The Finance 202: Gary Gensler, Biden’s likely pick to lead the SEC, has earned his rep as a Wall Street scourge

But when Kara Stein, a Democratic SEC commissioner at the time, got wind that her agency’s chief, Mary Jo White, was pushing for what she viewed as a watered-down version of the Volcker Rule, she knew who to call.  The rule, banning big banks from trading for their own gain, […]

But when Kara Stein, a Democratic SEC commissioner at the time, got wind that her agency’s chief, Mary Jo White, was pushing for what she viewed as a watered-down version of the Volcker Rule, she knew who to call. 

The rule, banning big banks from trading for their own gain, needed sign off from the CFTC. Stein was outnumbered on the SEC, but she had little trouble convincing Gensler of the stakes, her then-counsel Tyler Gellasch tells me. “Gary essentially said, ‘If you don’t like it, I don’t like it, and we won’t vote on it.’” The move gave Stein the leverage she needed to insist on a stronger standard, a position that ended up carrying the day. 

For Gellasch, who now leads the investor trade group Healthy Markets, the episode revealed two qualities of Gensler’s leadership: His ability to put the quick-study skills that elevated him to Goldman partner at age 30 to work understanding complex policymaking on the fly; and a knack for matching toughness with creativity to summon power beyond his official remit and deliver results. 

Now, on the threshold of being tapped to serve as Wall Street’s top cop, Gensler stands as a figure mostly beloved by progressives and feared by the finance industry that launched him. 

Gensler’s selection is likely but not final, my colleague Jeff Stein reports, a cautionary note struck by other outlets confirming the development, first broken by Reuters. A Biden spokesman did not respond to a request for comment. Gensler’s claim on the job appears to have strengthened since Democrats swept two Georgia Senate runoff races last week, recapturing control of the chamber and easing his path to confirmation. 

“Gary Gensler as chairman of the SEC is exactly what not only the SEC needs, but what investors who’ve been thrown to the wolves for the last four years need,” says Dennis Kelleher, president of Better Markets, which advocates stricter financial regulation. “He has the potential to return the SEC to the gold standard of investor protection.”

Industry critics weren’t always so convinced. 

These days, Gensler is leading the Biden transition’s agency review team. When President Obama tapped him to head the CFTC, liberals were deeply skeptical of his intentions, and not only because of his Wall Street background. They also pointed to his work as an aide in the Clinton Treasury Department opposing stricter oversight of derivatives, the financial instruments that intensified the devastation of the 2008-2009 financial crisis. Sen. Bernie Sanders (I-Vt.) opposed his confirmation.

Once installed, though, Gensler sought and secured tougher restrictions on derivatives than the Obama Treasury Department proposed, as we noted here last month. “At the end of his first year on the job, as improbable as it would have seemed a few months earlier, Treasury now felt the need to declare it stood shoulder to shoulder with Gary Gensler,” Noam Scheiber wrote in “The Escape Artists.” 

As Gellasch recalls, “He plowed ahead with rule after rule after rule and didn’t just propose them but finalized them, implemented them, and then defended them in court… There was a lot to do, and he was able to do it.”

Gensler would be taking the SEC’s helm with a less urgent mission but a nevertheless ambitious agenda. 

Progressives “are hoping the SEC under Mr. Biden will move swiftly to undo policy changes implemented by recently departed Chairman Jay Clayton. Those include curbs on shareholders’ ability to propose resolutions at company proxy meetings and efforts to make it easier for private companies to raise capital without registering with the SEC,” the Wall Street Journal’s Andrew Ackerman and Dave Michaels write

“Other priorities that a Democratic-led SEC are expected to consider include requiring companies to disclose more information about risks related to climate change and about workforce diversity and political contributions.” Gensler could also push for more disclosure of corporate political spending, a subject making headlines this week. 

Mob attack fallout

The Republican dam on impeachment may be breaking as the House takes up the matter today. 

Liz Cheney supports it; Mitch McConnell is open to it: “The push for an unprecedented second impeachment of Trump took a dramatic bipartisan turn, as several senior House Republicans joined the Democratic effort to remove Trump for his role in inciting an angry mob to storm the Capitol last week and the White House braced for more defections,” Mike DeBonis, Josh Dawsey and Seung Min Kim report.

“Cheney (Wyo.), the third-ranking House Republican, and Rep. John Katko (N.Y.), the top Republican on the House Homeland Security Committee, both publicly held Trump responsible for last Wednesday’s violence. They were later joined by Reps. Adam Kinzinger (R-Ill.), Fred Upton (R-Mich.) and Jaime Herrera Beutler (R-Wash.) … Meanwhile, Senate Majority Leader Mitch McConnell has been telling associates since the attack that Trump probably committed impeachable offenses. McConnell, a close adviser said, has not decided how he will vote on impeachment and wants to hear the case first.”

Tom Barrack told Trump his efforts to overturn the election would be costly.

The president didn’t listen and now his businesses are paying the price: “In the past week, it has lost a bank, an e-commerce platform and the privilege of hosting a world-famous golf tournament, and its hopes of hosting another have been dashed. In the future, the Trump Organization also could lose its D.C. hotel and even its children’s carousel in Central Park, if government landlords in Washington and New York reevaluate their contracts with Trump,” Josh Dawsey, David A. Fahrenthold and Jonathan O’Connell report.

“Trump lost a much bigger broker relationship when real estate giant Cushman & Wakefield told The Washington Post it would no longer work with him. The company has handled an array of business for Trump for many years, including office leasing at Trump Tower and 40 Wall Street, and retail leasing in Chicago. It means that Trump’s company will quickly have to find someone else to handle lease negotiations at some of his most prominent properties. 

  • Department of self-inflicted wounds: “By refusing to acknowledge that he would be returning to private life, Trump appears to have sabotaged what could have been his best chance at success in that realm — a rebound of the battered Trump brand.”

Other news:

  • Walmart halts political donations to lawmakers who tried to overturn the election: “The company’s PAC last year donated $1.2 million, split evenly between Democrats and Republicans, though its contributions in previous election cycles have typically skewed Republican,” Aaron Gregg reports. The Wall Street Journal is now maintaining a sortable list of the 47 companies and counting suspending their donations either in total or just to those Republicans who opposed certifying Biden’s victory — find it here.
  • U.S. Chamber’s Donohue slams Trump, defers on removal. Tom Donohue, the CEO of the big business lobby, “told a news conference that Trump ‘undermined our democratic institutions and ideals’ and it was up to Vice President Mike Pence, the Cabinet and Congress to decide whether to try to oust Trump early through the Constitution’s 25th Amendment or impeachment proceedings,” Reuters reports
  • YouTube suspends Trump. The video-streaming service, last among the big social media platforms to suspend the president, said it removed new content from his channel “in light of concerns about the ongoing potential for violence,” Rachel Lerman reports. The ban on new content will last at least a week.
  • DOJ investigating sedition and conspiracy charges: “The investigation, one of the largest ever undertaken by the department, includes counterterrorism and counterintelligence facets and has led to charges against more than 70 people and identified 170 suspects to date, acting U.S. attorney Michael R. Sherwin of D.C. said,” Spencer S. Hsu, Keith L. Alexander and Shayna Jacobs report.

Coronavirus fallout

Job postings ended 2020 well below pre-pandemic levels.

It’s another sign of a cooling labor market: “Available jobs posted online were down 10.6 percent at the end of December from a year earlier, according to job-search site Indeed’s measure of job posting trends. Postings rose from the end of November, when the number of available jobs were 11.8 percent below 2019’s trend, but the pace of improvement has eased since the summer, when businesses started to reopen after spring lockdowns,” the Wall Street Journal’s Sarah Chaney Cambon reports.

“January is normally a strong month for job openings, but this year may be different, said Nick Bunker, economist at Indeed.”

More from the U.S.:

  • More than 22,798,000 cases have been reported; more than 379,000 have died.
  • Trump administration pivots vaccine strategy: “The Trump administration announced sweeping changes to its vaccination rollout, including making all of the coronavirus vaccine supply immediately available, urging states to provide shots to anyone 65 and older and warning states with lagging inoculations that they could lose some of their shots to speedier places,” Lena H. Sun, Laurie McGinley, Isaac Stanley-Becker and Amy Goldstein report.
  • House Democrats want to fine colleagues $1,000 a day for not wearing masks: “It is a move that comes as at least three Democratic House members — Reps. Brad Schneider (Ill.), Pramila Jayapal (Wash.) and Bonnie Watson Coleman (N.J.) — revealed within 24 hours that they had tested positive for the coronavirus after sheltering with dozens others in a committee room on Wednesday as a pro-Trump mob stormed the building. Several Republicans in the room refused to wear a mask,” Paulina Firozi reports.

From the corporate front:

  • Ford shuts down a plant due to lack of computer chips: “When car sales bounced back sooner than expected, it left the industry struggling with a chip shortage. That was exacerbated by increased demand for laptops during the stay-at-home era — and the electronic and computer industries snapping up the excess supply of chips, said Kristin Dziczek, vice president of research at the Center for Automotive Research, a Michigan think tank,” CNN Business’s Chris Isidore reports.

The transition

Biden is preparing to roll out his stimulus plan.

His hope is not to use reconciliation: “The proposal, which Biden intends to unveil on Thursday, is expected to include $2,000 stimulus payments, an extension of enhanced unemployment insurance, money for vaccine distribution and delivery, funding for cities, states, schools, child care and more,” Erica Werner and Jeff Stein report.

“That’s led to speculation that the price tag of the package could be below $2 trillion — although Biden said last week that it could cost in the multiple trillions of dollars. Republicans are likely to balk… Biden’s unveiling of the package is likely to kick off a furious round of lobbying and horse-trading as numerous lawmakers push for their priorities in the legislation. In a new letter, Sen. Cory Booker (D-N.J.) and Rep. Ayanna Pressley (D-Mass.) are pushing Biden to include their”Baby Bonds’ proposal to give every American child a bank account seeded with $1,000 that they could access at age 18.”

Market movers

Stocks virtually unchanged.

Traders continue to weigh the possibility of more stimulus versus greater unrest: “The Dow Jones Industrial Average rose 60 points, or 0.2 percent, to 31,068.69. The Nasdaq Composite ended the day up 0.3 percent at 13,072.43. The S&P 500 rose marginally to 3,801.19. Losses from major tech companies kept Tuesday’s moves in check,” CNBC’s Fred Imbert and Maggie Fitzgerald report.

“Shares of Goldman Sachs rose 2.9 percent to lead the Dow higher. JPMorgan Chase and Bank of America were up 1.6 percent and 1.8 percent, respectively. Charles Schwab gained 1.6 percent and hit an all-time high.”

Fed sees potential economic boom from vaccines: “One U.S. Federal Reserve official says there is now a ‘clearer focus’ about the economy’s path forward and a horizon for a fuller recovery. Another says the pandemic’s ‘endgame’ is here. A third predicts 2021 will prove ‘impressive,’” Reuters’s Howard Schneider reports.

“For the Fed, even though the country’s short-term political and health risks seem great, they have focused on the more positive prospects of the medium term – with some suggesting the strength of the ensuing recovery may accelerate their plans to pull on some of the steps taken this year to battle the coronavirus recession.”

Municipal borrowing hits a 10-year high: “Bonds for new projects reached $252 billion last year, according to Refinitiv, a small increase from the previous year and the highest since 2010, when a federal incentive program helped push the total above $270 billion. The new borrowing drove the total amount of outstanding muni debt above $3.9 trillion for the first time since 2013, according to the Federal Reserve data from the third quarter,” the WSJ’s Heather Gillers reports.

Pocket change

GM unveils a potential foray into flying cars and electric van.

The carmaker saw its stock soar to a record high: “The Detroit automaker’s stock closed up 6.2 percent at $47.82 a share, setting a new closing record after hitting an intraday high of $48.95 earlier Tuesday morning,” CNBC’s Michael Wayland reports.

“The EV600 electric van is scheduled to go on sale later this year through a new commercial business unit of GM’s called BrightDrop … GM’s potential foray into ‘personal air mobility’ was announced as part of Cadillac’s portfolio of luxury and EV vehicles. It included an autonomous shuttle and an electric vertical takeoff and landing (eVTOL) aircraft, or more commonly known as a flying car or air taxi.”

SolarWinds says there is earlier evidence of massive hack: “Russian-linked hackers were accessing its systems in early September 2019, the network-management company said … based on a continuing investigation. Cybersecurity experts suspect preparations for the attack go back far longer,” the WSJ’s Dave Sebastian reports.

“The Austin, Texas-based company said an analysis suggests that hackers circumvented detection by mimicking legitimate network traffic that was run through U.S. servers. It is still trying to establish how the code entered its software and went undetected, the company said.”

Boeing limps into the new year: “The company delivered about 60 percent fewer aircraft to customers in 2020 than 2019 and less than one-third the deliveries of rival Airbus, the lowest in 43 years, company data showed,” Reuters’s Eric M. Johnson reports.

Visa abandons planned $5.3 billion acquisition of Plaid: “The Justice Department sued to block the deal in November, alleging the acquisition would allow Visa to unlawfully maintain a monopoly in the online debit-card market. Plaid, the government argued, was a nascent but important competitive threat to Visa, and eliminating that threat would lead to higher prices, less innovation and higher entry barriers for online debit services,” the WSJ’s Brent Kendall, AnnaMaria Andriotis and Peter Rudegeair report.

Sheldon Adelson dead at 87.

The legacy he leaves: “Adelson, a billionaire casino tycoon and free-spending political donor who helped bankroll conservative candidates in the United States and Israel, and who pushed the governments of both countries to reject the establishment of a Palestinian state alongside Israel, died Jan. 11 in Malibu, Calif,”  Donald Frazier writes in The Post’s obit.

“One of the world’s richest self-made men, he amassed an estimated fortune at one point this decade valued at $40 billion — Forbes now lists it at $35 billion — and used much of it to advance conservative causes and leaders, including a $25 million donation to help elect [Trump] as president in 2016. He also played a sizable role in underwriting Israeli Prime Minister Benjamin Netanyahu’s return to power in 2009.”

  • “Little known outside the business world for much of his life, Adelson vaulted to the forefront of national politics in 2012, when he and his wife buoyed the faltering presidential campaign of former House speaker Newt Gingrich (R-Ga.) with tens of millions of dollars in donations to a political action committee.”

Daybook

  • The Center for American Progress holds an event on its new policy framework to rebuild America over the next decade
  • The Labor Department reports weekly jobless claims
  • Former Treasury secretary Robert Rubin, former OMB director Peter Orszag and Nobel laureate Joseph Stiglitz unveil their budget framework for an uncertain world during a PIIE event
  • Delta Air Lines, BlackRock and Taiwan Semiconductor are among the notable companies reporting their earnings
  • The Census Bureau releases estimates of retail and food sales for December
  • JPMorgan Chase, Citigroup and Wells Fargo are among the notable companies reporting their earnings

The funnies

Bull session

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Thu Jan 14 , 2021