HOW WALL STREET WORKS
President-elect Joe Biden announced Monday that he will appoint Gary Gensler to chair the US Securities and Exchange Commission (SEC).
Gensler made several friends and many enemies during his tenure as regulator under Barack Obama. As chairman Commodity Futures Trading Commission (CFTC), Gensler helped draft the Dodd-Frank Financial Reform Act (Dodd-Frank — Frank Act), which is considered the largest change in US financial regulation since the Great Depression and which the industry has been very actively opposed to. Then Gensler quickly implemented this law, and did it much faster than other regulators..
Although Gensler is a former Goldman Sachs banker, his appointment is a clear signal that Biden plans to take a tougher stance on Wall Street than just the president. Donald Trump, but maybe even with Obama.
«Gensler was the toughest regulator under Obama. This will now become the norm in the Biden administration.», – former Democrat Congressman told CNN Business Barney Frank (Barney Frank).
Frank, co-author of the 2010 Financial Reform Act, named Gensler’s appointment «very good sign».
«This will relax people who may have feared that the enforcement of our bill would not be strong enough.», – said Frank, who is now the director of Signature Bank.
Elizabeth Warren (Elizabeth Warren), a fierce critic of big banks, is also very pleased with Gensler’s choice.
«He is a tenacious regulator who has pitted against the titans of the industry to rein in their risky behavior.», – Massachusetts Democrat said on Monday. «He will be an excellent chairman of the SEC during this economic crisis.».
Biden not only appointed Gensler to head the SEC, but announced the appointment on Monday Rohits Chopras (Rohit Chopra), Warren’s ally, for the position of Head of the Consumer Financial Protection Bureau (CFPB).
Early on, he made some sort of warning to Wall Street. in November when he asked Gensler to lead the oversight team working to form the Federal Reserve System (FED), the SEC, and the Federal Deposit Insurance Corporation (FDIC).
Dennis Kelleher (Dennis Kelleher), a proponent of Wall Street reform who also served on Biden’s agency review team, praised Gensler’s selection of leadership.
«Gary is a very experienced expert in the securities markets», – said Kelleher, CEO of Better Markets, in an interview. «He will be a smart, strategic and courageous leader who will return the SEC to the gold standard for investor protection.».
Before joining the government, Gensler spent almost two decades at Goldman Sachs (GS), where he was a M&A partner, headed the bank’s media group and was one of the leaders of this financial group..
Frank, a former congressman, said it was no coincidence.
«Gary Gensler was effective in part because he knew the business so well from his days at Goldman.», – Frank said. «This will be a counterargument for left-wing partners who believe that we shouldn’t have anyone who once worked in the industry.».
Stephen Cohen (Stephen Cohen), defense attorney at Sidley Austin, said Wall Street is gearing up for much tougher enforcement.
«The industry recognizes his reputation. He will want to demonstrate that the SEC will not let Wall Street go down – not only as a market regulator, but also as a market policeman.», – he said.
Cohen, a former Securities and Exchange Commission official who worked with Gensler during the Obama presidency, named Gensler «extremely smart and self-confident», but warned that he might face legal hurdles ahead.
«Courts are much more conservative than four years ago», – said Cohen, referring to Trump’s appointment of many business-oriented judges. «There will be more successful challenges to aggressive law enforcement and rule-making».
Gensler was also known as a demanding boss – so demanding that the employees eventually formed a union..
When he took over the CFTC, there were calls to merge the agency with the SEC. Gensler not only fended off these encroachments, but also achieved the expansion of the agency’s jurisdiction.
If confirmed, Gensler is expected to pay particular attention to investor protection. But he will also be asked to do the cryptocurrency industry and the exacerbation of the climate crisis.
Climate activists want Gensler to set binding industry-wide rules for disclosing climate change impacts. This is a move that parts of corporate America, most notably the fossil fuel industry, are likely to strongly oppose..
«Mr Gensler will assume his new position with a clear mandate and clear expectations for action on the climate crisis», – said in a statement Mindy Lubber (Mindy Lubber), CEO of the non-profit organization Ceres for sustainability.
Obviously, Gensler will contrast sharply in this area against the background of the Trump era.
In 2017, Trump appointed Jay Clayton (Jay Clayton), a renowned professional lawyer with a long experience in protecting large banks, to the post of head of the SEC. Under Clayton, who stepped down last month, the SEC received more than $ 14 billion in fines and returned a record $ 3.5 billion to affected investors, according to the agency..
However, Clayton also made some effort. by «modernization» systems that critics said were often targeted against investor protection.
For example, the SEC, led by Clayton, enacted rules that made it more difficult for shareholders to make proposals at annual meetings and get independent advice from proxies..
Last month, the SEC’s own investor advocate criticized «recent worrying actions» commission and urged the agency «selectively abandon its deregulating position, creating higher barriers for shareholders to independently oversee the management of public companies».
«Although they were usually described as attempts «modernize» or «streamline» regulations, they often resulted in reduced investor protection», – wrote in his report Rick Fleming (Rick Fleming), Representative of the US Securities and Exchange Commission.
Under Obama, the SEC has been criticized for its lack of rigidity in regulating markets after the 2008 financial crisis.
«The SEC results were pretty disappointing, said Kelleher, CEO of Better Markets.
Mary Shapiro (Mary Schapiro), Obama’s first SEC chairman, chose Roberta Huzami (Robert Khuzami), a former federal attorney who later became Deutsche Bank’s general counsel for the Americas to head the Commission’s enforcement division. The second SEC chairman under Obama was Mary Joe White (Mary Jo White), former federal attorney who later became a Wall Street attorney.
Kelleher expressed hope that Gensler will not repeat «fatal flaws» Obama-era SEC, hiring Wall Street lawyers for key agency positions.