The Hagstrom Report

Agriculture News As It Happens


Stabenow, Roberts disagree on Gensler future role

Sen. Debbie Stabenow | Sen. Pat Roberts


In a sign of the continuing partisan differences over how to avoid repeats of the loss of customer funds in the wake of the MF Global scandal, the leaders of the Senate Agriculture Committee disagree over who should be in charge of making changes to the rules and procedures at the Commodity Futures Trading Commission.

Committee Chairman Debbie Stabenow, D-Mich., believes that CFTC Chairman Gary Gensler should be involved in making changes for the segregation of customer funds held by futures commission merchants, while ranking member Pat Roberts, R-Kans., believes CFTC Commissioner Jill Sommers, a Republican who is in charge of the MF Global investigation, should lead the effort.

Gary Gensler

Gary Gensler
When MF Global collapsed late in 2011, money that customers — including farmers, elevators, co-ops — had placed for futures transactions in what were supposed to be segregated accounts was missing, and only about 70 percent of it has been returned to customers. Gensler recused himself from the investigation of MF Global because he had once worked with MF Global CEO Jon Corzine at Goldman Sachs.

But Gensler has asked CFTC staff to make recommendations on changes to see whether policies and procedures need to be tightened up and whether there need to be formal rule changes, Steve Adamske, a CFTC spokesman, confirmed to The Hagstrom Report on Thursday.

The CFTC’s general counsel said there was no reason for Gensler not to be involved in the future recommendations because MF Global has gone bankrupt and is no longer in business, Adamske said. He also said that Gensler had tried to convince the commission to vote on certain rule changes that might have affected what happened in the MF Global case and is very interested in the subject of the protection of customer funds.

Stabenow said in an interview this week that “it was appropriate for [the chairman] to recuse himself” in the MF Global investigation, but “future policy is a very different situation. What should be done differently on oversight and transparency — the chairman of the CFTC should be involved in that.”
Jill Sommers

Jill Sommers
On Jan. 10, Roberts wrote Sommers that she should lead an outside task force to make recommendations on future policy on segregated accounts.

On Jan. 26, Roberts released a letter from Sommers informing him that she had been told that “leading such a task force does not fall within the scope of my election to oversee the MF Global bankruptcy and enforcement matters.” Sommers said she still hoped that the commission would take his recommendation of an outside task force.

Roberts, who initially said he did not think that Gensler should recuse himself from the investigation because he had been involved in MF Global’s regulation, said, “Once again, I find it odd and confusing that Chairman Gensler can partially recuse himself or ‘non-participate’ in matters regarding enforcement on MF Global, but he can direct the commission staff to make recommendations on the matter. It appears the chairman is trying to recuse himself solely from questioning before the Senate.”

Roberts went on to say, “What is most concerning is that he is asking for these recommendations before the CFTC’s own investigation is complete and without stakeholder input.”

After word got out this week that Gensler was leading the review effort, Roberts said in an email, “Jill Sommers should chair the task force once her investigation is completed. Having led the investigation, she will be the best informed to help draw conclusions as to the lessons learned. The chairman has recused himself from MF Global enforcement matters; this should extend to the new rule making and should have extended to his dealings with MF Global matters prior to its failure.”

One point on which Roberts and Stabenow agree is their concern for people whose money is missing.

“My constituents and victims of this bankruptcy who are missing thousands of dollars of their own funds ask me, ‘Just what is going on down there?’,” Roberts said in the news release.

Stabenow said in the news release that her No. 1 goal is to get her constituents’ money back.

“A lot of Michigan farmers, grain elevators and co-ops lost money,” she noted. “We are working with the CFTC and those involved in the markets to make sure everybody gets their full money back.”

Stabenow, who recently sent a letter to stakeholders asking for recommendations on policy changes, said she is meeting with private sector committees and CFTC officials, and expects to hold hearings to find a way forward.

“We are trying to sort out the more responsible approach, to assure people they can have confidence going forward” in using the futures markets as a form of risk management, she said.