Two candidates for President Joe Biden’s team of Wall Street regulators appeared before the Senate Banking Committee on Tuesday for a joint hearing on their nominations.
Gary Gensler, named head of the Securities and Exchange Commission, and Rohit Chopra, online to head the Consumer Financial Protection Bureau – are expected to take a hard line against the interests of the financial services they would oversee.
Their aggressive approaches are likely to cause Republicans to pull back somewhat. But both won Senate confirmation by wide margins for other regulatory positions – Gensler in 2009 as chairman of the Commodity Futures Trading Commission and Chopra in 2018 for a seat on the Federal Trade Commission.
Gensler, testifying via video, was asked about the turbulent stock market drama involving GameStop stocks that has spurred clamor for tighter Wall Street regulation. The trading frenzy of stocks in the struggling video game retailer raised their price 1,600% in January, though they then fell back to earth after days of crazy price swings.
“Basically, it’s about protecting investors,” Gensler said. Among the issues to consider, he said, is the use of “behavioral” technology in stock trading applications.
“What does it mean when you have behavioral prompts to get investors to trade more? We’re going to have to study that and think about it,” Gensler told the panel.
The GameStop episode prompted lawmakers to worry about the business model of Robinhood, the online trading platform that has welcomed a wave of trading in GameStop. Critics have accused Robinhood of trying to attract people with little or no experience in stock trading by including features on its trading platform that resemble gaming apps – like covering the screens of virtual confetti users when making a transaction. Lawmakers have asked if Robinhood is doing enough to communicate the risks to its roughly 13 million users.
If confirmed to the SEC position, Gensler said, he would work to strengthen transparency and accountability in the markets. This will allow people “to invest with confidence and to be protected against fraud and manipulation,” he said.
Gensler has shown his receptiveness to new financial technologies and cryptocurrency. As a professor at the Sloan School of Management at the Massachusetts Institute of Technology, he focused his research and teaching on public policy as well as digital currencies and blockchain, the global ledgers of digital currency transactions.
Having worked for nearly 20 years at Goldman Sachs, the Wall Street investment bank, Gensler surprised many by being a strict regulator of big banks as chairman of the Commodity Futures Trading Commission during the 2008-09 financial crisis. . He imposed a $ 400 trillion global market surveillance for the complex financial instruments that helped trigger the 2008-09 crisis. Gensler lobbied for tighter regulations that the big banks and financial firms had lobbied against, and he was not afraid to take positions that clashed with the Obama administration.
CONSUMER WATCH DOG
Biden’s candidate for head of the Federal Consumer Watch Agency said on Tuesday that if confirmed, he would reinstate more aggressive enforcement action against businesses and banks that largely faded under the Trump administration.
Chopra, currently Democratic Commissioner at the Federal Trade Commission, would be the third permanent director of the Consumer Financial Protection Bureau, created in the aftermath of the 2008 financial crisis.
On the first day of his tenure, Biden asked President Donald Trump’s office manager Kathy Kraninger to step down.
Republicans criticized the office early on, arguing that its structure grants too much power to one person, its director. The office is also not subject to the annual Congressional budget process, but receives all of its funds from the Federal Reserve.
Chopra said during his Senate confirmation hearing on Tuesday that he planned to “work with [senators] build a new bipartisan consensus ”for the office.
But he also signaled that he wanted to give the agency back to what it was before. During the Trump administration, the office significantly reduced its enforcement measures, both in number and size, and relegated concerns, such as fair loans, to a much smaller position within the office.
Chopra said that, if confirmed, he would likely send the office back to aggressive fines and sanctions against companies for bad behavior.
“Economically, it doesn’t make sense to rip someone off and not have to pay a penalty for it,” Chopra told Senators. “Restitution is an essential part of the work of the CFPB.
A former consultant at McKinsey & Co. before the financial crisis, Chopra is a veteran of the office, working there in his early days as a senior office official on student loan matters. He is considered a staunch ally of Senator Elizabeth Warren, D-Mass., Who proposed the idea for the office long before the 2008-2009 recession. It is also popular with consumer groups who often oppose banks on regulatory matters.
Information for this article was provided by Marcy Gordon and Ken Sweet of The Associated Press and Tory Newmyer of the Washington Post.