CFTC Commissioner Scott O’Malia was known to battle against SWAP regulations inside the CFTC, now he will get paid handsomely to do the same for the industry’s top lobby group.
ISDA announces O’Malia will join the firm
The International Swaps and Derivatives Association (ISDA) announced that O’Malia will join the firm on August 18. ISDA has sued the CFTC to block its regulations and attempts to reign in the worldwide SWAPs industry. At $700 trillion in notional value, the SWAPs derivatives, primarily held by large banks and financial institutions, could wipe out the world economy nearly ten times over.
O’Malia is said to be in line for a major payday. Although O’Malia did not comment on his salary at ISDA, Bloomberg’s Silla Brush is reporting ISDA’s outgoing chief made approximately $1.8 million in 2012. As a CFTC commissioner O’Malia pulled down over $200,000 annually.
When the move was announced, O’Malia was roundly criticized by financial reform advocates.
“This is why Americans are so disgusted with so many high ranking government officials and believe that Washington is in cahoots with Wall Street,” Dennis Kelleher, the CEO of Better Markets, said in a statement. “Rather than protecting the public interest, they look like they are working for the industry in their government positions and then cashing in, getting what looks like an after-the-fact payoff from industry for services rendered while working in government.”
ISD’s lawsuit against CFTC
Kelleher notes that ISDA is a lead plaintiff in two key lawsuits against the CFTC.
ISDA sued the CFTC to kill the position limits rule to end excess speculation and price volatility in the commodity markets, a move viewed as benefiting large bank traders, some of whom have been accused by regulators of manipulating markets. O’Malia voted against the CFTC appealing a Federal District Court ruling that favored ISDA and was against the CFTC. Many banks have reduced their commodity trading units since the regulatory probes and legal actions.
In the statement Better Markets also noted ISDA is also a lead plaintiff against the CFTC in legal action attempting to block regulators from regulating overseas derivatives activities. This is particularly troubling to some reformers as many large banks have simply shifted their derivatives positions to arbitrage different regulatory jurisdictions.
Kelleheron CFTC’s duties
ISDA is doing this because it economically benefits its industry members who want to maximize their profits and bonuses,” Kelleher said in the statement. “But, the CFTC is supposed to be an independent agency charged with implementing the law, standing up to industry’s narrow self-interest and protecting the American people from another devastating financial crash and another Great Depression.”
Reuters reporter Douwe Miedema had observed “the speed of O’Malia’s move, and ISDA’s high profile, made the appointment striking even by Washington standards, where a ‘revolving door’ between regulators and those they oversee makes moves from one side to the other common.”
While he is being heaped with criticism, O’Malia wasn’t always behind the large banks while at the CFTC, as he was said to have stood up for a proper MF Global investigation, a matter that sources say will come to a conclusion shortly. For his part, O’Malia is reported to have said the ISDA offer spurred his exit from the agency, according to Politico reporter Zachary Warmbrodt. Warmbrodt tweeted that CFTC’s O’Malia says revolving door criticism “goes with the territory” and that becoming ISDA CEO was “not actually a very difficult decision.”