The Securities and Exchange Commission (SEC) looks like it will take a much tougher stance on Wall Street under the Biden Administration than it did under the Trump Administration with Monday’s announcement that President-Elect Joe Biden will indeed nominate Gary Gensler to lead the Securities and Exchange Commission.
In what is widely being viewed as a win for Senator Elizabeth Warren (D-MA) and progressive Democrats, Gensler is expected to pivot from his predecessor Jay Clayton’s more Wall Street-friendly policies in favor of a strong focus on investor protection.
Warren, a well-known critic of big banks, tweeted Monday of the Gensler pick: “He is a tenacious regulator who stood up to the industry titans to rein in their risky behavior. He will be an excellent SEC Chair during this economic crisis.”
Gensler did not exactly endear himself to Wall Street during his time as a regulator. Gensler served as chairman of the U.S. Commodity Futures Trading Commission from 2009 to 2014, leading the Obama-Biden Administration’s reform of the $400 trillion swaps market. He helped craft the 2010 Dodd-Frank financial reform law loudly opposed on Wall Street, and moved to swiftly implement its reforms much faster than other regulators.
Former Democratic Congressman Barney Frank, co-author of the financial reform law, told CNN Business that Gensler’s nomination is a very good sign for anyone worried that enforcement of that bill will be strong enough. “Gensler was the toughest regulator under Obama. That will now be the norm in the Biden administration,” Frank said.
Gensler was senior advisor to U.S. Senator Paul Sarbanes in writing the Sarbanes-Oxley Act and was Under Secretary of the Treasury for Domestic Finance from 1999 to 2001 and Assistant Secretary of the Treasury for Financial Markets from 1997 to 1999. Gensler was Chairman of the Maryland Financial Consumer Protection Commission from 2017 to 2019.
Gensler also worked as CFO for Hillary Clinton’s 2016 presidential campaign, as a senior advisor to Hillary Clinton’s 2008 campaign, and subsequently as an economic advisor for the Obama 2008 campaign.
Prior to his public service, Gensler worked at Goldman Sachs, becoming a partner in the Mergers & Acquisition department, headed the firm’s Media Group, led fixed income & currency trading in Asia, and lastly co-headed Finance, being responsible for the firm’s worldwide Controllers and Treasury efforts.
Currently, Gensler is a Professor of the Practice of Global Economics and Management, MIT Sloan School of Management, Co-Director of MIT’s Fintech@CSAIL & Senior Advisor to the MIT Digital Currency Initiative, researching artificial intelligence, blockchain technology, and new financial technologies. He won the MIT Sloan Outstanding Teacher Award based upon student nominations for the 2018-19 academic year.
About face from Clayton’s tenure?
While the SEC noted in announcing Clayton’s departure that the SEC obtained orders for more than $14 billion in fines (including a record $4.68 billion in fiscal year 2020) and returned a record $3.5 billion to harmed investors during his tenure, Clayton also led a modernization effort often criticized by Democrats and consumer advocates for what they saw as his industry-friendly approach, most notably with Regulation Best Interest, which many think won’t survive the Biden Administration and consider it a toothless version of the Department of Labor’s stricter fiduciary rule.
Elad L. Roisman has been serving as the Acting Chairman of the SEC following Clayton’s resignation from the position, effective last December after serving as Chair for more than three and a half years during the Trump Administration.
The SEC has five Commissioners who are appointed by the President with the advice and consent of the Senate. Their terms last five years and are staggered so that one Commissioner’s term ends on June 5 of each year. The Chairman and Commissioners may continue to serve approximately 18 months after terms expire if they are not replaced before then.
To ensure that the Commission remains non-partisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as Chairman, the SEC’s top executive.