Biden Administration At-A-Glance: The Nominees to Key Capital Markets Regulatory and Oversight Leadership Roles

In the first confirmation of a member of the Biden administration with jurisdiction over fiscal and economic policy and implications for U.S. capital markets and mortgage finance, the Senate yesterday evening voted 84-15 to confirm Janet Yellen as Treasury Secretary.

The former Federal Reserve Chair will become the first woman who will serve in the post and brings significant experience to the role, having been at the forefront of economic policymaking for 25 years; in addition to her former role as the first female Fed Chair, she also served as the first female chair of the White House Council of Economic Advisors during the Clinton administration and has enjoyed a long, successful career as a labor economist.[1]

According to Senator Sherrod Brown (D-OH) the top Democrat on the Senate Banking Committee, “As Fed chair and as a labor economist, she made it clear that she understands what drives our economy: It’s not the stock market; it’s not Wall Street—it’s people.” Similarly, upon the Senate Finance Committee’s unanimous vote to approve Ms. Yellen’s nomination, Senator Chuck Grassley, (R-IA) indicated his hope that the support from Republicans on the committee “signals an interest by me and I know by all of my Republican colleagues in working cooperatively and in a bipartisan way” with President Biden.[2]

The strong support Ms. Yellen’s appointment to Treasury Secretary underscores the strength of her qualifications, the bipartisan respect she cultivated throughout her career, and an awareness among members of Congress of the urgency of the task she must immediately grapple with on day one of her new role, including avoiding a protracted economic downturn; helping to advance an economic relief package as Americans and American businesses continue to financially suffer from the policies to combat the COVID epidemic; and ultimately address the dire fiscal health of the U.S. economy at-large, but particularly the rapidly rising budget deficits facing the Federal as well as state and local governments.[3]

As Senate Minority Leader Mitch McConnell aptly noted before the vote, “This certainly isn’t because Dr. Yellen’s or President Biden’s economic policy views have unanimous support in the Senate. I expect we’ll have no shortage of spirited policy discussions with Dr. Yellen in the months ahead—especially if some Democrats keep trying to use this historic emergency as a pretext to push through permanent far-left policy changes.”

Gary Gensler, who had been leading then-President-elect Biden’s transition planning for financial industry oversight since November, has officially been announced as the new administration’s pick to serve as chair of the U.S. Securities Exchange Commission.

As chair of the Commodity Futures Trading Commission (CFTC) from 2009 to 2014 under President Obama, Gensler was instrumental in the promulgation and implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), specifically with respect to dramatic regulation of derivatives markets and swaps trading, including the infamous “Volcker Rule.”

That experience earned him a reputation as a “hard-nosed operator willing to stand up to powerful Wall Street interests”. According to the Reuters, “His appointment as the country’s top securities regulator is expected to put an end to the four years of rule-easing that Wall Street banks, brokers, funds and public companies have enjoyed under President Donald Trump’s SEC chair Jay Clayton.”[4]

Gensler also oversaw the prosecution of banks culpable for rigging LIBOR, the fallout of which the industry is still grappling with and which will continue to be among the top issues for Wall Street and its regulators to resolve in the near future.

As such, his appointment is likely to prompt concern among financial institutions that Gensler will pursue not only tougher regulations related to Democratic policy priorities including climate-change related risks, political spending and social justice, but also punitive enforcement actions on matters ranging from LIBOR transition issues, data privacy and cybersecurity breaches, and due diligence and disclosure violations.

Last week, then-President-elect Joe Biden announced FTC Commissioner Rohit Chopra as his pick to lead the Consumer Financial Protection Bureau (CFPB). Chopra is widely recognized as a CFPB veteran as he was among Senator Elizabeth Warren’s (D-MA) first hires when the bureau was established and built from the ground up in the aftermath of the 2008 financial crisis.[5]

In 2011, he was appointed to serve as the CFPB’s student loan ombudsman, a role established under the Dodd-Frank Act. His background as the bureau’s top watchdog on student loans is suggestive of the importance that asset class will play in the CFPB’s oversight capacity during the Biden administration.

According to President Biden’s presidential transition website, Chopra “has actively advocated to promote fair, competitive markets that protect families and honest businesses from abuses. Commissioner Chopra was unanimously confirmed by the Senate in 2018, and he has pushed for aggressive remedies against lawbreaking companies, especially repeat offenders.”[6]

According to HousingWire, “Chopra’s appointment signals the Biden administration could be preparing for a return to a more aggressive regulatory regime. In his previous roles, together with state and international law enforcement partners, he has worked to increase scrutiny of dominant technology firms that pose risks to privacy, national security and fair competition.”

Meanwhile, consumer groups have expressed enthusiasm for the decision. Per the Center for Responsible Lending, “We are encouraged that the CFPB will now return to its mission of protecting people’s finances, which has heightened significance in this economic downturn, and which includes a strong fair lending program. Chopra is the latest in a series of impressive federal agency and department nominees, which includes former Federal Reserve Chair [Janet] Yellen, [and] Congresswoman [Marcia] Fudge…”[7]

Democratic Representative Marcia Fudge (OH-11) has been nominated to replace Secretary Ben Carson to lead the Department of Housing and Urban Development (HUD). Fudge has represented Ohio’s 11th District – located in Cayuga County region between Cleveland and Akron – since 2008 and most recently served on the House Committees on Agriculture, House Administration, and Education and Labor.[8]

In light of her role on the House Agriculture Committee, Rep. Fudge had openly and aggressively lobbied for the role of Secretary of Agriculture, and her nomination to lead HUD came as something of a surprise to many in Washington. As POLITICO reports, Fudge in fact “lamented [in November] in an interview with POLITICO that Black policymakers have traditionally been relegated to just a handful of Cabinet positions — including HUD secretary.”[9]

However, as the COVID-19 pandemic has caused millions of people to fall behind on their rent and mortgage payments, HUD will play a central role in the Biden administration’s economic policymaking and COVID-relief plan. As countless Americans face eviction and significant back-rent and mortgage bills as earlier relief programs begin to expire, if confirmed, Fudge will therefore be instrumental in the implementation of Biden’s economic recovery plan, which is expected to dedicate billions of dollars to rent relief.

Additionally, HUD is expected to seek additional funding to address homelessness, consistent with the Biden administration’s agenda to address the ever-widening gap in home ownership rates between white and Black Americans, seen as a key driver of the ever-persistent racial wealth gap.