Gary Gensler’s SEC Will Be Good for Wall Street

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President-elect Joe Biden’s nomination of Gary Gensler to chair the Securities and Exchange Commission is being portrayed in some quarters as a threat to Wall Street. On the contrary, he’s a strong choice. Wall Street should recognize this appointment as serving its own interests as well as those of the wider public.

The U.S. financial sector has prospered because the country’s capital markets are perceived as among the world’s most transparent, fair and reliable. Too often over the past four years, this reputation has been compromised. Gensler’s track record suggests he’s willing and able to put things right.

The SEC’s mission is to protect investors; maintain fair, orderly and efficient markets; and facilitate capital formation. The outgoing chair, President Trump’s appointee Jay Clayton, has frequently fallen short. On his watch, the agency adopted rules that allow financial professionals to take advantage of unsophisticated investors, weaken the proxy advisory firms that help big institutional investors hold corporate management to account, and undermine the incentives for whistleblowers to expose white-collar crime. Clayton’s SEC also sought to diminish market transparency by virtually eliminating a requirement that hedge funds report regularly on their stock holdings — an effort it had to abandon amid widespread opposition.

In contrast, as chairman of the Commodity Futures Trading Commission from 2009 to 2014, Gensler presided over reforms designed to strengthen derivatives markets and prevent banks from taking undue advantage of taxpayer backstops. He also oversaw an investigation into a crucial interest-rate benchmark — the London Interbank Offered Rate — that uncovered widespread manipulation. All this had the effect of making financial markets more resilient, competitive and fair. And it showed, by the way, that people with a Wall Street background — Gensler is a Goldman Sachs alumnus — can be effective regulators.

At the SEC, Gensler will have a full workload. Aside from fixing what the Trump administration has broken, he needs to make progress in many other areas. For example, corporate disclosure needs to come into the 21st century, recognizing climate risks and shedding more light on companies’ racial and gender composition. Auditors must be more, not less, independent if they’re to ensure the probity of companies’ financial statements. And regulators still lack the data they need to know what’s going on in markets.

Opacity, fragility, scams and crises might benefit a few individuals, but they only damage Wall Street as a whole — to say nothing of the harm to millions of ordinary Americans. Gensler’s SEC would strengthen the system, and that’s a goal the financial industry should embrace.

Editorials are written by the Bloomberg Opinion editorial board.

©2021 Bloomberg L.P.

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