Biden reshuffles US financial regulators to reign in corporates
America’s president-elect, Joe Biden, has begun reshuffling top office positions at various US financial regulators.
On Monday, just two days before his inauguration, Biden announced the appointment of Rohit Chopra to direct the Consumer Financial Protection Bureau (CFPB).
Biden also nodded to his intent to nominate Gary Gensler as the next chair of the Securities and Exchange Commission (SEC).
Both appointments signal tougher policing for financial services firms in the US, as Democrats – who have long argued Republicans have relaxed rules on large corporates – come back into power.
Chopra inherits the top CFPB role from Kathleen Laura Kraninger, who was nominated by Republicans for the role back in 2018.
She has since challenged the structure of the regulator in court. Democrats have also accused Kraninger of turning down restitution to consumers on multiple occasions.
“If the consumer bureau can’t get relief for consumers who have been harmed – and you admit they’ve been harmed – then what are you doing?” New York congresswoman, Carolyn Maloney, asked the director back in October 2019, as per an American Banker report.
One example, online payday lender Enova, paid a $3.2 million fine to the CFPB back in January 2019. It had extracted funds from 6,829 consumers’ bank accounts without authorisation.
According to a Democrat staff report, Enova offered to pay $1.6 million in restitution to those affected, but the regulator turned this down and didn’t require redress.
When the report emerged, California congresswoman Maxine Waters accused Karinger of ignoring advice from “career employees”, instead taking advice from “political appointees”.
In the first two years of Trump’s presidency, enforcement activity at the nation’s top three consumer protection agencies – including the CFPB – which resulted in fines of at least $5,000 plummeted 37%, compared to the last two years of Barack Obama’s presidency.
That’s according to a March 2019 report by watchdog group Consumer Carnage.
Chopra previously served as commissioner at the Federal Trade Commission (FTC). There, he voted in favour of the agency’s move to sue Facebook for “illegal monopolisation”.
He is also an ally of Massachusetts senator Elizabeth Warren. She called Biden’s new appointment of “a fearless champion for consumers” a “terrific” decision.
She added: “For too long, our banking regulators have behaved like they work for the financial institutions they regulate — not the American people.”
Previously, Chopra also served as assistant director of the CFPB, where he brought the regulator’s attention to alarmingly rapid rises in student debt.
Currently the Democrats are trying to push through legislated student finance aid during the ongoing global pandemic, which makes Chopra an ideal appointment to the role.
“In his government service, he has used all policy levers available to protect consumers from corporate wrongdoers,” says Mike Litt, consumer programme advocate with the US PIRG Education Fund.
“We couldn’t be happier with his selection to restore the CFPB after three years of disastrous leadership.”
Chopra has long angered lenders due to his consumer-first position on student loans, according to Wall Street Journal reports going as far back as 2014.
Former chairman of the Commodity Futures Trading Commission (CFTC), Gary Gensler is tipped by Biden to become the next chair of the SEC.
The ex-Goldman Sachs investment banker headed up the CFTC during Barack Obama’s presidency. He also, more recently, headed up Biden’s transition team on the Federal Reserve, banking and securities regulation.
Gensler is somewhat of a ‘convert’. Early in his career, he championed financial services deregulation, but decades later, he now stands for tighter enforcement in the industry.
Barbara Roper, director of investor protection at the Consumer Federation of America, says Gensler “can’t be intimidated” because of his autonomous Wall Street knowledge. “He’s a seasoned regulator who knows how to get things done.”
Karen Shaw Petrou, co-founder of financial-policy consultant Federal Financial Analytics, thinks the SEC’s priority under Biden will be investor protection.
She told NBC News she anticipates an Obama-era rule. This would see brokers compelled to work in their clients’ best interests.