WASHINGTON (AP) — When President Barack Obama's choice to head an agency that oversees some of the riskiest corners of the financial world faces senators Thursday, one question could dominate:
Will he be as aggressive as his predecessor in holding big Wall Street banks to stricter standards?
The nominee, Timothy Massad, has been tapped to be the next chairman of the Commodity Futures Trading Commission, which regulates futures and options markets. If confirmed, he would succeed Gary Gensler, a Wall Street veteran who surprised many by becoming a tough regulator who pushed for stricter rules that large banks had lobbied against.
For three years, Massad, 57, oversaw the Treasury's Troubled Asset Relief Program, the bank bailout program that was launched in response to the crisis. Under TARP, the government lent about $422 billion to bail out financial companies and automakers. The companies have repaid around $370 billion.
Obama, in praising Massad's supervision, has cited the roughly $30 billion in returns for taxpayers under TARP. But the Treasury has estimated that taxpayers will still lose about $40 billion. It attributed much of the loss to declines in stock prices of bailed-out General Motors and American International Group, which Treasury sold, and in the estimated value of its holdings of Ally Financial stock.
After the 2008 financial crisis, the CFTC brought the secretive $600 trillion market for derivatives under regulation for the first time. The goal was to prevent another crisis and resulting taxpayer bailout. Derivatives are complex investments that helped ignite and escalate the financial meltdown.
The value of derivatives is based on a commodity or security, such as oil or currencies. They are often used to protect businesses that produce or use the commodities, such as farmers or airlines, against price fluctuations. But they also are used by financial firms to make speculative bets.
After its hearing Thursday, the Senate Agriculture Committee is expected to approve Massad's nomination and send it to the full Senate for confirmation.
Massad, who has worked for the Treasury since Obama took office in 2009, would oversee the implementation and enforcement of CFTC rules that were enacted to meet the agency's mandate under the 2010 financial overhaul law.
Before joining the government, Massad was a corporate attorney for 24 years at a leading white-shoe firm, Cravath, Swaine & Moore.
Massad "has no reform track record" and little experience with the markets the CFTC regulates, said Marcus Stanley, policy director of Americans for Financial Reform, a coalition of consumer and labor groups. "He's a bit of a blank."