President-elect Joe Biden chose Rohit Chopra to be the director of the Consumer Financial Protection Bureau, beating a progressive ally of Senator Elizabeth Warren to head the agency whose creation she championed. The choice comes at a time when Democrats are looking for ways to provide relief for a student loan to millions of Americans as part of a COVID-19 relief package.
Chopra, now commissioner of the Federal Trade Commission, helped launch the agency to the consumer after the 2008-09 financial crisis and served as deputy director, where the alarm was raised about skyrocketing student loan debt levels. Chopra previously served as assistant director of the CFPB, where he led the agency’s student loan efforts. He also served as a Special Adviser in the United States Department of Education.
In these roles, Chopra has led efforts to stimulate competition in the student loan financing market, develop new tools for students and secure hundreds of millions of dollars in repayments to borrowers who are victims of illegal conduct by credit agents, debt collectors and college networks for profit.
Biden announced the move on Monday, along with his intention to nominate Gary Gensler, former chairman of the Commodity Futures Trading Commission, as the next chairman of the Securities and Exchange Commission. Gensler, a former Goldman Sachs banker, stepped up oversight of the complex financial transactions that helped cause the Great Recession.
The choice of Biden by an expert with experience as a strong market regulator during the financial crisis to lead the SEC signals a goal of turning the Wall Street watchdog into an activist role after a period of deregulation during the Trump administration.
Consumer advocates praised the selections of Gensler and Chopra.
Gary Gensler “was not afraid to take over Wall Street as chairman of the U.S. Commodity Futures Trading Commission and will return the SEC to an agency that protects retail investors from risky practices and protects the financial system from dangerous actors,” Ed Mierzwinski, director senior federal consumer programs in the US PIRG consumer protection group, said in a statement.
Gensler, now a professor of economics and management at MIT’s Sloan School of Management, was assistant secretary of the Treasury in the Clinton administration and later headed the CFTC during Barack Obama’s term.
Gensler was a senior consultant to Senator Paul Sarbanes in drafting the Sarbanes-Oxley Act and was Under Secretary of the Treasury for domestic finance from 1999 to 2001 and Deputy Secretary of the Treasury for financial markets from 1997 to 1999. With nearly 20 years’ experience working in the powerhouse of Wall Street, Goldman Sachs, Gensler surprised many by being a strict regulator of large banks as president of the CFTC.
Fluent in the nexus between politics and economic policy, Gensler was chief financial officer of the 2016 Clinton presidential campaign against Donald Trump and Obama’s economic adviser in his 2008 presidential candidacy.
Gensler was a leader and consultant on the Biden transition team responsible for the Federal Reserve, banking issues and securities regulation.
“Protecting unsophisticated investors”
Jay Clayton, a former Wall Street lawyer who headed the SEC during the Trump administration, presided over a deregulation action to soften the rules that affected Wall Street and the financial markets, as Trump promised when he took office. Rules that, under Dodd-Frank law, tightened the reins of banks and Wall Street in the wake of the financial crisis and the Great Recession.
“Gensler will make the SEC avoid making it easier for companies to raise money and protect unsophisticated investors,” said Erik Gordon, assistant professor of business at the University of Michigan. “His history in the Obama administration leaves him few friends on the Republican side – and he probably doesn’t care.”
The senior Republican on the House’s Financial Services Committee, Deputy Patrick McHenry of North Carolina, said Gensler’s responsiveness to new financial technologies and cryptocurrencies is positive. But he added: “I fear that Democrats want to divert the (SEC) from bipartisan common ground in an attempt to achieve their most partisan goals.”
Senator Sherrod Brown of Ohio, the senior Democrat on the Senate Banking Committee who is expected to become its president, said Gensler’s track record as a regulator “demonstrates that he will hold bad actors accountable and put the interests of working families first” .
Brown said that Chopra will return the CFPB to its central mission to protect consumers and also “ensure that the agency plays a leading role in combating racial inequalities in our financial system”.
The CFPB was created at Warren’s request as an independent agency under the Dodd-Frank Act. Its director had ample freedom to act alone, without obtaining the agreement of the agency’s board members.
While enforcing consumer protection laws, the CFPB has also been empowered to review the practices of virtually any company that sells financial products and services: credit card companies, payment lenders, mortgage agents, debt collectors, colleges profitable, car lenders, money transfer agents.
Frank Facebook critic
The CFPB has become a keen target for conservative Republicans. Trump appointed then White House budget director Mick Mulvaney as interim director of the CFPB when Cordray left in November 2017.
Mulvaney was a vocal critic of the consumer protection agency and made profound changes to it, easing regulations on payday loans, for example, and withdrawing enforcement efforts. The agency has been led by Kathy Kraninger, appointed by Trump, since December 2018.
As one of two Democratic commissioners on the five-member Federal Trade Commission, Chopra has openly criticized the practices of large companies, especially the tech giant Facebook. He had strong disagreements about FTC actions against the company for privacy violations and alleged anti-competitive conduct, saying they did not go far enough.
“Rohit Chopra has the ideal experience to start working at the CFPB,” said Mike Litt, a consumer advocate for the US PIRG Education Fund, in a statement. “In his government service, he used every policy lever available to protect consumers from corporate wrongdoers. We couldn’t be happier with his choice to restore the CFPB after three years of disastrous leadership.”