Two prominent Democratic lawmakers said in a letter published Tuesday that a financial regulator appointed by President Obama has “failed to answer a number of key questions” about a potential conflict of interest.
House Government Oversight Committee ranking member Elijah Cummings (D-Md.) and Sen. Elizabeth Warren (D-Mass.) on Monday told Commodity Futures Trading Commission official J. Christopher Giancarlo that he has neglected to answer some of their pointed questions about stock transactions centering around a company Giancarlo once helped manage.
The inquiry highlights the potential for federal officials to share interest with firms in which they have no direct, documented stake. Cummings and Warren specifically took issue with the fact that Giancarlo has not promised to recuse himself from matters concerning a bank that pushed up the price of stock sold by the CFTC Commissioner.
Giancarlo’s September 2014 sale of shares in GFI Group Inc. occurred as two other financial companies—CME Group, Inc., and BGC Partners—were involved in a heated battle to acquire the financial firm, his erstwhile employer.
It also deviated from a divesture plan he drafted when, in the summer, he joined the CFTC, after being approved by the Senate in June. Giancarlo called the discrepancy a “mistake,” when Bloomberg first reported it.
On Feb. 20, Warren and Cummings asked Giancarlo to explain the alleged oversight error. But while he gave the pair of lawmakers a detailed response, Giancarlo did not detail why his “mistake” coincided “immediately after [GFI stock price] approached or reached a five-year high.”
“Your letter failed to answer a number of key questions and failed to provide any of the documents we requested,” Cummings and Warren said Tuesday.
Giancarlo, the pair also claimed, failed to hand over information about CFTC ethics rules governing the commissioner’s ability to participate in matters affecting CME Group and BGC Partners.
Giancarlo did note that he would amend his ethics agreement to reflect the acquisition last month of GFI by BGC. He said he will not engage in any issue involving either firm “unless authorized…by CFTC ethics staff.” But Warren and Cummings were upset that he didn’t indicate whether he would “participate in matters related to the CME group.” They also want more details about when the CFTC ethics staff would permit Giancarlo “to participate in matters involving BGC.”
“We are troubled by these gaps in your letter,” the pair stated, commenting that Giancarlo made $100,000 selling his GFI stock, as the CME-BGC bidding war raged.
“Congress nor the public is able to fully assess whether your actions were appropriate and whether you have fully addressed all conflicts of interest moving forward,” Warren and Cummings added.
The two legislators are asking Giancarlo to meet with some of their staffers “at the earliest opportunity.” Among the material they would like to review includes a copy of his “final employment agreement with GFI,” documents related to his CFTC Ethics Agreement and official guidance provided on the matter, and details about his GFI divesture plan and “how the mistakes occurred and how they were identified.”
In late January, Giancarlo made waves in the financial press for coming out against post-financial crisis CFTC rule changes. Currently, the only Republican among four CFTC Commissioners, he said the revisions to the regulatory framework “have shifted business overseas, made it more expensive to operate exchanges and will encourage high-speed trading that could have an unpredictable market impact.”
In their Feb. 20 letter to Giancarlo, as The Sentinel noted, Warren and Cummings described the CFTC as “playing an increasingly important role in regulating over-the-counter derivatives.”
Credit default swaps, a type of derivative, played a prominent role in the 2008 financial meltdown and the historic multi-billion dollar taxpayer bailout of AIG that followed.
