WASHINGTON — Now that Timothy Massad has been tapped to lead the agency that regulates futures and options markets, a key question arises: Will he be as aggressive as his predecessor in holding big Wall Street banks to stricter standards?
President Obama on Tuesday nominated Massad to chair the Commodity Futures Trading Commission. The 2010 financial overhaul law gave the agency the task of laying down rules for oversight of derivatives, complex instruments traded in a $700 trillion worldwide market. They contributed to the 2008 financial crisis.
For three years, Massad has overseen the Treasury’s Troubled Asset Relief Program, the bank bailout launched in response to the crisis. If confirmed by the Senate, he would succeed Gary Gensler, who steps down when his term ends in January. Gensler, a 20-year Wall Street veteran when he took over in 2009, surprised many by being a tough regulator who pushed for stricter rules. He sometimes clashed with the administration.
Massad, who has worked at Treasury since Obama took office, has been an advocate for the administration’s policies.
‘‘The question is whether he has the guts, independence, and commitment . . . to stand up to Wall Street,’’ said Dennis Kelleher, president of Better Markets, which advocates strict financial regulation. ‘‘It’s a dramatically difficult job . . . at a critical time.’’
Obama praised Massad as someone who doesn’t seek the spotlight but consistently delivers good results. The president cited the nearly $30 billion in returns for taxpayers that the TARP program secured.
Senator Tim Johnson, the South Dakota Democrat who chairs the Senate Banking Committee, which will consider Massad’s nomination, called him ‘‘an excellent selection.’’
‘‘He is exactly the type of leader the CFTC needs as the commission works to implement the new Wall Street reform rules [and] strengthen the agency’s ability to hold wrongdoers accountable,’’ he said.
Under Gensler, the agency completed 43 of 60 rules it’s charged with writing. Other regulators, including the Securities and Exchange Commission, have adopted roughly a third of their rules.
Massad would be tasked with crafting the final CFTC rules, some of which are the most critical. They include the so-called Volcker Rule, which would prohibit banks from trading for their own profit. The latest version includes an exemption for banks to make such trades when they are used to offset other risks taken. Adoption of the rule has been delayed largely because of Wall Street banks’ objections and the need to get a handful of federal agencies, including the CFTC, to agree on the final form.
The value of a derivative is based on a commodity or a security, such as oil, interest rates, or currencies. They are often used to protect businesses that produce or use the commodities, such as farmers or airlines, against price fluctuations. They also are used by financial firms to make speculative bets.
Senator Elizabeth Warren, Democrat of Massachusetts and a member of the Banking Committee, said: ‘‘I look forward to hearing more from Tim Massad about what steps he thinks the CFTC can take to further reduce the risk of future crises and level the playing field for middle-class families.’’
Obama also urged Congress to fully fund the CFTC. He said budget cuts have left it ‘‘outgunned’’ to the point of having to drop some cases.
That, Obama said, is like not having enough cops on the beat. For the CFTC, the beat is policing Wall Street.