Wall Street on notice with Biden poised to get tough 

The new Democratic President isn’t going to let the US financial sector stand in the way of his climate change and social justice causes - and he wants to reform payday lending and debt-collection rules too 

by Sean OMeara
Wall Street on notice with Biden poised to get tough 
Wall Street-friendly Republicans criticised Joe Biden for ‘bowing to leftists'. Photo: Reuters

Wall Street could be facing an uncomfortable four years after President-elect Joe Biden's team confirmed he planned to nominate consumer champions to lead two powerful financial agencies.

Signalling a tougher stance on the industry than had been expected, Gary Gensler will serve as chair of the Securities and Exchange Commission (SEC) and Federal Trade Commission member Rohit Chopra will head the Consumer Financial Protection Bureau (CFPB). 

Progressives see the agencies as critical to advancing policy priorities on climate change and social justice. 

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But Wall Street-friendly Republicans criticised Biden on Monday for ‘bowing to leftists', warning the picks would be divisive. 

"The Biden team is pandering to members of the far-left," Patrick McHenry, lead Republican on the House of Representatives finance panel said of Chopra, while warning Gensler should "resist pressure to commandeer our securities disclosure regime to try to fix non-economic issues or social problems”.

The chair of the derivatives regulator from 2009 to 2014, Gensler implemented new swaps trading rules created by Congress after the financial crisis, developing a reputation as a tough operator willing to stand up to powerful Wall Street interests. 

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

DEMOCRATIC CONTROL

With Republicans appearing to have had a good chance of maintaining control of the Senate following the November 3 election, financial executives had hoped Biden would pursue more moderate picks. But Democratic victories in two Georgia run-off elections earlier this month mean Democrats will now have effective control of the chamber once Biden and Vice President-elect Kamala Harris are sworn in. 

Those wins also mean anti-Wall Street firebrand Sherrod Brown will lead the powerful Senate Banking Committee. He has said he plans to try to repeal Wall Street-friendly rules introduced by President Donald Trump's regulators.

On Monday, Brown hailed Chopra as a "bold" choice who would ensure the CFPB "plays a leading role in combating racial inequities in our financial system," while Gensler would "hold bad actors accountable" and put "working families first”.

Gensler is expected to pursue new corporate disclosures on climate change related-risks, political spending, and the composition and treatment of company workforces, and to complete post-crisis executive compensation curbs, among other rules.

PAYDAY LENDING

Chopra is expected to review payday lending and debt-collection rules, which influential consumer groups say won't protect Americans. They also hope he will stamp out exorbitant lending rates and abusive debt-collection practices, address the student debt burden and gaps in minorities' access to credit. 

"The CFPB has an incredibly important job to do, including stopping financial rip-offs," said Lisa Donner, executive director at think tank Americans for Financial Reform. "It also has an urgent role to play in helping families survive and recover from the pandemic-induced economic crisis."

Biden, though, will first have to fire Kathy Kraninger, the current CFPB director, a power he will have thanks to a ruling last year by the Supreme Court which said the CFPB director served at the president's will.

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

“The CBA does not believe it is in the best interest of consumers to have a new director with each change in administration. This whip-saw effect will stifle innovation and prevent consistent regulations," Hunt said.

  • Reuters

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