Wall Street set to learn how tough Biden’s watchdogs will be
President Joe Biden’s plans for a new era of strict Wall Street surveillance will take center stage this week when two of his top regulator picks face questions from members of the Senate Banking Committee in a hearing on Tuesday.
Gary Gensler, whom the White House has called head of the Securities and Exchange Commission, and Rohit Chopra, the administration’s choice to head the Consumer Financial Protection Bureau, should be upheld, according to lawmakers and financial executives. Yet their strong support of the Progressive Democrats means they are certain to receive pointed questions from Republican senators about their plans to crack down on business.
The wild rally of GameStop Corp., the explosion of companies and blank check applications, like the Robinhood Markets platform, which have prompted millions of novice investors to start trading will certainly be the focus of attention. . The biggest banks, hedge funds and private equity firms should also be in the spotlight, especially after four years of clean cuts under former President Donald Trump.
Gensler, 63, is well known on Wall Street after leading the Commodity Futures Trading Commission under the Obama administration and made his fortune decades earlier at Goldman Sachs Group Inc. Chopra, a 39-year-old Federal Trade Commission member who helped Senator Elizabeth Warren set up the CFPB, reportedly head an agency Democrats want to reinvigorate to protect consumers from abuse involving credit cards, mortgages and high interest loans. Republicans would rather he stayed in the sleep that defined the office in the Trump era.
“There remains a deep rift between Republicans and Democrats over the role of the CFPB in financial regulation,” said Andrew Olmem, deputy director of the National Economic Council in the Trump administration, who is now a partner at the Mayer law firm Brown. “This is a very important appointment because a new director can significantly change the direction of CFPB. “
Gensler, who has taught at the Massachusetts Institute of Technology, said in his prepared testimony that he plans to examine whether the SEC rules have kept pace with technological advancements. “I believe financial technology can be a powerful force for good, but only if we continue to harness the core values of the SEC in the service of investors, issuers and the public,” he said.
Chopra has signaled that he will focus on the economic impact of the coronavirus, which he says has left millions of US finances “in shambles”. “Experts expect distress in a number of consumer credit markets, including an avalanche of defaults and vehicle foreclosures,” he said.
The following is a breakdown of the political topics that Gensler and Chopra will face in the hearing and, if confirmed, in their work:
The popularity of commission-free trading, led by Robinhood, has forced regulators to grapple with new questions. The first of these is the “gamification” and proliferation of apps that make investing fun, but critics say inappropriately hooks consumers with nudges and prompts to keep them going. to negotiate. Figuring out if and how to react is something Gensler will have to grapple with. The issue could also fall within the remit of Chopra and the CFPB.
The GameStop frenzy has raised additional regulatory concerns, especially whether unsophisticated investors should be able to so freely engage in risky trades involving options. Bubbles, too, will be on the minds of senators. A number believe the SEC should do something about the meteoric rise in unregulated Bitcoin and other cryptocurrencies. Another potential target is Special Purpose Acquisition Companies, or SPACS, which are essentially shell companies that issue shares before investors even know what their money is being used for.