By Alexandra Alper
WASHINGTON (Reuters) - A senator called on President Barack Obama on Monday to replace the chairman of the chief derivatives regulatory agency with an official who will crack down more quickly on speculation in oil and other commodities markets.
In a sharply worded letter, Sen. Bernie Sanders, an Independent from Vermont, slammed Commodity Futures Trading Commission Chairman Gary Gensler for not swiftly putting in place position limits, which curb the size of positions that traders can hold in commodities like gold and oil.
The curbs were included in the 2010 Dodd-Frank financial reform law, which aimed to rein in the kind of market risk-taking that sparked the 2008 financial crisis.
"In blatant disregard of the law, Chairman Gensler has allowed oil and gasoline prices to be dictated by Wall Street speculators instead of supply-and-demand fundamentals," Sanders wrote. "As a result, the American people continue to pay much higher prices for gasoline than they should."
The CFTC declined to comment.
The CFTC's position limits rules, finalized in October, are set to go into effect later this year.
Sanders said they should have been put into place sooner. He blames Gensler for the lag.
Gensler's term expired in April, but the law allows him to stay in office until January 2013. President Obama has not shown his hand on whether he will reappoint Gensler.
"The president believes that Chairman Gensler has provided strong and effective leadership and is grateful for his ongoing contribution to the CFTC," a spokeswoman for President Obama said in an email. She noted that Gensler is "currently able to continue serving in this role as a holdover."
Obama has shown a keen interest in cracking down on oil market manipulation as part of his wider push to show he's doing all he can to prevent spikes in gasoline prices.
In the run up to the November presidential election, he unveiled a plan in April that would boost penalties for companies found guilty of manipulation in the oil futures market and increase funding for the CFTC's surveillance and enforcement staff.
The agency has faced a backlash from industry groups eager to overturn the Dodd-Frank position limits rules.
The Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association (ISDA) brought a legal challenge against the rules in December. They argued that they would damage the efficiency of markets and were not explicitly required by Dodd-Frank.
Industry groups have also argued there is no concrete evidence to show that speculation in oil markets drives up gas prices.
SLAMMED FROM THE LEFT
The legal challenge has not stymied criticism among liberal lawmakers, who say the curbs are needed to lower fuel costs for Americans already suffering from a sluggish economy.
In March, a group of Senate Democrats, including Sanders, wrote Gensler a letter asking him to put the curbs into effect immediately. Later that month, the Vermont lawmaker introduced a bill to force the CFTC to use its emergency powers to impose the curbs swiftly.
Reuters has reported that the agency conducted a legal analysis that suggested the agency's emergency authorities would not immediately permit it to impose position limits.
Gensler was sworn in to his CFTC post in 2009 despite fears among some lawmakers who were skeptical that the former Goldman Sachs executive could fairly regulate the same markets he once worked in.
Sanders and Sen. Maria Cantwell, a Democrat from Washington state, both objected to Gensler's nomination, fearing he would not be tough enough on swaps regulation.
While Gensler worked as a top official at the U.S. Treasury, he participated in talks on legislation that deregulated swaps and relaxed barriers between commercial and investment banks.
(Reporting By Alexandra Alper,; Additional reporting by Caren Bohan,; Editing by Andrew Hay and Jan Paschal)