FINANCE Bloomberg Businessweek November 16, 2020Wall Street Prepares
For Biden
38
designating a company as “systemically important,”
which then puts it under heightened Fed supervi-
sion. The council can do the same for products or
practices it believes are too risky. In addition, the
FSOC sets key oversight priorities. But four Trump
appointees can stay on for at least a year, meaning
change may not come fast.○ SECURITIES AND EXCHANGE COMMISSION
No watchdog matters more to Wall Street’s
investment banks than the SEC, which will be at the
center of the fight between progressive Democrats
and moderates over the direction of financial reg-
ulation. Liberals would like to see former SEC
Commissioner Kara Stein return to lead the agency
as chairman. During her SEC tenure she blasted
bank fines as too weak and questioned whether the
agency should have placed more restrictions on
products such as leveraged exchange-traded funds.
Two other potential candidates for SEC chairman
are making the financial industry nervous: Gary
Gensler,whocraftedtough ruleson over-the-
counterderivativeswhenhewasanObamaadmin-
istrationregulator,andPreetBharara,theformer
topfederalprosecutorinManhattanwhopursued
majorfinancialcrimescases.○ REGIONALBANKS
LenderssuchasU.S.Bancorp,PNCFinancial
ServicesGroup,andTruistFinancialareamong
thosethathavebenefitedmostfromtheTrump
administration,withregulatorstailoringrules
sothatWallStreetbanksgotthetoughestover-
sight.Bidenappointeescouldrevisitthoseroll-
backs, though some Democratic lawmakers
backedthereliefthatmidsizelendersgotunder
Trump.NewwatchdogsandDemocratsmightalso
exertmorescrutinyonpotentialmergersinvolv-
ingregionalbanks.Suchlenders,however,can
countonRepublicanalliesintheSenatetohelp
fendoffattacks.—RobertSchmidt,JesseHamilton,
andMaxBerleyCOURTESY U.S. DEPARTMENT OF THE TREASURY○ Industry critics may get key posts and have
a major impact on financial regulationPresident-elect Joe Biden will look for a Treasury
secretary and other key officials to negotiate with
Congress on more stimulus, reverse some of
President Trump’s regulation cuts, and mend rela-
tions with U.S. trading partners. A few contenders
have emerged to fill the top economic-policy jobs,
including Federal Reserve Governor Lael Brainard
for Treasury and economist Heather Boushey as
director of the National Economic Council. Here
are five areas of interest as the Biden administra-
tion approaches the Jan. 20 inauguration.○ PRIVATE EQUITY
The lightly regulated investment companies are
sure to face policy fights that could affect their busi-
ness model, as well as the companies they own.
Democrats’ goal of imposing new taxes on buyout
firms will face resistance in the Senate. But it’s pos-
sible that eliminating the carried interest loophole,
which allows partners’ profits to be taxed at a lower
capital-gains rate rather than as income, could
draw bipartisan support. Even without Congress,
Biden’s regulators are expected to step up scrutiny
of private equity and could issue new rules.○ CONSUMER FINANCIAL
PROTECTION BUREAU
Wall Street has already ceded the CFPB to the
progressives, who want Senator Elizabeth Warren’s
brainchild to get much tougher than it has been
in the Trump years at policing mortgages, credit
cards, and other products. Warren herself is sure
to play a role in picking its next director. One poten-
tial candidate is Rohit Chopra, a commissioner on
the Federal Trade Commission who helped set up
the CFPB and has worked there.○ FINANCIAL STABILITY
OVERSIGHT COUNCIL
In the Trump era, the FSOC—the powerful group of
regulators led by the Treasury secretary—strayed
from its envisioned role of trying to spot risks
that could cause another financial panic, focus-
ing instead on blunting its own authority. That will
probably change under Biden. Its powers includeTHE BOTTOM LINE President-elect Biden can change the
direction of financial regulation by installing Democratic allies in top
federal posts.○ Brainard