Biden picks for financial agencies offer preview of regulatory agenda

President Biden’s picks to lead two major financial industry regulators shed light Tuesday on their plans for expanding consumer and investor safeguards while holding financial firms to higher standards.

During their confirmation hearing, Biden’s nominees to lead the Securities and Exchange Commission (SEC) and Consumer Financial Protection Bureau (CFPB) vowed to be vigilant in a rapidly changing — and in some cases, perilous — financial landscape.

SEC Chairman nominee Gary Gensler would be taking the helm of a commission that was quickly ensnared in a high-profile debate last month over how closely the government’s stock market watchdog should handle a surge of investment activity driven by online trading platforms and the increasingly viral nature of markets.

“Every day on the job I’m going to be animated by working families and protecting investors as a key mandate of the agency,” Gensler told members of the Senate Banking Committee on Tuesday.

“Technology is providing greater access, but it also raises interesting questions,” he continued. “We’re going to need to study that and think about it and what does this mean for our marketplace.”

The other nominee at Tuesday’s hearing — CFPB Director-designate Rohit Chopra — would be in charge of a powerful consumer watchdog agency tasked with ensuring that tens of millions of Americans who have leaned on housing protections and debt forbearance during the pandemic can exit those programs without mistreatment or deception.

“While Congress has hit pause on many of the troubles in the mortgage market, we are not out of this,” Chopra told senators.

“Many families are going to struggle. They have lost income, they may not be able to resume [payments] and we should make sure that they can stay in their homes when they have that ability to do so.”

Both Gensler and Chopra appear on the road to confirmation in the 50-50 Senate, where Vice President Harris can cast any tie-breaking votes. A simple majority is needed for either one to get sworn in, and both Gensler and Chopra have been approved for Senate-confirmed positions before.

Even though confirmation is likely, that doesn’t mean the nominees didn’t face some harsh words of warning, from Republicans and Democrats alike.

“The SEC has been asleep on the job for long enough. It’s time for the commission to get up off its behind and protect investors and consumers, and I expect to see progress on all of these areas under your leadership,” Sen. Elizabeth Warren (D-Mass.) told Gensler on Tuesday.

On the other end of the political spectrum, several Republican senators griped with Gensler and Chopra’s expansive visions for the agencies they’re nominated to lead, raising some doubts about the extent of the bipartisan support they will receive both at the committee level and during subsequent floor votes.

Chopra, a Federal Trade Commissioner since 2018 and a former CFPB student loan watchdog, drew the most Republican backlash.

Throughout his career, Chopra has blasted federal regulators for refusing to penalize powerful companies for misconduct to the extent he thinks they deserve. His searing condemnation of the FTC’s settlement with Facebook drew bipartisan praise from big tech critics and elated liberals who back tougher penalties on major corporations.

Chopra said Tuesday he plans to continue that approach at the CFPB, arguing meager penalties and discrete settlements harm companies that play by the rules and leave consumers vulnerable to abuse.

“It is something that economically just does not make sense,” Chopra said. “When you rip someone off and don’t have to pay them back, how is that really much of a sanction?”

Progressives have been eager for Chopra to bring that mentality to the CFPB after four years of looser oversight, low-key enforcement and regulatory rollbacks imposed by Trump-appointed officials.

Chopra is expected to follow the precedent set by former CFPB Director Richard Cordray and Warren, the agency’s architect, with a focus on steep penalties, public shame and unequivocal warnings to the rest of the industry.

For Republicans, that’s precisely why Chopra’s nomination is problematic.

GOP lawmakers and financial industry advocates raged for years over the CFPB’s aggressive regulatory and enforcement agenda under Obama-appointed officials and warned Chopra about employing those tactics.

“We know that Commissioner Chopra favors unaccountable regulators with vast powers,” said Sen. Pat Toomey (Pa.), the Banking Committee’s ranking Republican.

“I’m concerned about whether or not he returned the CFPB to the hyperactive, often lawbreaking anti-business agency that it was under the Obama administration.”

While the criticism Gensler received was tepid in comparison, he also made commitments that rankled Republicans.

Gensler, who served as chairman of the Commodity Futures Trading Commission during the Obama administration, expressed support for requiring publicly traded companies to reveal more information about the climate-related risks they face and the money they donate to political causes — two key liberal priorities.

Republicans have argued that such requirements provide little important insight to investors, aren’t worth the time and effort necessary to comply, and could push companies away from legal but politically unfavorable activities.

Sen. Cynthia Lummis (R-Wyo.) told Gensler that her state’s revenue — which depends heavily on fossil fuel exports — was “dramatically declining” amid the transition to renewable energy sources and feared climate disclosures would make it “more difficult for energy companies to raise capital.”

Gensler countered that energy companies could benefit from having a clear set of standards to even the playing field as a growing number of investors prioritize climate change in their portfolios.