Prospects darken for Wall Street as Biden regulators take shape

WASHINGTON (Reuters) – Wall Street could face an uncomfortable situation four years after President-elect Joe Biden’s team confirmed Monday that they plan to appoint two consumer champions to lead major financial agencies, signaling a position harder on the industry than many anticipated.

Gary Gensler will be chairman of the Securities and Exchange Commission (SEC) and Rohit Chopra, a member of the Federal Trade Commission, will head the Consumer Financial Protection Bureau (CFPB). Progressives see agencies as essential to advancing policy priorities on climate change and social justice.

Wall Street-friendly Republicans on Monday criticized Biden for bowing to leftists, warning the choices would be divisive.

“Biden’s team is bowing to members of the far left,” Patrick McHenry, senior Republican on the House of Representatives finance panel said of Chopra, while warning Gensler should “resist the pressure to requisition our title disclosure regime to try to correct economic or social problems. “

Chairman of the derivatives regulator from 2009 to 2014, Gensler implemented new swap trading rules created by Congress after the financial crisis, developing a reputation as a tough trader ready to resist powerful Wall Street interests.

Chopra helped set up the CFPB after the crisis and was its first student loan ombudsman. At the FTC, he campaigned for tougher rules for big tech companies on consumer privacy and competition, and for tougher enforcement penalties.

THE DEMOCRATS IN CONTROL

With Republicans appearing to have a good chance of retaining control of the Senate after the Nov. 3 election, financial executives had hoped Biden would pursue more moderate choices. But Democratic victories in two Georgia polls earlier this month mean Democrats will have effective control of the chamber once Biden and Vice President-elect Kamala Harris are sworn in on Wednesday.

These victories also mean Sherrod Brown will head the powerful Senate Banking Committee. He said he plans to try to repeal pro-Wall Street rules introduced by regulators under President Donald Trump.

On Monday, Brown hailed Chopra as a “bold” choice that would ensure the CFPB “plays a leading role in tackling racial inequalities in our financial system”, while Gensler “holds bad actors accountable” and gives the priority to “working families”.

Gensler is expected to pursue further corporate disclosures on climate change risks, political spending, the composition and treatment of the company’s workforce, and complete compensation restrictions leaders after the crisis, among other rules.

Chopra is expected to review payday lending and debt collection rules, which influential consumer groups say will not protect Americans. They also hope it will eliminate exorbitant loan rates and abusive debt collection practices, tackle student debt burdens and access to credit gaps for minorities.

“The CFPB has an extremely important job to do, including stopping financial scams,” said Lisa Donner, chief executive of Americans for Financial Reform, a think tank. “It also has an urgent role to play in helping families survive and recover from the economic crisis induced by the pandemic.”

Biden, however, will first have to fire Kathy Kraninger, the current CFPB director, a power he will have thanks to a Supreme Court ruling last year that said the CFPB director served in the will of the president.

But Richard Hunt, chief executive of the Consumer Bankers Association, dismissed the idea that Biden should automatically use that power.

“The CBA does not believe that it is in the best interests of consumers to have a new director with every change of administration. This boost will stifle innovation and prevent consistent regulations, ”Hunt said in a generally forceful statement.