Wall Street will have to prioritize climate change, racism

The influential Senate Banking Committee will get a new chairman from Ohio Democrat Sherrod Brown, who has said his top priorities for Wall Street will focus on tackling systemic racism and climate change.

“We’re going to see everything we do through the dignity of work and through a climate lens and through a racial justice lens,” Brown told reporters Tuesday.

With Democrats taking a slim majority in the Senate, Brown will take the first committee seat with Pennsylvania Republican Pat Toomey, who will lead the minority side of the committee.

Brown did not specify how he would pursue legislation targeting his priorities, but said he had asked potential candidates with administrative roles to consider their roles in climate risk assessment. Reuters reported on Tuesday that the Biden administration would select Gary Gensler as head of the Securities and Exchange Commission, which could help develop disclosure requirements on issues related to climate change.

Regulators like the Federal Reserve have already put forward the idea of ​​improving transparency within the banking sector on how they assess climate risks.

On racial justice, Brown noted that financial firms have shown greater interest in recognizing the racial economic divide, but said he would like to see a regulatory system that “might lead them a little faster. in that direction”.

Brown said calling Wall Street CEOs to testify on Capitol Hill is a possibility, expressing a desire to ask the big banks about “huge” CEO payouts and executive pay.

But in the early days of the Biden administration, Brown said his top priority would be relief from COVID-19.

“The first priority is COVID and doing what we need to do to grow this economy,” Brown said.

Outlook for banking regulation

Brown was a staunch opponent of reforms made under current committee chairman Mike Crapo, an Idaho Republican who pushed efforts to reduce some Obama-era regulations installed after the great financial crisis.

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Under the Trump administration, the GOP and some moderate Democrats were able to pass a bill in 2018 to strike down parts of the Dodd-Frank Act. Among the many changes: releasing many banks from the Volcker rule restrictions on proprietary trading.

Brown said he does not plan to reconsider this bill, but will review the implementation of regulatory changes made in recent years.

That review could include additional regulatory changes the Fed put in place under the leadership of Trump-appointed Randal Quarles.

As vice chairman of oversight of the Fed, the Fed reduced the liquidity and financing needs of large super-regional banks like US Bancorp (USB), PNC Financial (PNC), Capital One (COF) and Charles Schwab (SCHW).

Quarles can remain Fed governor until 2032, but the Biden administration may have the opportunity to replace him as head of regulatory affairs once his tenure as vice president oversight ends in October.

Brown said he would like to see him replaced by someone ideologically similar to Daniel Tarullo, the 2009-2017 Fed governor who installed the bank’s post-crisis stress testing regime. central.

“Vice President of Supervision Quarles has always, always, always pushed for whatever Wall Street needed,” Brown said, adding that he had asked Fed Chairman Jay Powell in the past to “moderate” them. efforts of Quarles.

Brown would be the keeper of any potential Biden nominee for banking regulators, since all financial regulatory appointments begin the process of confirmation by the Senate Banking Committee.

Brian Cheung is a reporter covering Fed, Economics, and Banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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