A major regulator of financial derivatives is flexing some newfound muscle in the wake of the economic meltdown.

The U.S. Commodity Futures Trading Commission, or CFTC, wants Congress to strengthen the Obama administration’s legislative plan for overseeing the $592 trillion over-the-counter derivatives market, according to CFTC documents we obtained.

The commission’s move is noteworthy given its own legacy of lax regulation, which we detailed in June. The move also highlights a philosophical shift for the commission’s chairman, Gary Gensler, who once beat back CFTC oversight efforts as assistant Treasury secretary under President Clinton.

Now Gensler appears to mean business. In a letter sent this week to House and Senate leaders, he asked that loopholes in Obama’s bill be closed. Specifically, Gensler wants to eliminate oversight exemptions for small and foreign derivatives dealers and to require that money be set aside as collateral in derivatives trading.

Gensler’s wide-ranging proposal comes even though his staff contributed to Obama’s bill, which is part of a wider administration effort to overhaul the financial regulatory system.

Obama’s bill, Gensler said, “is a very important step toward comprehensive regulation.” Yet ultimately, “The law must cover the entire marketplace without exception,” Gensler wrote in the Aug. 17 letter to Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) and the committee’s ranking member Saxby Chambliss (R-GA).

The letter also went to Senate Banking Committee Chairman Christopher Dodd (D-CT), House Financial Services Committee Chairman Barney Frank (D-MA), and at least four other lawmakers. Last month, Frank announced guidelines for a derivatives regulation bill that closely follows the administration’s plan.

But Gensler’s recommendations for additional reform are needed to prevent future economic crises, according to Michael Greenberger, a former high-ranking CFTC official who once fought Gensler to strengthen the commission’s authority.

“I support everything he said,” said Greenberger, now a law professor at the University of Maryland.

Greenberger was particularly impressed that Gensler wants mandatory trading requirements enforced even when one of the parties isn’t a bank or swaps dealer. This plan would close “a major loophole in the legislation,” Greenberger said.

Gensler’s letter was also well received by Harkin, who said in a statement that the chairman’s “recommendations carry weight, as they should.”

But the recommendations could be embarrassing for Obama, who just sent his less thorough bill to Congress last week.

It was only a couple months ago that Obama resisted calls for the CFTC to be dissolved or merged with another government agency. Now Gensler’s letter—and the 20 pages of his additional proposed legislative language attached to it—suggests Obama’s bill is insufficient.

Greenberger cast the letter in another light: Obama’s legislation is already “good,” though it leaves a few critical holes. Gensler’s ideas, Greenberger said, would make the bill “excellent.”

Without Gensler’s additions, he said, the financial system will be vulnerable to another meltdown. “If you lock every door and window in the house but leave the back door open, then a burglar is going to come through the back door.“