President Obama’s choice to lead the Commodity Futures Trading Commission would take the agency’s helm at a crucial moment, with the derivatives regulator poised to flex new muscles in the face of fierce opposition and a strained budget.
"I think what people are going to find with him is that he calls it like he sees it," Mark A. Patterson, former Treasury Department chief of staff, told The Hill. "He's not going to come into this favoring any point of view. He'll come into it with an open mind, but he will also be a tough regulator."
But congressional Democrats and reform advocates warn that he must be willing to lock horns with a financial sector that has made clear its intentions to chip away at regulations drafted under hard-charging CFTC Chairman Gary Gensler and commissioner Bart Chilton, who are departing the agency.
“We are deeply concerned that some industry interests may view the Gensler and Chilton departures as opportunities to roll back or slow down essential reforms required by the Dodd-Frank Act,” a group of nine Senate Democrats led by Sen. Dianne FeinsteinDianne FeinsteinOvernight Defense: Armed Services chairman's hopes for Trump | Senators seek to change Saudi 9/11 bill | Palin reportedly considered for VA chief Lawmakers praise defense bill's National Guard bonus fix CIA head warns Trump: Undermining Iran deal would be 'disastrous' MORE (D-Calif.) wrote this week in a letter to Obama.
The letter does not mention Massad by name, nor does it signal whether the lawmakers will support his confirmation. Rather, they implore Obama to name a commissioner — presumably to replace Chilton — with the “expertise, independence and track record” to carry out the agency’s evolving mission.
In 2010, Dodd-Frank handed the relatively tiny CFTC new authority to regulate the $400 trillion derivatives or swaps market, seen as a major contributor to the 2008 economic crisis.
Since then, the CFTC has churned out rules at a pace unseen at other financial regulators, issuing at least 65 final rules, and all but finishing its rulemaking responsibilities under Dodd-Frank.
Although there is no love lost between Gensler and some of Wall Street’s representatives, some lobbyists say his approach was necessary to finish the agency’s heavy workload.
“There was definitely people Gary intended to step on – of course Dodd-Frank was made to run over some people,” said a lobbyist for a company of the manufacturing sector who worked closely with the regulator. "If you're just there to emote... you're going to have a rough time with him."
K Street is now sizing up the potential new members of the commission.
"We're looking forward to the opportunity to meet the new commissioners and talk to them about some of the issues," said De'Ana Dow, a partner at Capitol Counsel, a top tax and financial services lobbying firm.
With the rules largely in place, the CFTC must now implement and enforce them. That will be no easy feat for an agency with 674 workers, only 40 more than it employed two decades ago. President Obama's budget proposes to increase the CFTC's budget from $195 million to $315 million in the next fiscal year.
With the limited resources, the agency had to fight off industry’s high-powered challenges to its authority.
After completing a proposal, initiated by Dodd-Frank, that would create position limits – a tool that regulators could use to restrict how much risk a corporation or large financial institution could take on – the agency was promptly sued.
The lawsuit, filed in 2011 by the Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association, said that the agency overstepped its bounds and didn’t fully consider the economic cost of the regulations. Earlier this year, an appeals court upheld the ruling.
With many other rules now in place, Wall Street is now shifting its strategy for affecting the regulations.
“We’ll be coming at it from a different angle. Now you have practical implications [of Dodd-Frank],” said Dow, who spent 22 years as a lawyer at the CFTC. "We'll be able to look at the rules from the perspective of how [they are] playing out in reality.”
Lobbyists, she said, will be ”coming to the agency looking for some tweaks here and there” and are holding out hope that they will be able to get clients “some relief on some of these things.”
Massad has offered few clues about how he might be disposed toward such requests. However, those who worked close with him have no doubt that, although his "buttoned-down" style may differ from Gensler's, he could be a strong leader of the commission.
"He left one of the most lucrative firms [in the country] to come to Washington to work on the TARP program, one of the most unpopular programs the government has ever been involved in," Patterson said. "It's clear he came here to make a difference."
Officials at Cravath, Swaine and Moore, the law firm where Massad worked before leaving for the federal government in 2008, declined to comment. Treasury Department officials could not discuss the pending nomination.
“Don't think we haven't been trying to find out about the man,” Dow said. “That's the story: A lot of people don't know much about him, and I’ve spoken to a number of people. … All we've heard is that he's smart and a consensus builder.”
On the other side, “a rag tag band” of watchdog groups and reform advocates will press the CFTC’s leadership for strict enforcement of the laws, said Bart Naylor, a financial policy analyst for Public Citizen.
Advocates said their attempts to glean information about Massad yielded positive, though vague descriptions of the nominee as “serious” and “skillful,” but said they, along with their allies in Congress, would demand more information before supporting his confirmation.
“If he doesn’t clarify where he’s going to take this commission, then, yes, there will be opposition,” Naylor said.