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One of the first things President Donald Trump did when he took office was to sign an executive order requiring that for every new federal regulation implemented, two must be rescinded. “If you have a regulation you want, No. 1, we’re not gonna approve it because it’s already been approved probably in 17 different forms,” Trump said. “But if we do, the only way you have a chance is we have to knock out two regulations for every new regulation. This was part of his campaign promise “to dramatically reduce federal regulations.”
During his presidency, it was no surprise that Trump wasn’t a fan of regulations. Wall Street, the environment and corporations were left alone with little or no oversight. Trump contended that burdensome regulations stood in the way of business. His goal, as we now know, was to run the economy hot to boost the stock market and create more jobs. Regulations, to Trump, were an anathema to these objectives. For four years, it took a back seat.
Trump appointed former top Wall Street lawyer Jay Clayton to lead the premier financial services regulatory agency—the Securities and Exchange Commission (SEC). Clayton made some strides, but it seemed that his mandate was to keep a hands-off approach to the financial industry, for the most part.
This attitude may soon quickly change. Although President-elect Joe Biden received strong support from Wall Street donors, they may no longer be immune to oversight. Biden has nominated two hard-line regulators for top positions—one who is closely tied to Wall Street-critic Senator Elizabeth Warren and the other to Hillary Clinton. This signals a potential radical shift in regulations with a renewed stronger stance against people and companies that try to violate the rule of law.
It has been reported that Gary Gensler will serve as chair of the SEC. Rohit Chopra, formerly from the Federal Trade Commission, will be in charge of the Consumer Financial Protection Bureau (CFPB), which was the brainchild of Senator Warren.
It seems that the leftist part of the Democratic Party is taking charge and will champion climate change, social justice initiatives and reigning in the excesses of Wall Street. Congressman Patrick McHenry (R-N.C.) complained, “The Biden team is pandering to members of the far-left.”
Chopra is intimately familiar with the CFPB, as he helped launch the consumer-advocate focused agency. The CFPB was formed after the financial crisis, in response to allegations that people took mortgages and signed for credit cards without fully understanding the attendant risks and costs associated with the products and services. The newly formed agency was established to help people fight back against abusive behaviors—on the part of large and powerful companies, such as the ones in the credit card industry. It will be interesting to see what Chopra would do relative to the debate on cancelling student debt, due to accusations that they ruin the lives of young people, as they are unable to pay down their loans while also trying to build their lives, purchase homes and start families.
Gensler has a stellar background on Wall Street. He previously served as the chairman of the Commodity Futures Trading Commission in President Barack Obama’s administration, was the under secretary of the Treasury for Domestic Finance and the assistant secretary of the Treasury for Financial Markets.
Gensler also has substantial real-world investment banking experience. He was a Goldman Sachs partner, which is a huge achievement and coveted title on Wall Street. Gensler was also the chief financial officer for Hillary Clinton’s presidential campaign.
Biden’s selection of a well-recognized private and public-side financial expert with experience in both regulatory agencies and investment banking to lead the SEC signals a radical departure from Trump’s agenda. It’s likely that the SEC will become much more active and vigorous in its approach after a long period of deregulation.