Biden Picks Warren Allies to Head Financial Sector Oversight Agencies, SEC, and CFPB

January 18, 2021 Updated: January 18, 2021

President-elect Joe Biden on Jan. 18 announced six additional picks for top administration posts, including two progressive allies of Sen. Elizabeth Warren (D-Mass.) for positions in financial sector oversight, in a move that suggests more aggressive regulation of big business.

Biden has nominated a current member of the Federal Trade Commission (FTC), Rohit Chopra, to serve as the next director of the Consumer Financial Protection Bureau (CFPB), an agency that is Warren’s brainchild and that has often been the target of Republican criticism on grounds of executive overreach and tough regulatory posture.

Under President Donald Trump, CFPB directors have softened the agency’s strict approach to financial institutions, while Democrats have called for a more muscular bureau to take on what they say are financial-industry excesses.

Chopra, an ally of Warren, helped launch the CFPB in 2011 and previously served as assistant director of the agency, where he led efforts on student loans. At the FTC, he “pushed for aggressive remedies against lawbreaking companies, especially repeat offenders, and has worked to reverse the FTC’s reliance on no-money, no-fault settlements,” his FTC biography indicates.

A lawsuit was brought in 2019 alleging the CFPB’s unconstitutionality, with dozens of House Republicans joining in an amicus brief (pdf) in which they argued that its leadership structure was an “affront to the separation of powers” and that allowing it “would take a wrecking ball to one of the central pillars of our constitutional architecture.”

In June 2020, the U.S. Supreme Court ruled that the structure of the CFPB was unconstitutional as it “violates the separation of powers,” but stopped short of dismantling the agency. “The agency may therefore continue to operate, but its director, in light of our decision, must be removable by the president at will,” Chief Justice John Roberts wrote in an opinion.

Biden on Jan. 18 also announced that he will be appointing Obama-era Wall Street regulator Gary Gensler to lead the Securities and Exchange Commission (SEC).

Gensler, an 18-year Goldman Sachs veteran who joined the Treasury Department in 1997, was appointed by then-President Barack Obama to head the Commodity Futures Trading Commission in 2008, where he earned a reputation as an aggressive regulator. He helped reform the rules surrounding the $400 trillion swaps market as part of the Obama administration’s overhaul of financial sector regulations in the wake of the 2008 crisis.

“All of us that were involved at the time, and certainly myself, should have done more to protect the American public through aggressive regulation,” Gensler said shortly before he became chairman of the Commodity Futures Trading Commission.

Biden’s incoming economic team has signaled that it will formulate economic policy around issues such as climate change, gender equality, and race, rather than solely around traditional indicators of performance, such as gross domestic product. One of Biden’s proposals, which would fall under the remit of the SEC, would be to require publicly traded companies to disclose data on the racial and gender composition of their corporate boards “to better aid shareholders and advocates in their call for a diverse and inclusive management structure.”

Some conservatives have expressed reservation. Richard Morrison, a fellow at the conservative Competitive Enterprise Institute, said the former SEC chief has raised the alarm about “a ‘growing drumbeat’ for the Commission to impose reporting standards on environmental, social, and governance (ESG) topics.”

“That would be a mistake,” Morrison wrote of proposals to include political causes in financial sector regulatory initiatives, and urged Gensler to avoid taking an aggressive stance in this regard.

“I urge Mr. Gensler to focus on the Commission’s core mission of protecting investors and facilitating capital formation, not on divisive initiatives like forcing companies to report on whether they’ve supported a laundry list of political causes,” Morrison wrote in a statement.

It’s unclear how quickly the Senate will hold votes on Biden’s picks. So far, hearings have been scheduled for four key officials on Jan. 19: retired Army Gen. Lloyd Austin for Defense Secretary, Janet Yellen for the Treasury, Alejandro Mayorkas for Homeland Security, and Antony Blinken for the State Department.

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