Foreign Policy

Be careful for Wall Avenue: Biden could also be coming for you

In a tumultuous 10 days of U.S. President Donald Trump refusing to admit President-elect Joe Biden, crippling the president’s transition, cleaning up the Pentagon and washing hands of the pandemic, very little is about the future of American politics became clear.

One trend line could become clear, however: Biden’s willingness to strengthen Wall Street regulation in a dangerous international financial environment. He has set up a transition team on financial reforms led by Gary Gensler, an aggressive regulator who has made remarkable progress in public life, from the Wall Street employee and loyal acolyte of former Treasury Secretary Robert Rubin (who ran Wall Street in the 1990s deregulated) to one of the most threatening nemes in the financial sector.

As head of the Commodity Futures Trading Commission (CFTC), Gensler introduced important new rules for global trading in derivatives in the 2010s and strengthened the Dodd-Frank Regulatory Act, which Trump sought to weaken. He also cited charges of tightening the so-called Volcker Rule to exclude banks from risky proprietary trading, especially when it became clear that banks could evade it by shifting trading to their overseas operations.

“He was seen as one of the most progressive regulators,” Michael Greenberger, a former CFTC official at the University of Maryland, said of Gensler. “This task force sends a pretty good signal.”

Gensler is joined by other prominent progressive voices, including Simon Johnson, former chief economist at the International Monetary Fund and professor at the Massachusetts Institute of Technology, who co-wrote the book 13 bankers, Dennis Kelleher, the head of Better Markets, an advocacy group criticizing the revolving door lobby that allowed some of those responsible for disastrous deregulation to return to power. Also on the task force is Damon Silvers, an AFL-CIO attorney who fought hard after the financial crisis to tighten Dodd-Frank restrictions on big banks.

Some financial reformers, such as former Biden adviser Jeff Connaughton, said the task force selection clearly reflected the influence of the boss of Biden’s 2020 transition, former Senator Ted Kaufman, who is also a leading voice for Wall Street reform was a thing of the past in the EU.

Such transition review task forces are intended to be fairly technocratic, providing incoming officials with a list of topics to focus on, but not recommending guidelines. Even so, Gensler will almost certainly get a senior position in the new Biden administration, possibly as deputy treasury secretary under a figure as progressive as Federal Reserve Governor Lael Brainard, a leading candidate for the Supreme Treasury.

If Biden takes an aggressive stance on Wall Street, it could help calm angry progressives in his own party who believe that Sens. Bernie Sanders and Elizabeth Warren’s anti-corporate proposals have been briefly summed up.

Undoing Trump’s deregulation of Wall Street will be a difficult task – and the president isn’t done yet. In 2018, Trump signed a bill to lift some Dodd-Frank restrictions on bank lending and seeks to keep the Fed’s Board of Governors in stock. oversees financial regulationwith ultra-conservatives like Judy Shelton, who is expected to be ratified by the Senate next week.

Since taking office, the task force member, Kelleher, has written: “The Trump administration has set itself the goal of dismantling the core pillars of financial reform by: lowering banks’ capital requirements, weakening stress tests and wills, enabling more proprietary trading and unifying unregulated trading in derivatives enables consumer and investor protection to be withdrawn, supervisory regulation of systemically important banks reduced, [and] Castration of the regulation of systemically important non-banks and the shadow banking system. “

“President Trump has merged the White House with Wall Street and made big finance priorities the top priority of this administration,” Kelleher wrote in the last year American Prospect. “Critics of the financial reform have claimed that the law and regulations would affect banks’ revenues and profits, preventing them from lending and in turn affecting economic growth and jobs. In fact, the largest banks have seen or dwarfed record sales and profits in virtually every quarter since 2009, including all of 2018 and the first quarter of 2019. ”

Kelleher wrote that the Trump administration’s decision to deregulate major non-banks that cannot make deposits and provide unregulated credit card and credit services, is especially important “because it shows the sheer ruthlessness of the Trump administration.”

Kelleher said in an email on Thursday that he would make no comment on his current role on the task force and its advice or influence other than to say, “Anyone who answers such questions at this point in time or in the short and maybe medium term me don’t know what you are talking about, no matter how confidently you speak! “

And despite the zeal of the Task Force, it is not clear that even its desire to avoid the regulatory mistakes that sparked the 2008-2009 financial crisis will be enough to carry out a root and branch reform, which is mainly legislative and branch reform the Fed would require. Even so, Trump has tried to relax the rules of the Consumer Financial Protection Bureau created by Dodd-Frank, as well as the capital requirements for banks.

Robert Johnson, director of the Progressive Institute for New Economic Thinking, calls the Biden Task Force a “really good group.” But then he asked, “What power will they really have … after the power of money bends the best designs in a selfish direction?”

Gensler was CFO of Hillary Clinton’s presidential campaign, but had little influence on politics there. Even when he was first won to lead the CFTC in 2009, his past on Wall Street spoiled him in the eyes of progressives. Sanders and Senator Maria Cantwell maintained his nomination, and the then Senator also criticized him for his ties to Goldman Sachs. Tom Harkin.

Even so, Gensler was more willing than some of his colleagues to admit that he made mistakes in running Wall Street amok by supporting the repeal of Glass-Steagall and the Commodity Futures Modernization Act, which effectively drives the global market in the US deregulated. Counter derivatives.

“Looking back now, I realize that we all – everyone who was involved at the time, and certainly myself – should have done more to protect the American public through aggressive regulation and comprehensive regulation,” said Gensler at its confirmation hearing in 2009.

Now Wall Street banks and shady non-banks are grappling with the idea that one of their most ardent custodians could stand in a higher position in the Biden administration.

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