Joe Biden has a lot of people to thank for his election as President, and not just Elizabeth Warren and Bernie Sanders, but a whole host of others who helped him become the latest POTUS. With the Democrats making Blue Waves across the Congress and Senate, there will be very little in the way of Biden’s plans to pick the right Regulator.
The agenda for Biden was already being touted as ESG, China and the Stimulus package before he started, but it started to properly clarify this week.
Consumer Financial Protection Bureau
A few years ago, U.S. Senator Elizabeth Warren had a mighty showdown with Wells Fargo CEO John Stumpf at a Senate Banking Committee hearing. She also proposed and built the Consumer Financial Protection Bureau (CFPB) which has been enforcing federal consumer financial laws since 2010. Some of the ‘successes’ of the agency include:
Rohit Chopra was sworn in as a Federal Trade Commissioner in May 2018. Previously he had joined the Department of Treasury to launch the new CFPB, before that he had a stint at McKinsey & Co. too.
In December last year, Chopra tweeted:
“Today, I voted to sue Facebook for illegal monopolization. The lawsuits filed by the Federal Trade Commission and 48 AGs allege that Facebook bought or buried competitive threats.
Our complaints seek all relief necessary to remedy the harm, including breaking up the company.”
Warren shared about Chopra’s appointment: “I worked closely with Rohit Chopra to set up the CFPB and fight for America’s students, It’s terrific that President-elect Biden picked Rohit to run the CFPB.”
Commentators suggest that if Chopra succeeds in turning the CFPB around after the turbulent Trump era, then life will become hard for student lenders, payday lenders and credit-card companies that prey on consumers. The Blue Waves the Democrat Party has generated, has started to show the first signs of what the next Regulator will look like.
Senate Banking Committee
Another supporter of Senator Warren is the new chairman of the Senate Banking Committee, Senator Sherrod Brown. He has already spoken about some of his initial plans:
“For too long, the Senate Banking and Housing Committee has only delivered for Wall Street,” Brown said in a statement last Thursday. “Under new Democratic leadership, we’re going to get to work for everyone else, and put workers, and their families, and what matters to their lives at the center of everything we do.”
The market has reacted to the appointment too:
“We’re under no illusion,” said Consumer Bankers Association President and CEO Richard Hunt, who represents JPMorgan Chase, Bank of America and other lenders. “We have our work cut out for us.”
The Blue Waves of the Democrats strengthened their intent with this selection.
The Securities and Exchange Commission
Headlines trending on Twitter this week have included sentiments like:
“Outlook darkens for Wall Street as Biden’s regulators take shape”
“Biden’s Wall Street Watchdogs Signal New Era of Touch Oversight”
“Wall Street’s new sheriff is on a mission”
On the 16th November last year, Jay Clayton, Chairman of the Securities and Exchange Commission (SEC) confirmed that after serving for more than three and a half years, he will conclude his tenure at the end of this year.
In November, Gary Gensler, a former Chairman of the Commodity Futures Trading Commission (CFTC) was being considered as a potential Deputy Treasury Secretary.
Back when he was the Chairman, in 2013, one of the statements he published was:
“I support the final “Volcker Rule” before the Commission today. It achieves the important balance, as directed by Congress, of prohibiting banking entities from proprietary trading while at the same time allowing banking entities to engage in permitted activities, including market making and risk mitigating hedging.”
It is widely reported today that Gensler is Biden’s tip to lead the SEC now that Clayton has left the role:
Some of the biggest challenges that Gensler will be facing will include topics like: what to do about Chinese stocks listed on US Exchanges, how to resolve the rise of gamification amongst the new retail investors, and a strengthening of principles from the Volcker Rule.
The Blue Waves will be returning to the Dodd-Frank Act it would seem, Janet Yellen did suggest this last year.
How will Wall Street Respond?
With the impending $1.9 trillion relief package announced last Thursday some Exchanges took a tumble on Friday. Whether that is due to the new Regulators Biden is announcing or the Stimulus Package is a matter for discussion, but there are some interesting statistics that might help understand this better.
According to some commentators, the S&P 500 gained an average 11.3% in the first year of a Democratic president. But just 5.7% for Republicans, going back to World War II.
Earnings reports from companies like BofA, Goldman Sachs, Netflix, Charles Schwab and State Street have all been announced already this week. Many more will be announcing in the coming days, confusing the effects of Biden’s decisions on Capital Markets.
One thing is clear though, the rule-cutting and lax enforcement of the Trump era is over. For all that Clayton extolls how much he achieved as the head of the SEC, it is almost guaranteed that Gensler will go a step further.
Author: Andy Samu
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