Joe Biden is redesigning financial regulation

The new head of the Securities and Exchange Commission is to be Gary Gensler. Gensler is considered a fearless overseer who is not afraid of arguments and is very familiar with the financial markets. Investors mostly see this as a good sign. Outgoing SEC chief Jay Clayton, appointed by Biden’s predecessor Donald Trump, has been criticized for being too friendly towards the industry.

From 2009 to 2014, under US President Barack Obama, Gensler was already in charge of the derivatives supervision CFTC. Biden was vice president at the time. During this time, Gensler initiated reforms that strengthen the derivatives markets and prevent banks from taking excessive risks. He also oversaw the investigation into the widespread manipulation of the Libor reference rate and implemented the financial reform.

Gensler had already proven back then that as a Wall Street insider he could be an effective regulator. He worked for the investment bank Goldman Sachs for nearly 20 years and enjoys great respect in the financial industry, as well as in the party’s left wing – a rare combination.

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Richard Trumka, head of the powerful AFL-CIO union, welcomed the staff, as did the Democratic Senator Elizabeth Warren, who has earned a reputation for being a banking horror in recent years. Gensler “showed during his time in the Obama administration that he was committed to the middle class,” praised Trumka. He will fight “against excesses on Wall Street”.

Gensler will particularly look at fintechs and cryptocurrencies

A long to-do list is waiting for Gensler at the SEC. He will take a closer look at the so-called Spacs, he has already leaked that. Spacs stands for Special Purpose Acquisition Companies. These are shell companies that initially raise capital through an IPO in order to invest the money in the takeover of a company that has not yet been identified. They are currently the trend on Wall Street, but are hardly regulated and structured in such a way that the initiators in particular benefit, but not the small investors.

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Gensler will also keep a close eye on fintech companies and cryptocurrencies. Gensler, who currently teaches at the elite MIT, is a crypto expert and advises the “Digital Currency Initiative” of his university. He gave his first lecture on “Blockchain and Money”.

Gary Gensler

From 2009 to 2014, under US President Barack Obama, Gensler was already in charge of the derivatives supervision CFTC.

(Photo: Reuters)

He believes the technology has potential, but expects major changes, as he explained at a 2019 event. “I would be surprised if the technology wasn’t anchored somewhere in the financial system in ten years. But so much of the stuff that is currently hyped will no longer exist. ”In a study from November he also looked at the current risk management tools and analyzed why they are not sufficient for an age of new technologies.

Rohit Chopra is supposed to assist him with some tasks

In addition to his focus on cryptocurrencies, he has to reform publication rules in order, among other things, to map climate risks for listed companies. Among other things, Rohit Chopra should stand by his side. So far he is commissioner of the competition authority FTC, but he is supposed to be head of the consumer protection authority for financial products (CFPB), which was founded after the financial crisis.

Chopra spoke out against the power of big tech while at the FTC. He voted in favor of the agency’s lawsuit against Facebook’s “illegal monopoly”, which a group of attorneys general has joined.

Observers in Washington expect that in his new position Chopra will, among other things, take care of tenants who have defaulted on their payments due to the pandemic and are illegally kicked out by their landlords. He also apparently wants to take a closer look at the practices of debt collection agents. Under Trump, the influence of the consumer protection agency was significantly reduced. But the authority should clearly gain in profile.

In addition to choosing Gensler, Warren also welcomed Chopra’s decision. The Senator from Massachusetts helped design the consumer protection agency. “Our bank regulators have been acting like they work for the institutions they oversee, not the American people, for too long. But big changes are coming, ”she said.

Obama confidante should also play a major role

According to media reports, Obama confidante Michael Barr is planned for the Office of the Comptroller of the Currency (OCC). He was in the Treasury under Obama and played a major role in shaping the far-reaching financial reform that was passed after the financial crisis. The OCC is an authority based in the Treasury Department that oversees 1200 banks.

Barr currently teaches at the University of Michigan and was previously also an advisor to the cryptocurrency Ripple, which is currently embroiled in a lawsuit with the SEC.

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