In December 2008, the newly-elected Barack Obama announced two key members of his financial regulatory team: Mary Schapiro to head the Securities and Exchange Commission and Gary Gensler as head of the Commodities and Futures Trading Commission.
“We have been asleep at the switch, not just some of the regulatory agencies but some of the congressional committees,” Obama said at the time.
Now, Gary Gensler is back and he’s switched jobs. He is President Joe Biden’s nominee to head the SEC and his upcoming tenure – if he is confirmed – could be defined by the agency’s response to the recent market volatility that stemmed from retail investors banding together to drive up stocks like GameStop (GME) and AMC Entertainment (AMC).
The roller coaster market has caught the attention of D.C. policymakers.
Hearings will begin on Capitol Hill in the coming weeks and, on Feb. 4, Treasury Secretary Janet Yellen convened a meeting that included the acting heads of the SEC and CFTC, among other officials. A summary of the meeting released later said those regulators would review “whether trading practices are consistent with investor protection and fair and efficient markets.”
‘A very cautious agency’
The SEC is “led by folks that I think after the 2008 financial crisis have wanted to do the right thing,” said Andy Green, who served as counsel to SEC member Kara Stein later in Obama’s presidency. They “have not always later on been brave enough to move forward and in the aggressive ways needed to reestablish the rules of the game on financial markets.”
The SEC “has been a very cautious agency,” Green told Yahoo Finance.
Green, now a senior fellow for economic policy at the Center for American Progress, a liberal think tank, saved his harshest criticism for the Trump era: the SEC had “been rowing in the wrong direction in terms of making sure the markets work” over the last four years, he said.
But Green acknowledged that more could have been done when he was in the building, and said he was hopeful for Gary Gensler’s upcoming tenure at the SEC.
“I think it’s going to be a breath of fresh air,” he said. What Gensler “got done [at the CFTC] in four years [is] what the SEC basically couldn’t finish in eight.”
“He’s not going to be afraid to call call BS on those who are coming and saying, ‘oh it can’t be done,’” said Green.
Gensler is still awaiting his confirmation hearing in the Senate, expected in the coming weeks. The question could be what wrongdoing, if any, he’ll be wrestling with once he gets through the Senate.
Alma Angotti, co-leader of the global investigations and compliance practice at consulting firm Guidehouse, put a finer point on it: “If nobody did anything wrong, and this is how the market works in this situation, then the regulators will have to think about, is this the way we want the market to work in this situation?” Angotti told Yahoo Finance.
“The SEC doesn’t typically protect investors from themselves,” she said.