Paul Volcker, the former Federal Reserve Chairman whose idea of restricting banks’ risky trading was a major tenet of the Dodd-Frank financial regulation overhaul passed by Congress last year, is 84 years old. The collective ages of three key Treasury Dept. officials implementing the so-called Volcker Rule: 90.
Amias Gerety, 31, Felton C. Booker, 32, and Nick Franchot, 27, are staffers handling vital banking policy. They’re frequent visitors to Capitol Hill, briefing congressional committees on the fine points of systemic risk and capital markets. They’re also the front-line contacts when executives from Wall Street firms come to plead for leniency on the rules arising from the 2010 law. Washington’s bank lobbyists privately refer to them as the “young Turks” or the “young pups.”
Washington, of course, is a town full of fresh-faced, eager Ivy Leaguers looking to make their mark. Mostly they toil in obscurity—and with plenty of adult supervision. These days the Treasury Dept. is hamstrung by vacancies as the Obama Administration has been slow to nominate people for the more senior jobs, while the Senate has been loath to confirm appointees as an election nears. The post of assistant secretary for financial institutions—the top banking policymaker—has been vacant since December. Last month the Administration announced it had picked Cyrus Amir-Mokri, 47, formerly of the U.S. Commodity Futures Trading Commission, for the job. The Senate has yet to vote on his nomination. At least four other Treasury nominees are in the same position.
That often leaves relative newcomers such as Gerety, Booker, and Franchot running the show, according to the bank lobbyists and congressional staff. While bankers, who would not speak on the record for fear of alienating Treasury, say the three are diligent and smart, the lack of gray-haired expertise at the department has led to plenty of grousing.
Financial institutions are grappling with the biggest raft of government changes to the industry since the 1930s. How the Treasury and other banking regulators craft rules such as Volcker’s could affect the industry’s bottom line by billions of dollars. “We don’t know who to talk to about detail issues, and we can’t get feedback,” says Wayne A. Abernathy, an executive vice-president at the American Bankers Assn., a trade group in Washington. “If you had a full shop at Treasury maybe you’d have somebody thinking about the economic impact of having to raise capital levels.” Richard Hunt, head of the Consumer Bankers Assn., which represents lenders of all sizes, says he’s “surprised” the Administration hasn’t moved more quickly to fill jobs. Treasury declined to make Gerety, Booker, and Franchot available for an interview.
The trio is often involved in the unglamorous minutiae of regulation that could become essential if the U.S. were to face another financial crisis. The most prominent is Gerety, who holds the newly minted title of deputy assistant secretary, Financial Stability Oversight Council. That makes him the lead staff member for the supergroup of regulators led by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben S. Bernanke. In February, Gerety was the sole government representative at a meeting with executives from some two dozen banks including Goldman Sachs (GS), Citigroup (C), JPMorgan Chase (JPM), and Deutsche Bank (DB) on Dodd-Frank issues. The 2002 Harvard graduate is coordinating the effort to resolve one of the government’s most vexing challenges: determining which firms pose a systemic risk to the U.S. financial system and should therefore be subjected to heightened scrutiny.
Booker is acting director of Treasury’s Office of Financial Institutions Policy, which deals with regulations that affect major banks. The first person in his family to attend college, he earned graduate degrees in law and business from Columbia and was a mergers and acquisitions lawyer at Simpson Thacher & Bartlett before joining Treasury in late 2009. He’s one of a group of staffers trying to figure out how to avoid a repeat of the chaos that ensued from the collapse of Lehman Brothers. In July, Booker stood before Geithner, Bernanke, and other regulators in Treasury’s historic Cash Room and presented a congressionally mandated report on “secured creditor haircuts,” an examination of creditor claims when banks shut down. Franchot, a 2007 graduate of Yale, worked as an analyst at a commercial lender before joining the Treasury in June of last year. He’s detailed to the capital markets team, which handles issues ranging from housing finance to the Volcker Rule.
Deputy Treasury Secretary Neal S. Wolin, 49, who leads implemention of the new regulations arising from the Dodd-Frank law and closely supervises the effort, disputes the notion that the department is suffering from an experience shortage. “We have put together a dedicated, hardworking team that includes expertise at every level to implement critical reforms to our financial system,” Wolin says. Gerety, Booker, and Franchot are among a group of 30 staffers that holds twice-a-week meetings with Wolin on matters related to the implementation of Dodd-Frank. Still, Wall Street may be wishing the young pups at Treasury were on a tighter leash.