On Monday, January 18, President-elect Biden nominated Rohit Chopra to be Director of the Consumer Financial Protection Bureau (CFPB) and Gary Gensler to be Chair of the Securities and Exchange Commission (SEC).
Rohit Chopra, Director of the Consumer Financial Protection Bureau
Chopra currently is a Commissioner of the Federal Trade Commission (FTC). He previously served as Assistant Director of the CFPB, an agency which he helped now-Senator Warren (D-MA) establish. Chopra was the Treasury Department’s first Student Loan Ombudsman, a position created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, following the 2008 financial crisis. He was nominated to the FTC by President Obama and was unanimously confirmed by the Senate in 2018.
Chopra’s tenure at CFPB was marked by his focus on student loan debt, including uncovering a student loan scheme that overcharged members of the military. Under his guidance the agency sued both Corinthian Colleges and ITT Educational Services, resulting in both institutions being dissolved. Before joining the Obama-Biden administration, Chopra worked for McKinsey. He earned his bachelor’s from Harvard University and his MBA from the Wharton School at the University of Pennsylvania.
Gary Gensler, Chair of the Securities and Exchange Commission
Gensler is the professor of the Practice of Global Economics and Management at the MIT Sloan School of Management, Co-Director of MIT’s Fintech@CSAIL, and Senior Advisor to the MIT Media Lab Digital Currency Initiative. He also leads the Biden-Harris transition agency review team for the Federal Reserve, Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Securities and Exchange Commission. Gensler served as Chair of the CFTC in the Obama-Biden administration from 2009 to 2014 and served in the Clinton administration as Under Secretary of the Treasury for Domestic Finance and as Assistant Secretary of the Treasury for Financial Markets. As Chair of the CFTC, Gensler led efforts to implement oversight of the swaps market, which was at the center of the 2008 financial crisis.
Gensler served as Chief Financial Officer for Hillary Clinton’s presidential campaign and has previously served as Co-Head of Finance for Goldman Sachs. He started his career with Goldman Sachs, working as a top mergers and acquisitions banker, and leading the team that advised the NFL on the sale of television rights, before advancing up through the company. Gensler also served as a senior advisor to then-Chair of the Senate Banking Committee Senator Sarbanes (D-MD), helping to write the Sarbanes-Oxley law tightening accounting standards following the Enron and WorldCom scandals. He was selected in 2017 to be the Chairman of the Maryland Financial Consumer Protection Commission. Gensler earned his bachelor’s and master’s from the Wharton School at the University of Pennsylvania.
President-elect Biden’s nominations of Rohit Chopra and Gary Gensler continue the trend of former Obama administration officials extending their service in the Biden era. Both nominees have extensive experience in the areas they would oversee, with Chopra helping to stand up the CFPB and Gensler’s background at Goldman, Treasury and the CFTC, where he oversaw a significant portion of the swaps market.
More than perhaps any other nominees to date, the nominations of Chopra and Gensler underscore the cliché that elections have consequences. To be sure, both Chopra’s and Gensler’s names were on multiple short lists for top Biden administration regulatory jobs, dating back to last year. However, the Georgia Senate elections and subsequent change in Senate majority power have increased the chances that both nominees will be confirmed in an evenly divided Senate. While no one expects Chopra’s Senate vote to match the voice vote he received in 2018 as an FTC commissioner, Chopra is a favorite of Senator Warren and is likely to receive unanimous support from the Democratic caucus. Similarly, Gary Gensler, who led the Biden transition’s agency review team for several financial regulators, including the SEC, is likely to receive the necessary support for confirmation. Gensler has longstanding relationships with senators and House members going back to his time as President Obama’s chairman of the CFTC during Dodd-Frank negotiations. Those with long memories will remember the detailed role Gensler played in the drafting and markup of Title VII of Dodd-Frank, regulating the swaps market, part of which Gensler oversaw at the CFTC and part of which he would oversee at the SEC. Gensler is also widely respected by both the progressive and moderate wings of the Democratic Party. He enjoyed a good working relationship and regular communications with the NewDems in the House during his time as CFTC Chair.
Given his background at the CFPB, and the ongoing issue of student lending and debt, expect Chopra to continue focusing on student lending as Director. Additionally, all corners of consumer finance including mortgage servicing, credit reporting, debt collection, auto lending and payday lending, to name a few, will receive a closer examination and increased enforcement actions. Chopra’s future confirmation hearing will yield increased insight into his potential agenda at the Bureau, but we expect a return to the Richard Cordray-era focus on the CFPB’s broad authority to prohibit unfair, deceptive, and abusive acts or practices (UDAAP). Current CFPB Director Kathy Kraninger curtailed the Bureau’s extensive exercise of UDAAP authority and regulation by enforcement under Director Cordray, and the change in administration is likely to signal a significant change in direction yet again at the CFPB.
Similarly, the transition from Jay Clayton to Gary Gensler at the SEC will mark a very different approach toward securities regulation, with greater enforcement likely and a new focus on areas like cryptocurrency and environment, social and governance (ESG) regulations. Gensler is a fierce advocate for investor protections. Having taught a course on cryptocurrencies at MIT, he will now be in a position to push for greater regulation of crypto exchanges in particular, and cryptocurrencies in some instances, including Bitcoin. Gensler will also likely reverse the Trump SEC’s posture on ESG, and like other departments and agencies under the Biden administration will likely work to require public companies to disclose any climate-related financial risks in their operations and supply chains. Under Chairman Gensler, the SEC would have a working majority. Regulated entities can expect a much greater focus on ESG requirements under a Gensler chairmanship.
The Senate Banking Committee is likely to schedule hearings for both nominees in the coming weeks, and incoming Chairman Sherrod Brown intends to move both Chopra and Gensler through committee and off the Senate floor as soon as possible. Given the impending Senate impeachment trial of President Trump and the realities of Senate floor time and competing priorities, it may take a few months for both nominees to be confirmed. However, both Chopra and Gensler will be ready to begin advancing their agendas on day one of their new roles.