Published December 06, 2011
U.S. Republican senators skewered the top U.S. futures regulator for his ties to former MF Global chief Jon Corzine and said he was "ducking" his responsibilities by stepping aside from a probe into now-bankrupt futures brokerage.
At a congressional hearing on Tuesday, Republicans accused Commodity Futures Trading Commission Chairman Gary Gensler of trying to preserve his reputation rather than take the heat for MF Global's collapse and its missing customer money.
"To me it looks like you are ducking the responsibilities of your job," said Senator Mike Johanns.
"As President Truman so famously observed, the buck stops with you."
Gensler, who appeared pained by the repeated questioning, said he stepped aside from the MF global investigation in early November so that he would not become a distraction or risk creating an appearance of a conflict of interest.
He said he thought it important to do so once it became clear the CFTC's review "could become a specific investigation about specific individuals."
Gensler and Jon Corzine, who resigned as MF Global's chief executive early last month, both worked at Goldman Sachs in the late 1990s and held prominent positions.
They also worked together in Congress when Corzine was a senator and Gensler worked as an advisor for Paul Sarbanes, then the chairman of the Senate Banking Committee.
MF Global collapsed in late October after it was forced to reveal that it had made a $6.3 billion bet on European sovereign debt. Investigators are searching for up to $1.2 billion in missing customer money, and are probing whether MF Global raided customer funds for firm use.
Multiple congressional panels are probing whether regulators, including the CFTC, failed to police MF Global.
They are also seeking to compel Corzine to testify before multiple hearings, including one by the House Agriculture Committee on Thursday.
Republican senators took turns on Tuesday pressing Gensler on whether MF Global got preferential treatment before its collapse and about his decision to recuse himself, despite the fact that a fellow Republican senator - Charles Grassley - had called for Gensler's recusal in early November.
Richard Shelby, the top Republican on the Senate Banking Committee, questioned how often Corzine got face time with Gensler.
Gensler said he had a "courtesy meeting" with Corzine when Corzine became CEO of MF Global in spring of 2010, and said there was one other staff call with MF Global that he joined.
He noted the agency has met more than 1,100 times with industry officials and the public in the Dodd-Frank financial oversight law was enacted last year.
Senators then dug into Gensler for not removing himself earlier from MF Global matters if he believed his involvement could be a distraction.
"It never occurred to you prior to Nov. 3 that you shouldn't be participating regarding MF Global?" Senator Johanns asked.
Gensler responded that he stepped aside as soon as it turned into an enforcement matter.
He added that he has sat out other investigations into specific individuals during his time as head of the CFTC. He did not elaborate.
"It feels to me like you panicked, and it's more about a career-enhancing situation to avoid accountability," Senator Bob Corker told Gensler.
"I made a judgment," Gensler responded. "It was certainly not for the reasons you are saying."
Shelby has requested that the CFTC's inspector general look into the agency's oversight of MF Global including Gensler's decision to recuse himself from the investigation. (Reporting by Dave Clarke; Editing by Tim Dobbyn)