President Biden’s decision to head two key regulatory agencies – the Securities and Exchange Commission and the Consumer Financial Protection Bureau – highlighted two goals Tuesday: transparency and control of powerful interests. He stressed that those who break the law must be held accountable for their actions.
In a full hearing before the Senate Banking Committee, SEC candidate Gary Gensler and consumer bureau candidate Rohit Chopra gave details of their positions on issues such as climate change, stock market volatility, student loans and cryptocurrencies.
Faced with questions from Republicans who suspected Mr Biden might use regulatory agencies to advance liberal policies, the two candidates insisted they would not extend the powers entrusted to the agencies – but were sure how to exercise it would.
For example, Mr Gensler defended the need for companies to disclose climate risks and diversity efforts, saying these issues are a top priority for many investors. “I think diversity in board and leadership roles is beneficial to decision-making, and that is something I am committed to with the SEC,” said Gensler.
Republicans asked whether it was appropriate for the SEC to impose such standards on companies, but Mr. Gensler repeatedly stressed that he was talking about transparency for investors and not instructing companies to take certain actions.
Mr. Gensler said corporate disclosure rules boil down to “materiality” and what a “reasonable investor” wants to know. He said the standard was largely developed by the courts but has changed over time.
“It’s the investor community that can decide,” Gensler said, not companies. And with “tens of trillions of assets invested,” he said, they are looking for information on climate risks.
The hearing was milder than expected, especially for Mr Chopra, who ran an agency that is often demonized by Republicans. Mr. Chopra is a close ally of Senator Elizabeth Warren, the Massachusetts Democrat who inspired the creation of the Consumer Bureau, and is expected to aggressively use the agency’s wide-ranging powers to set and enforce rules, including by serving businesses Forcing consumers to pay refunds they have done wrong.
Senator Patrick J. Toomey of Pennsylvania, the senior Republican, echoed his party’s criticism of the consumer bureau in his opening speech, calling it “arguably the most inexplicable agency in federal government history” and one that has persecuted an “activist”. Anti-business agenda. “
But this criticism was at times undercut by members of his own party. Throughout the hearing, Republicans have called for tighter surveillance on companies that harm consumers, especially those targeting members of the military and the elderly, on several occasions. Senator John Kennedy, Republican of Louisiana, suggested that Congress tighten the rules on credit bureaus, forcing them to be more responsive to consumer complaints about inaccurate information in credit reports.
Senators from both parties questioned Mr. Gensler about the GameStop trading frenzy in January, specifically how brokers like Robinhood, the online trading platform at the center of the rally, are making money.
Mr. Gensler assured several senators that, under his leadership, the SEC would investigate the aftermath of the sudden rise and fall in the video game company’s stock and sales of customer deals – called the payment for the flow of orders – that fund popular trading platforms that don’t charge commissions. Mr Gensler said the practice needs to be reviewed to see if it is harming retail investors.
Mr. Chopra, currently commissioner for the Federal Trade Commission, also discussed popular tech companies and criticized the FTC for what he believed to be lax enforcement efforts. The commission’s deal with Facebook on how to deal with people’s private information in 2019, which included a $ 5 billion fine, did not resolve the company’s core problems, he said.
Silicon Valley’s powerhouses will be in the crosshairs of the consumer bureau, he said, saying it is critical for the agency to “look closely” and “look at the implications for our privacy” at big tech companies entering the financial services market and privacy to evaluate our personal information. “
Student loan oversight is another priority for Mr Chopra, who previously served as the first student loan ombudsman at the Consumer Bureau. Some of the problems plaguing the mortgage industry prior to the housing crash – including rampant maintenance failures that hurt borrowers seeking relief to which they were legally entitled – had crept into the student loan market, he said.
Mr Chopra said he will work with the education department and attorneys general to ensure student loan service providers and other industry players are complying with the law. “It’s very, very important that we get it right,” he said.
He also said the office must closely monitor the property market as eviction moratoriums and other emergency chemical relief efforts end. The consumer bureau warned this week that 11 million families – nearly 10 percent of US households – are in arrears with their payments and face eviction or foreclosure.
“We need to be prepared for potentially looming problems when it comes to forbearance that could lead to foreclosures,” said Chopra.
The sharpest moment of the hearing came when Mr Toomey pressed Mr Chopra on his previous criticism of lawmakers who had supported changes to curb consumer bureau independence. In a 2016 lecture, Mr. Chopra accused these lawmakers of “having shillings for predatory lenders,” a statement that Mr. Toomey asked Mr. Chopra to withdraw.
“I regret saying that,” replied Mr Chopra.
Mr. Gensler, who headed the Commodity Futures Trading Commission during the Obama administration and worked for the Senate Banking Committee decades ago, encountered fewer problems. Republicans shared some of his concerns about fair treatment of retail investors and noted his expertise in digital currencies, a subject Mr. Gensler taught at MIT
Mr. Gensler assured Senator Mike Rounds, Republican of South Dakota that he shared the Senator’s desire to support experiments in digital currency.
“These innovations were a catalyst for change,” said Gensler. “Bitcoin and other cryptocurrencies have brought new considerations to payments and financial inclusion, but they have also raised new investor protection issues that we have yet to consider.”
And when Mr. Kennedy asked Mr. Gensler why more people on Wall Street didn’t go to jail after the financial crisis a decade ago, Mr. Gensler said he agreed with the Louisiana Republican concerns but noted that the agency he was During the year the crisis headed only civil and not criminal law enforcement agencies.
“Those are questions I share with you,” said Mr. Gensler.
