Senate Vetting Choice for SEC Head 03/02 06:05
President Joe Biden's choice to head the Securities and Exchange Commission
is coming before a Senate panel for his confirmation hearing at a moment when a
roiling stock-trading drama has spurred clamor for tighter regulation of Wall
WASHINGTON (AP) -- President Joe Biden's choice to head the Securities and
Exchange Commission is coming before a Senate panel for his confirmation
hearing at a moment when a roiling stock-trading drama has spurred clamor for
tighter regulation of Wall Street.
Gary Gensler, a chairman of the Commodity Futures Trading Commission during
the Obama administration, has experience as a tough markets regulator during
the financial crisis. More recently he has been in the academic world. Biden's
selection of Gensler to lead the SEC signals a goal of turning the Wall Street
watchdog agency toward an activist role after a deregulatory stretch during the
The Senate Banking Committee is weighing Gensler's confirmation in a virtual
hearing Tuesday. Also being vetted and questioned is Rohit Chopra, a member of
the Federal Trade Commission who is Biden's nominee to lead the Consumer
Financial Protection Bureau.
Gensler is promising to work toward strengthening transparency and
accountability in the markets. That will enable people "to invest with
confidence and be protected from fraud and manipulation," he said in written
testimony prepared for the hearing. "It means promoting efficiency and
competition, so our markets operate with lower costs to companies and higher
returns to investors. ... And above all, it means making sure our markets serve
the needs of working families."
The trading frenzy in shares of the struggling video-game retailer GameStop
lifted their price 1,600% in January, though they later fell back to Earth
after days of wild price swings. A number of big hedge funds had bet that
GameStop stock would fall, only to be thwarted by small investors who banded
together on social media with a wave of buying that sent the price up. The saga
was portrayed as a victory of ordinary investors over Wall Street giants. But
some lawmakers charged that the online trading platform Robinhood acted to
favor its big Wall Street clients when it blocked its customers on Jan. 28 from
buying GameStop shares.
The SEC is investigating. Treasury Secretary Janet Yellen convened a meeting
of top federal regulators to discuss the trading turbulence and whether the way
the market operates may hurt individual investors.
Allison Herren Lee, the acting SEC chair, has said the agency is examining
the role that short-selling may have played in GameStop's extreme stock moves,
as well as potential stock manipulation and whether companies issuing stocks
are adequately disclosing risks to investors.
The GameStop episode has bolstered political momentum in the direction of
closer regulation of the securities markets, though Republican lawmakers and
regulators generally will oppose new rules. Possible avenues for new rules that
have been raised include requiring market players to disclose short-selling
positions and restricting arrangements of payment for order flow --- a common
practice in which Wall Street trading firms pay companies like Robinhood to
send them their customers' orders for execution.
Gensler was a leader and adviser of Biden's presidential transition team
responsible for the Federal Reserve, banking issues and securities regulation.
He doesn't appear to face enough opposition to derail his approval by the full
Senate, which the Democrats control by a slim margin.
"Gensler will tip the SEC away from making it easy for companies to raise
money and toward protecting unsophisticated investors," says Erik Gordon,
assistant business professor at the University of Michigan.
Jay Clayton, a former Wall Street lawyer who headed the SEC during the Trump
administration, presided over a deregulatory push to soften rules affecting
Wall Street and the financial markets, as President Donald Trump pledged when
he took office. Rules under the Dodd-Frank law that tightened the reins on
banks and Wall Street in the wake of the 2008-09 financial crisis and the Great
Recession were relaxed. Clayton also eased rules for smaller companies raising
capital in the market.
With a background of having worked for nearly 20 years at Goldman Sachs, the
Wall Street powerhouse investment bank, Gensler surprised many by being a tough
regulator of big banks as head of the Commodity Futures Trading Commission. He
imposed oversight on the $400 trillion worldwide market for the complex
financial instruments that helped spark the 2008-09 crisis. Gensler pushed for
stricter regulations that big banks and financial firms had lobbied against,
and he wasn't afraid to take positions that clashed with the Obama
Among his likely priorities as SEC chair would be requirements for
corporations to disclose their climate change risks, political spending and
executive compensation. Gensler, who co-authored a 2002 book of investing
advice for moderate-income people titled "The Great Mutual Fund Trap," also
could push for protections in ordinary investors' relationships with their
advisers. He may take up tighter rules for new "blank-check" offerings used by
companies in developing stages to raise money in the markets, observers say.
Gensler comes armed with receptiveness to new financial technologies and
cryptocurrency. As a professor of economics and management at MIT's Sloan
School of Management, he has focused research and teaching on public policy as
well as digital currencies and blockchain, the global running ledgers of
digital currency transactions.
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