Gary Gensler cut deals with Goldman Sachs for 18 years. Now, he's leading the charge for regulatory reform. The New York Times explains:

The proposals championed by Mr. Gensler, if adopted by Congress, would substantially alter what is now a largely unregulated market in over-the-counter derivatives, financial instruments used by companies and investors to protect themselves and bet on moves in variables, like interest rates or currencies, and to speculate.

The proposals include forcing the big banks that sell derivatives to conduct their trades in the open on public exchanges and clear them through central clearinghouses, so that any investor can see the prices that dealers charge their customers. Today, those transactions are bilateral and private.

The banks and their customers might have to post collateral or guarantees to prevent the kinds of panics seen during the financial crisis, in which some investors worried that trading partners might have trouble keeping their side of the contract.

In this way, the clearinghouses would work as circuit breakers in the great web of derivatives trading encircling the globe. Shifting the products, and the risk of default, off the books of the banks and onto these middlemen would ensure that no single bank was too interconnected to fail, the rationale goes.

The banks, for their part, sense a threat to the billions of dollars in profits they earn each year from trading in these complex derivatives.

Many don't understand these complex financial instruments, but, they need reform. They've helped to turn Wall Street into one giant, rigged casino that is designed so that Wall Street firms win, regardless of whether the economy grows or tanks. The Times continues:

Mr. Gensler’s conversion would seem to put him at odds with his mentors, like Robert E. Rubin, the former Treasury secretary, and with his former colleagues on Wall Street.

“Wall Street’s interest is not always the same as the public’s interest,” he says now. “Wall Street thrives and makes money in inefficient markets, and I am creating efficiencies in the market...”

“I disagree with anyone who says derivatives did not play a part in the crisis,” he said in defense of more oversight. He added: “Like San Francisco after the earthquake, we had a calamity, and now we need building codes.”

Regulatory reforms create efficient markets that champion economic growth and protect Main Street interests. Now is our chance to pass it.