The Biden administration is tapping two financial regulators from the Obama administration to oversee key departments that had loosened their grip of the industry under President Trump, according to two people with knowledge of the plans.
Gary Gensler, who led the Commodity Futures Trading Commission during the Obama administration from 2009 to 2014, will be President-elect Joseph R. Biden Jr.’s nominee to lead the Securities and Exchange Commission, these people said. Also, Rohit Chopra, the former assistant director of the Consumer Financial Protection Bureau, has been chosen to run that agency.
Mr. Gensler is a veteran regulator who played a central role in bringing the big banks to heel in the aftermath of the 2008 financial crisis, giving new teeth to a watchdog agency. Lately, as an academic, he has been schooling himself on digital currencies like Bitcoin that have become an important part of the S.E.C.’s regulatory mandate. He had been leading the transition team advising Mr. Biden on financial regulatory oversight.
Mr. Gensler, 63, will step into an agency that has faced criticism as being too lenient in pursuing high-profile cases involving Wall Street and corporate America.
“I think he comes in with more of a well developed enforcement philosophy given the work he did at the C.F.T.C., and just probably a bit more of an aggressive enforcement bent than the prior chair,” said Matt Solomon, the former chief litigation counsel at the S.E.C. and a partner at the law firm Cleary Gottlieb.
The agency that Mr. Chopra will take over has been defanged under Mr. Trump. Created as a brainchild of Senator Elizabeth Warren as part of the Dodd-Frank financial overhaul law, the consumer bureau was made largely ineffectual after Mr. Trump appointed Mick Mulvaney to run it as interim chair. He pledged to run the agency with “humility and prudence” and requested no funding from the Federal Reserve. Kathy Kraninger, who took over as director of the agency in 2018, has been lambasted by Democrats for undermining the bureau, which they have accused of denying consumers of “millions of dollars in relief.” Democrats have been pressuring Ms. Kraninger to resign or face being fired.
In June, the Supreme Court ruled the president has the power to remove the C.F.P.B. director before his or her five-year term is up.
While at the consumer bureau through 2015, Mr. Chopra served as the agency’s first “student loan ombudsman” pushing for more protections for borrowers. Student loans are expected to be a key focus for Mr. Chopra, along with payday loan protection and debt collection regulations. On those issues, he would most likely have an ally in Bharat Ramamurti, the former Warren aide Mr. Biden has tapped as National Economic Council director for financial reform and consumer protection.
For the past three years, Mr. Chopra has served as a commissioner of the Federal Trade Commission, often offering a dissenting voice against the Republican majority, arguing instead for tougher enforcement action against companies like Facebook.
At the S.E.C., one of Mr. Gensler’s most pressing decisions will be choosing a director of enforcement — an important position in setting regulatory priorities. But the incoming administration and congressional Democrats, who will control both chambers, have already laid out a number of them.
Mr. Biden has spoken about requiring companies to disclose more information about their environmental impact, while members of Congress have discussed limiting corporate share buybacks and asserting greater control over so-called shadow banking activities by hedge funds and private equity firms.
“This entire administration is prioritizing climate change with respect to what each agency can bring to the table to help us in the fight against climate change — and the S.E.C. has a really critical role in that regard,” said Mary Schapiro, the former S.E.C. chairwoman who worked closely with Mr. Gensler when he was at the commodities regulator. Ms. Schapiro cited climate, along with trading and market structure issues, as likely to be among the priorities for Mr. Gensler.
When Mr. Gensler took over the helm of the C.F.T.C., it had a lackluster reputation mostly limited to bringing enforcement actions against small trading firms. There were even calls in Congress for it to be merged with the S.E.C. But Mr. Gensler’s stewardship in the aftermath of the 2008 financial crisis quieted those criticisms. His agency often shared the spotlight with the S.E.C. — and at times even overshadowed it.
Under his leadership, the C.F.T.C. cracked down on manipulation by big banks of Libor — the London Interbank Bank Offered Rate — which is used to set interest rates on many bank loans. Working in tandem with the Justice Department, Mr. Gensler and the C.F.T.C. extracted big fines from banks and led to a plan to replace Libor with a new benchmark that is less subject to abuse.
The C.F.T.C. also shared the stage with the S.E.C. in investigating the so-called flash crash of 2010, when the Dow Jones Industrials fell 1,000 points in just 10 minutes — a record drop at the time. A joint investigative report by the two regulators never pinpointed an exact cause, but found that a combination of high-frequency trading and rapid trading in E-mini stock futures — a sophisticated exchange traded fund — contributed to the turmoil.
“Wall Street’s interest is not always the same as the public’s interest,” he told The New York Times in 2010.
After leaving the C.F.T.C., Mr. Gensler began teaching at the Massachusetts Institute of Technology’s Sloan School of Management, becoming well-schooled in digital currencies. He even taught a course on blockchain technology and how it can play a role in transforming markets and replacing Wall Street middlemen — experience that would make him the first commission chairman to speak the language of crypto enthusiasts without having to resort to Google for translation.
Mr. Gensler will succeed Jay Clayton, who stepped down last month. Mr. Clayton was a corporate lawyer who came to the S.E.C. from Sullivan & Cromwell after doing work for many big banks and companies. One of his mandates, he said, was to make the process somewhat easier for companies to go public and to protect Main Street investors.