Why SEC Leader Gary Gensler Gets Much Tougher on Wall Street: NPR
The chairman of the US Securities and Exchange Commission, Gary Gensler, testified before the Senate Banking Committee on September 14 in Washington, DC. Gensler discussed his approach to the job in a recent interview with NPR.
Bill Clark / Pool / Getty Images
hide caption
change caption
Bill Clark / Pool / Getty Images
The chairman of the US Securities and Exchange Commission, Gary Gensler, testified before the Senate Banking Committee on September 14 in Washington, DC. Gensler discussed his approach to the job in a recent interview with NPR.
Bill Clark / Pool / Getty Images
In his new job as Wall Street’s chief of police, Gary Gensler often thinks of one of his grandfather’s favorite aphorisms.
“Ellis Tilles would say, ‘Numbers do not lie, but liars can certainly find it,’ Gensler told NPR in a recent interview, noting that his grandfather immigrated to the United States from Lithuania at the age of 17.
The chairman of the US Securities and Exchange Commission first heard that saying when he was little and grew up in Baltimore.
And even though he did not know his grandfather well, That saying has become a kind of guiding principle when he promises to bring a tougher and more muscular approach to supervision at a critical time for markets.
During the pandemic, millions of amateur investors began trading stocks for the first time, thanks to apps like Robinhood.
They have joined forces on the social network Reddit to push up the price of “meme shares”, including GameStop. And they have embraced cryptocurrencies and trendy investments such as SPACs, which have become a popular way for private companies to bypass traditional public offerings.
People are queuing for t-shirts at a pop-up kiosk for the online brokerage house Robinhood along Wall Street in New York City on July 29, the day the company was listed on the stock exchange. Millions of amateur investors buy stocks through apps like Robinhood.
Spencer Platt / Getty Images
hide caption
change caption
Spencer Platt / Getty Images
People are queuing for t-shirts at a pop-up kiosk for the online brokerage house Robinhood along Wall Street in New York City on July 29, the day the company was listed on the stock exchange. Millions of amateur investors buy stocks through apps like Robinhood.
Spencer Platt / Getty Images
This worries Gensler, who says that these amateur investors may not be adequately protected.
“The basic trade or principle in our capital markets is for investors to receive full and fair information,” said Gensler. “And two, that they are protected from fraud and manipulation.”
Under his leadership, the agency has launched a series of high-profile investigations, including one of a planned SPAC deal involving former President Trump’s commitment to social media.
And Gensler is on his way through a long agenda. On Wednesday, the SEC unveiled several proposals, including potential restrictions on how executives can trade on their own companies’ stocks and pressure for improved revelations about company buybacks.
There is much more to come, much of it related to forcing Wall Street to disclose more information or to improve the protection of average investors.
The very scope of the SEC’s agenda has astonished some longtime Wall Street observers.
“I’m shocked, as someone who’s been following the SEC for half a century now, that the agenda is so robust, and there’s so much energy behind it,” said James Cox, who teaches corporate and securities law at Duke University.
“I think not only does Gary Gensler work seven days a week, but I think he works 26 hours a day,” he says.
“My name is Gary Gensler”
Gensler brings many years of experience as a regulator to his current role.
Unlike many of his predecessors, Gensler is not a lawyer by education. After starting his career at Goldman Sachs, where he rose through the ranks to become a partner, Gensler worked in the Treasury Department and then, as chairman of another regulator, the Commodity Futures Trading Commission.
He ran that agency at another key time, in the wake of the global financial crisis in 2008. Gensler spent most of his time at the CFTC implementing new rules and regulations required by the far-reaching Dodd-Frank Act that brought tougher restrictions on Wall Street activities.
Gensler is credited with curbing the so-called over-the-counter derivatives market, which is valued at hundreds of trillions of dollars. This type of contract, traded by non-exchange traded traders, contributed to the meltdown in 2008.
And Gensler has kept the pulse of markets and finance throughout his life.
In 2018, Gensler began at the MIT Sloan School of Management, where he taught a course called “Blockchain and Money” on the technology that underpins Bitcoin and other cryptocurrencies.
“My name is Gary Gensler,” he said as he introduced himself to his students during his first lecture. “I’ve spent my whole life around the world of finance and money and public policy.”
Gensler, then chairman of the Commodity Futures Trading Commission, talks with then-Federal Reserve Chairman Ben Bernanke and then-US Treasury Secretary Jacob Lew during a meeting with financial regulators on December 9, 2013 at the Washington DC Treasury Department Gensler. has many years of experience as a regulator.
Alex Wong / Getty Images
hide caption
change caption
Alex Wong / Getty Images
Gensler, then chairman of the Commodity Futures Trading Commission, talks with then-Federal Reserve Chairman Ben Bernanke and then-US Treasury Secretary Jacob Lew during a meeting with financial regulators on December 9, 2013 at the Washington DC Treasury Department Gensler. has many years of experience as a regulator.
Alex Wong / Getty Images
Tougher rules are coming for cryptocurrencies
Of all the objects on Gensler’s document, the planned regulatory approach to cryptocurrencies may tend to attract the most interest.
Gensler’s class on Blockchain has become popular among cryptocurrencies who want to learn more about how digital currencies work.
But it also defines how Gensler approaches the job.
Cryptocurrencies have exploded in popularity since the pandemic began last year, and today tens of millions of investors buy all kinds of virtual money, including those like Dogecoin that started as jokes.
“Markets – and technology – are always changing,” Gensler told members of the Senate Banking Committee during his nomination hearing. “Our rules need to change along with them.”
In the NPR interview, Gensler said that crypto-investors deserve “some protection similar to what you’d expect on the New York Exchange or the Nasdaq or other trading venues.”
Gensler has asked its employees to look at how the SEC can regulate digital currencies and the exchanges on which they are traded. In speeches and congressional testimonies, he has claimed that many cryptocurrencies are in practice securities, and therefore come under the agency’s authority.
Wall Street fears exceed
Gensler’s aggressive approach to regulation has some investors worried that the US could fall behind its competitors, or that new rules could stifle innovation.
This is a challenge all regulators face, according to Edmund Shing, Investment Manager at BNP Paribas Wealth Management.
“Consumer protection is generally a good thing, and regulations put in place to protect consumers are never a bad thing,” he argues. “The question is whether governments then transcend themselves.”
Gensler has heard this concern before, and when asked how he finds the right balance, Gensler invokes each regulator’s favorite cliché.
“It’s kind of the Goldilocks point,” he says. “That the porridge is not too hot, and not too cold.”
And while he tries to get that recipe just right with new rules, Gensler says he will continue to keep his grandfather’s aphorism at the top of his mind.
“I just want to take every day to see what we can do for the American public – for young investors, for working families, for retirees along the way,” he told NPR. “And then, hopefully, make the markets a little better for ordinary people.”
