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on his low-lying sofa with a cup of fresh coffee. He had read the piece in the Journal. He elaborated on the theme that I had just discussed with his managers, that the impact of not only CFTC regulation, but the whole panoply of rules and regulations imposed by Dodd–Frank, the G-20 Financial Stability Board (FSB), the US Federal Reserve Board, and US Financial Stability Oversight Council (FSOC) was to cause Goldman and its competitors to reserve cash rather than putting it to work on behalf of clients. As a result, Goldman would offer its limited resources more selectively to its best and largest clients. It was another incidence of ill-crafted regulation helping big companies over small ones.
I left Cohn's executive suite and headed to meetings with other New York swaps trading firms. I had no way of knowing that in just a few years Gary Cohn would play a key role in my career trajectory.
Meanwhile, I received word from a number of attendees at SEFCON that my speech and the announcement of the white paper were causing quite a stir. Undoubtedly, the White House's waiver denial ensured that the speech that was not given at SEFCON received far more attention than it would have garnered if it had been given from the SEFCON podium.
Thank you, CFTC Office of General Counsel and, maybe, the White House. As a junior commissioner, I could not possibly have received that much attention without your help.
Notes
1 1. The Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173, commonly referred to as Dodd–Frank) was signed into US federal law by US President Barack Obama on July 21, 2010. It was the largest revamp of the US financial regulatory framework since the Depression, affecting all federal financial regulatory agencies and almost every part of the nation's financial services industry. Among other mandates, Dodd–Frank substantially expanded the jurisdiction of the Commodity Futures Trading Commission (CFTC) to regulate over-the-counter derivatives.
2 2. Robert J. Shiller, Finance and the Good Society (Princeton University Press, 2012), 76.
3 3. Leo Melamed is an American attorney, finance executive, and Chairman Emeritus of the CME Group who pioneered numerous financial instruments, including futures on US Treasury bills, Eurodollars, and stock index futures. See, generally, Leo Melamed, Man of the Futures: The Story of Leo Melamed & the Birth of Modern Finance (Harriman House, 2021).
4 4. Richard L. Sandor is an American businessman, economist, entrepreneur, and Chairman and CEO of the American Financial Exchange who pioneered interest rate futures. He also founded the world's first exchange to facilitate the reduction and trading of greenhouse gasses, earning the title “father of carbon trading.” See Good Derivatives: A Story of Financial and Environmental Innovation (Wiley, 2012).
5 5. Anatoli Kupriyanov, 2009 ISDA Derivatives Usage Survey, International Swaps and Derivatives Association (ISDA) Research Notes, No. 2 (Spring 2009), 1–5 available at https://www.isda.org/a/SSiDE/isda-research-notes2.pdf
6 6. The Milken Institute found the following economic benefits to the US economy from derivatives: “[b]anks’ use of derivatives, by permitting greater extension of credit to the private sector, increased U.S. quarterly real GDP by about $2.7 billion each quarter from Q1 2003 to Q3 2012; [d]erivatives use by non-financial firms increased U.S. quarterly real GDP by about $1 billion during the same period by improving their ability to undertake capital investments; [c]ombined, derivatives expanded U.S. real GDP by about $3.7 billion each quarter; [t]he total increase in economic activity was 1.1 percent ($149.5 billion) between 2003 and 2012; [b]y the end of 2012, employment had been boosted by 530,400 (0.6 percent) and industrial production 2.1 percent.” See Apanard Prabha et al., “Deriving the Economic Impact of Derivatives,” Milken Institute (Mar. 2014), 1, available at http://assets1b.milkeninstitute.org/assets/Publication/ResearchReport/PDF/Derivatives-Report.pdf
7 7. For a practical view of the role of derivatives products in everyday life, see: Dawn Stump, “Maybe Mom's Job Is Cool After All: Derivatives Get a Bad Rap, but They Keep Hamburgers Affordable,” Roll Call, March 8, 2021, available at https://www.rollcall.com/2021/03/08/maybe-moms-job-is-cool-after-all/
8 8. Food and Agriculture Organization of the United Nations, International Fund for Agricultural Development, World Food Programme, “The State of Food Insecurity in the World 2014: Strengthening the Enabling Environment for Food Security and Nutrition,” 2014, available at http://www.fao.org/publications/card/en/c/56efd1a2-0f6e-4185-8005-62170e9b27bb/
9 9. United States Census Bureau, International Data Base World Population: 1950–2050, available at http://www.census.gov/population/international/data/idb/worldpopgraph.php
10 10. David Pilling, “The Real Price of Madagascar's Vanilla Boom,” The Financial Times (June 5, 2018), illustrating how the absence of a functioning market for vanilla futures was producing a cycle of boom and bust in Madagascar's vanilla crop, exacerbating poverty and violent gang activity on the African island. Available at https://www.ft.com/content/02042190-65bc-11e8-90c2-9563a0613e56
11 11. The Cosmos Club, founded in 1878, is a Washington social club distinguished in science, literature and the arts, a learned profession, or public service. Members come from virtually every profession that has anything to do with scholarship, creative genius, or intellectual distinction. Among its members have been three presidents, two vice presidents, a dozen Supreme Court justices, 36 Nobel Prize winners, 61 Pulitzer Prize winners and 55 recipients of the Presidential Medal of Freedom.
12 12. The most notable and perhaps most important CFTC commissioner to advocate for reform of swaps markets was former Chair Brooksley Born (in office: August 26, 1996–June 1, 1999), who called on Congress and the Clinton administration to authorize the CFTC to regulate over-the-counter swaps and who resigned as chair as a matter of principle when those calls were rejected.
13 13. Reporting, clearing, exchange trading, price discovery, and transparency have been the hallmarks of the (well-regulated) futures industry for over 100 years.
14 14. It is estimated that following the 2008 Financial Crisis, minimum global clearing rates were about 40% for interest rate swaps and 8% for credit default swaps. By 2017, about 85% both of new interest rate swaps and new credit default swaps were being cleared. See generally, CFTC Chairman J. Christopher Giancarlo, “Cross Border Swaps Regulation Version 2.0: A Risk-Based Approach with Deference to Comparable Non-US Regulation” at https://www.cftc.gov/sites/default/files/2018-04/oce:chairman_swapregversion2whitepaper_042618.pdf