The CFTC gained a raft of new powers

Gary Gensler has been lobbying Republicans to preserve a promised increase of funds for the Commodity Futures Trading Commission, which he chairs, as they weigh options for shaping the implementation of financial regulatory reforms.

The CFTC gained a raft of new powers under the Dodd-Frank reforms passed earlier this year as the Democratic-led Congress sought to prevent a repeat of AIG, the insurance group bailed out after its sale of credit default swaps to a host of Wall Street banks went spectacularly wrong in 2008.

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In depth: US business regulation - Sep-13FT Trading Room - Oct-26Now all Washington’s regulators are writing the rules prescribed by the financial reforms before implementing them. Mr Gensler wants an extra $90m on top of the CFTC’s current $261m budget and 400 more staff on top of its existing 680. “We need about 60 per cent more people, even though we’re taking on seven times as much volume,” said Mr Gensler.

However, defunding the CFTC and Securities and Exchange Commission remains a prized trump card for Republicans in Congress who have gained power after seizing control of the House of Representatives in midterm elections this month. Without control of the Senate or the White House they cannot repeal the law.

Although the CFTC is not the most controversial of agencies, others that are held in less regard by Republicans, such as the new Consumer Financial Protection Bureau, are not dependent on Congress for their budget, leaving the SEC and the CFTC most vulnerable to defunding.

Mr Gensler said he had seen Republican members of Congress last week in his efforts to secure a large increase in funding to implement the new rules. “I’ve been meeting with members of the House and members of the Senate on these needs,” he said in a video interview for the FT’s View from DC series. “I think that everybody understands that it was a real crisis in 2008 and we want this new legislation to work.”

The CFTC does face specific criticism from newly empowered Republicans. Spencer Bachus, a congressman from Alabama who is favourite to become the next chairman of the House financial services committee, has highlighted derivatives as a cause for concern.

He told the Financial Times that non-financial companies must not endure a multi-billion dollar increase in costs by having to post increased margin and cash collateral against their derivatives trades.

Mr Gensler says only a “very small category” of non-financial companies will face the most onerous and expensive regulations on derivatives trading. Companies from IBM to Boeing have been lobbying to escape being labelled a “major swap participant” and being forced to post more cash against trades and face more supervision by regulators.

But Mr Gensler said the CFTC and Securities and Exchange Commission envisaged “very few parties” being caught by this definition. Other companies will have broad exemption from rules that push more trading of derivatives through clearing houses and on to other trading platforms to bring transparency to the notoriously opaque market.

That definition is one of 30 groups of rules that the CFTC has to write before next July and many believe the regulator might miss the deadline – regardless of whether Republicans try to starve it of cash.