President-elect Joe Biden has chosen Rohit Chopra to be the director of the Consumer Financial Protection Bureau, tapping a progressive ally of Sen. Elizabeth Warren to helm the agency whose creation she championed. The pick comes as Democrats eye ways to provide student loan relief to millions of Americans as part of a COVID-19 relief package.
Chopra, now a commissioner at the Federal Trade Commission, helped launch the consumer agency after the 2008-09 financial crisis and served as deputy director, where he sounded the alarm about skyrocketing levels of student loan debt. Chopra previously served as assistant director of the CFPB, where he led the agency’s efforts on student loans. He also served as a Special Advisor at the U.S. Department of Education.
In these roles, Chopra led efforts to spur competition in the student loan financing market, develop new tools for students and secure hundreds of millions of dollars in refunds for borrowers victimized by unlawful conduct by loan servicers, debt collectors, and for-profit college chains.
Biden announced the move Monday, along with his intent to nominate Gary Gensler, a former chairman of the Commodity Futures Trading Commission, as the next chair of the Securities and Exchange Commission. Gensler, a former Goldman Sachs banker, tightened oversight of the complex financial transactions that helped cause the Great Recession.
Biden’s choice of an expert with experience as a strong markets regulator during the financial crisis to lead the SEC signals a goal of turning the Wall Street watchdog agency toward an activist role after a deregulatory stretch during the Trump administration.
Consumer advocates praised the selections of Gensler and Chopra.
Gary Gensler “wasn’t afraid to take on Wall Street as chair of the U.S. Commodity Futures Trading Commission and will return the SEC to an agency that both protects small investors from risky practices and protects the financial system from dangerous actors,” Ed Mierzwinski, senior director for federal consumer programs at consumer advocacy group U.S. PIRG, said in a statement.
Gensler, now a professor of economics and management at MIT’s Sloan School of Management, was an assistant Treasury secretary in the Clinton administration and later headed the CFTC during Barack Obama’s term.
Gensler was senior adviser to U.S. Senator Paul Sarbanes in writing the Sarbanes-Oxley Act and was Under Secretary of the Treasury for Domestic Finance from 1999 to 2001 and Assistant Secretary of the Treasury for Financial Markets from 1997 to 1999. With a background of having worked for nearly 20 years at Wall Street powerhouse Goldman Sachs, Gensler surprised many by being a tough regulator of big banks as CFTC chairman.
Fluent in the nexus between politics and economic policy, Gensler was chief financial officer for Hillary Clinton’s 2016 presidential campaign against Donald Trump and an economic adviser to Obama in his 2008 presidential bid.
Gensler has been a leader and adviser of Biden’s 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 deregulatory push to soften rules affecting Wall Street and the financial markets, as Trump pledged when he took office. Rules that under the Dodd-Frank law tightened the reins on banks and Wall Street in the wake of the financial crisis and the Great Recession were nipped in.
“Gensler will tip the SEC away from making it easy for companies to raise money and toward protecting unsophisticated investors,” said Erik Gordon, an 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 Financial Services Committee, Rep. Patrick McHenry of North Carolina, said Gensler’s receptiveness to new financial technologies and cryptocurrency are positive. But he added, “I fear Democrats want to steer the (SEC) away from bipartisan common ground in an attempt to achieve their most partisan goals.”
Sen. Sherrod Brown of Ohio, the senior Democrat on the Senate Banking Committee who is set to become its chairman, said Gensler’s record as a regulator “demonstrates that he will hold bad actors accountable and put the interests of working families first.”
Brown said Chopra will return the CFPB to its central mission of protecting consumers and also will “ensure the agency plays a leading role in combating racial inequities in our financial system.”
The CFPB was created at Warren’s behest as an independent agency by the Dodd-Frank law. Its director was given broad latitude to act alone, without winning agreement from members of an agency board.
While it enforces consumer-protection laws, the CFPB also gained powers to scrutinize the practices of virtually any business selling financial products and services: credit card companies, payday lenders, mortgage servicers, debt collectors, for-profit colleges, auto lenders, money-transfer agents.
Outspoken critic of Facebook
The CFPB became a keen target of conservative Republicans. Trump named then-White House budget director Mick Mulvaney as acting director of the CFPB when Cordray left in November 2017.
Mulvaney had been a vocal critic of the consumer agency and made deep changes to it, softening regulations on payday loans, for example, and pulling back on enforcement efforts. The agency has been led by Trump appointee Kathy Kraninger since December 2018.
As one of two Democratic commissioners on the five-member Federal Trade Commission, Chopra has been an outspoken critic of practices by big companies, especially tech giant Facebook. He has lodged strong dissents onagainst the company for privacy violations and alleged anti-competitive conduct, saying they didn’t go far enough.
“Rohit Chopra has the ideal background for hitting the ground running at the CFPB,” Mike Litt, consumer program advocate with the U.S. PIRG Education Fund, said in a statement. “In his government service, he has used all policy levers available to protect consumers from corporate wrongdoers. We couldn’t be happier with his selection to restore the CFPB after three years of disastrous leadership.”