Wetjen exit marks end of an era at CFTC

Zachary Warmbrodt | POLITICO Pro

Mark Wetjen doesn’t see himself as a “thrill junkie,” but for a couple of years the lawyer from Dubuque was at the heart of one of the most fast-and-furious policy debates the finance world has ever seen.

In the middle of his nearly four-year tenure as a member of the CFTC, the Harry Reid aide-turned-regulator developed a reputation as anything but a rubber stamp for then-CFTC Chairman Gary Gensler, a fellow Democrat and an outspoken Wall Street critic who was trying to push through dozens of new rules required by the 2010 Dodd-Frank law.

Their task was to implement safeguards in an unregulated derivatives market that helped fuel the global financial crisis in 2008. Their policy disagreements on how best to police bank trading became national news (to the extent to which stories about derivatives rules ever can).

Wetjen, who later served for several months as the agency’s interim chairman, is the last CFTC commissioner from that era in office and he will step down on Friday. He’s staying mum about where he’s going to work next.

In an interview in his office last week, Wetjen, 41, talked about how he got the job, what it was like during the Gensler years and how the agency should handle a major unresolved policy question about how to regulate foreign trades that have a physical link to the United States.

What follows is a transcript of the interview edited for length and clarity.

Why are you leaving now?

There are some other things I want to do in life that are drawing me away from the commission. But also I feel like the commission is clearly in very, very good hands. We have a very good chairman in Chairman [Timothy] Massad. We have two other excellent commissioners that are going to be here. I’m sure the president will appoint and Senate will confirm two additional very, very good commissioners when that time comes. I didn’t have any concerns about what the impact of my departure would be on the commission, and that was something I discussed with the administration.

What are you doing in your final days here?

I’ve made a decision to stop participating in any and all matters before the agency even though the ethics laws and rules would allow me continue participating in some matters. I felt it’s best for the agency that I just stop participating. My focus has been on these matters around winding down the office, which has taken up perhaps more time than I would have anticipated. … I will not be voting on any more matters.

Was that in any way influenced by the experience around Commissioner Scott O’Malia’s departure?

I was not motivated by other peoples’ experiences. I was motivated by just a judgment about what felt right.

O’Malia went to work for the International Swaps and Derivatives Association. Former Commissioner Bart Chilton went to DLA Piper and has done some work with high-frequency traders. Former Commissioner Jill Sommers has worked on the board of Allston Trading and Patomak Global Partners. I don’t know what you’re doing next. But when these transitions happen, there’s press about the revolving door between government and the private sector. Is that in the back of your mind? How do you respond to concerns about that as you make this move away from the commission?

Other than your question right now, I haven’t responded to any until now. For me personally, based on my judgment about what’s best for the CFTC, and also what’s best for me, taking this approach, the one I’ve taken, makes the most sense. There are other ways that it could be done. History has shown it has been done differently by others. I’m not making any judgement about how it was done by others. It just felt for me this was the best way to do it.

Do you have any sense of whether the White House is vetting someone to take your place?

They were made aware in advance of my actual announcement, of course. But I don’t know whether they’ve started to work on vetting a replacement. That wasn’t something I discussed with them.

Looking back, can you talk about how this job came about and why you wanted to do it in the first place?

I became aware of a need at the agency given the impending retirement of Commissioner [Michael] Dunn and I also reflected on my own experience having worked on Dodd-Frank. I was involved in all the various parts of it to varying degrees. But I would say that Title 7 [Dodd-Frank’s derivatives section] without a doubt I spent the most amount of time on compared to any other part of the legislation. … I was really compelled by that experience. … The first person who told me about the vacancy and planted the seed really was Gary Gensler.

Did he recruit you?

I wouldn’t say that. … He was the first person to raise the idea, which of course, as I said, planted a seed with me and ultimately was the beginning of an effort or a pursuit to try and make it happen.

This is when you were a counsel to Senate Majority Leader Harry Reid?

Yeah.

What was it like to be Mark Wetjen during the heady days of the CFTC in 2012 and 2013?

It was fascinating. It was incredibly engaging and oftentimes intense. I don’t view myself as a thrill junkie or anything but there was a lot going on and it was all happening at a rapid pace. So, it just made for a lot of excitement and exhilaration in a professional sense in way that probably is pretty unique.

During that time, The New York Times would mention you by name in editorials and say you were somehow standing in the way of tougher rules. There was the New York Magazine article, which referenced your previous job as helping collect garbage. Where do you think all that came from? Do you want to respond to any of that now that we’re a couple years out?

I don’t know where it came from. But, my mentor, Sen. Reid, and I continue to talk on occasion. And he said something to me, I don’t remember if it was before I arrived here or after, but he said something to me that’s something I always remember. He said, the president put you there for who you are. Everyone knew your background, everyone knew of your character, everyone knew your qualifications, everyone knew what you did and everyone knew what you didn’t do. You’re there for a reason. And the reason why you’re there is because of who you are. … Follow your conscience and do what you think is right.

So, that’s what I’ve done. There are times when we were considering something and we were having to make a decision as a commission when I knew it wasn’t going to be responded to with cheers by every stakeholder. But that’s not our job as commissioners to make every stakeholder happy in every case. …

Do you feel like you helped contribute to that process by not just being a rubber stamp for whatever the chairman wanted you to do?

I don’t believe that I was appointed to be a commissioner to be a rubber stamp. Throughout that process, whether it was conversations with the White House or conversations with senators who confirmed my appointment, that was never something that people suggested to me that I should do. … What did come up were comments along the lines of what I shared with you that I heard from Sen. Reid: Use your best judgement, be who you are, be thoughtful, listen. Those are things that tended to come up over and over. …

One last thing I would say. … I’m proud of my background. I come from the outskirts of a small town in Iowa. I had wonderful parents. I come from a big family. I’m one of five kids. All of us are very close. We’re just a normal, everyday, middle-class family and always in a position of having to work hard to get by and certainly work even harder to try and succeed. I’m not bothered about articles that try and poke fun of my background. It doesn’t bother me because I’m proud of it.

Is there anything that didn’t really get aired out or wasn’t explained about what was going on at the time that you’d like to talk about?

A lot of what has gone on here over the last number of years occasionally has been more dramatized in the media than in reality it really was. That’s certainly true as it relates to interpersonal relationships between commissioners and staff, at least speaking for myself. I consider every commissioner and every chairman I’ve served with to be a friend. I’m not just saying that to sound nice. …

Now, that’s separate from what we had to do as professionals and why we’re put here as commissioners, but you can execute on your duties as a commissioner and maintain friendships along the way. I believe that’s what I’ve done and that’s how I feel about my colleagues.

Are you saying that portrayals about your disagreements with Chairman Gensler have been exaggerated?

I’m saying that the occasional policy disagreements Gary and I had always were worked out. We always came to agreement. If you look at the record, he and I voted the same way on everything. He and I remain friends. He’s still someone that I stay in touch with.

There’s a lingering policy question from that time on the Nov. 2013 staff advisory that said if you’re a foreign banking organization with a swap outside the U.S., and you have personnel in the U.S. arranging it, that hooks you into CFTC oversight. The CFTC is taking some more time to think about that. Would you like the commission to withdraw that once and for all? Do you think there are elements of it that need to be implemented?

Frankly, the decision itself contained in the letter, the decision to view U.S. conduct in the matter of arranging or helping execute a trade. … It’s not clear that that should in every instance be a transaction subject to U.S. jurisdiction, given the overall policy framework that we came to agreement about in the cross-border guidance and how we looked at transactions taking place between entities located offshore.

Whatever happens next, it should be a commission decision. … It should be a commission vote. It’s a significant enough decision that the full commission should decide it. I don’t have any reason to believe that that’s not what’s planned by the chairman. It’s not something I’ve specifically discussed with him. I would expect that’s what happens in the future.

Are you concerned about morale at the CFTC?

It’s hard to keep a finger on the pulse of the morale of the agency on any given day. My general sense is that as the intensity of the rulemaking under Dodd-Frank has waned that has probably led to better work-life balances for the staff members. … There’s still some issues we’re trying to work through. We’ve improved upon this. I made some decisions as acting chair to improve upon this. But there continues to be some things the agency can and should do by way of compensation, by way of training opportunities to help improve staff morale. …

Are there any financial market risks that you think are being left unaddressed right now or are there any emerging trends that need to be higher up on the commission’s list of priorities?

I do think the margin rule for uncleared swaps is a hugely important rule. So, when that is finalized that will be a significant event, but also I think one where you’ll see a further reduction in counterparty risk, which should be on balance helpful. …

I’ve spent some time talking about and thinking about clearinghouse risk. I’ve also spent some time talking about the need for our agency to better coordinate and work with other agencies in our joint effort to bring transparency to and oversee related market places. … Someone, whether it’s the CFTC or someone more appropriately placed, should have a better view into what’s going on in the Treasury market. And then just more generally I would say there has to be much better coordination between agencies that have disparate jurisdiction over disparate markets, but markets nonetheless that are very, very interconnected and intertwined.

Is there a moment at the agency that you’re most proud of?

The overall experience of serving as acting chair [in 2014] was a memorable one. … Twice in 2014 Congress provided funding to this agency, and twice they increased our funding. It was a complete team effort at the agency in advocating for those additional funds. There are other factors outside the agency that obviously led to that result. I also don’t think it’s entirely accidental that it all happened when I was in a position of strongly advocating for that. The agency needed that. They needed those funds. I was just proud to be part of an effort that helped secure it. … We were starting to experience some retention issues. We were starting to lose staff. The troubling part of that was when you start to lose some key staff. … I felt like we had to stem that bleeding.

What is your advice for your successor?

It’s the advice I was given. At the end of the day you’re going to be selected and confirmed because of who you are. It’s going to be because of your background. It’s also going to be because of your temperament and your character and all these other component parts that make up a personality and make a person who he or she is. That’s why that person will end up in the seat and they just need to remain true to that. … Be true to yourself. Make your best judgment. Keep your word. Do what you say you’re going to do. Do what you tell the president. Do what you tell the Senate you’re going to do. If people do that, they tend to be good commissioners.

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