided U.S. dollars to the European Central Bank in exchange for Euros-- sometimes as much as $100 billion at a time.  The ECB then funneled those dollars to European banks to provide liquidity and prevent crises from bank insolvencies.  Since the currency swap was not technically a loan, the Fed did not have to embarrass itself by openly showing foreign bank debt on its balance sheet.  The ECB meanwhile did not have to print new Euros and expose the true fragility of big European banks.

The entire purpose of this unholy arrangement was to obscure the truth: namely that the Fed was bailing out Europe with U.S. dollars.

But why is it the business of the Federal Reserve to bail out European banks that find themselves short of dollars to pay their dollar-denominated contracts? After all, those
contracts often were hedges taken to protect banks against weakness of the Euro.  Hedges are supposed to reduce risk, but banks that miscalculate should suffer their own losses accordingly.  It’s not our business if the ECB chooses to create moral hazards by providing liquidity to European banks, but why should the Fed prop up Europe’s bad decisions!

The Fed has promised to provide unlimited amounts of dollars to the ECB, should circumstances require it.  It boggles the mind.  Of course when Fed officials first entered into these swap agreements with the ECB last September, they did so quietly.  The American public only found out via websites of the ECB, the Bank of England, or the Swiss Central Bank.

The Fed already has pumped trillions of dollars into the economy since 2008, and US banks currently hold $1.5 trillion of excess reserves.  So why don't American banks lend those excess trillions to European banks if they really need dollars?  If US banks could earn 1 or 2 percent on those loans, they might just be interested. But they can't compete with the ½ percent interest rate charged by the Fed to the ECB.  That's one glaring example of the harm caused by the Fed's ability to create money and loan it at below-market interest rates.

The Fed argues that these loans will be temporary, merely providing a little boost to get Europe over the hump.  But that's what they thought a few years ago when such lines of credit to the ECB were set to expire, only to see the Fed reauthorize them. What happens if the European financial system collapses?  Will the Fed be left holding a bunch of worthless Euros?  Will the ECB simply shrug and turn over the collateral it received from European banks, maybe in the form of bonds from Ireland, Italy, or Greece?  Have the 17 individual central banks backing the ECB pledged their gold holdings as collateral?

The Fed has placed a hundred-billion dollar bet on the future of the Euro, with the strength of the dollar on the line.  This is absolutely irresponsible, and directly contrary to market discipline.  Let private banks, European or otherwise, take their own risks.  Let foreign central banks inflate their own currencies and suffer the consequences.  In other words, it’s time to apply market principles to banks and money.