Joe Biden’s presidential transition has barely started, but already banks and investment firms are anxious about two names they fear are in the running to lead the U.S. Securities and Exchange Commission.
The uneasiness started soon after the election, when news broke that Gary Gensler — a scourge of Wall Street when he led the Commodity Futures Trading Commission — had been tapped to examine financial regulators for the president-elect. That fueled concerns that Gensler himself might be in line for the top job at the SEC or another agency he’s reviewing.
Then Washington lobbyists and industry trade groups got wind of another SEC contender who they would find potentially more alarming: Preet Bharara, Manhattan’s former top federal prosecutor. Bharara loomed large over Wall Street in the decade following the 2008 financial crisis, when he aggressively investigated insider trading and contributed to SAC Capital Advisors, Steven Cohen’s old hedge fund firm, shutting its doors.
Biden’s transition team didn’t respond to requests for comment, nor did Gensler or Bharara.
Gensler and Bharara are among many names Biden advisers are discussing as possible SEC candidates, according to more than a dozen people familiar with the conversations who asked not to be named in sharing private communications. But the deliberations are in their early stages, and Biden has suggested he may not even start offering nominees for higher-profile cabinet positions — like Treasury secretary and attorney general — until next month.
Still, the financial industry chatter about an SEC pick highlights the job’s importance to banks, asset managers and stock exchanges.
Wall Street was already on edge over the internal battle over appointees between moderate and progressive Democrats, worried that liberal Sen. Elizabeth Warren, D-Mass., and other lawmakers would pressure Biden to select tough regulators. Those fears grew when the president-elect filled his landing teams — aides who examine federal agencies — with several industry critics. While Biden has said little about his plans for financial regulators, the move signaled he’s open to nominating candidates in the mold of Gensler and Bharara.
One preferred candidate among progressives, according to people familiar with the matter, is former SEC Commissioner Kara Stein, who clashed with Wall Street banks during her tenure. Allison Lee, a current SEC commissioner who’s likely to become acting chair under Biden, is also favored by some liberal Democrats to get the post permanently.
Michael Barr, a former top aide to ex-Treasury Secretary Timothy Geithner, is in the mix, too, according to two people familiar with the matter. Barr, who was one of the main authors of the Dodd-Frank Act, gained a reputation during the Obama administration as an unyielding negotiator who often dismissed Wall Street’s lobbying demands. The University of Michigan law professor is also on the Biden transition group reviewing the Treasury Department.
Georgetown University Law Professor Chris Brummer, whose work has focused on global regulatory issues, financial inclusion and industry innovation, is also said to be in the running. Brummer, who would be the first African-American SEC chairman, recently published a study about the lack of diversity among U.S. regulators. Like Barr, Brummer is part of the team examining the Treasury Department for Biden.
A candidate favored by moderate Democrats is former SEC Commissioner Robert Jackson Jr., who opposed many of the Trump-era rule cuts during his stint at the agency. Jackson, who’s now a law professor at New York University, wrote a New York Times op-ed in 2018 with Bharara arguing that insider-trading laws needed to be clarified to better protect investors.
All of the potential SEC nominees named in this article either declined to comment or didn’t respond to requests for comment.
Gensler, who is known for his hard-charging leadership style, has already reached out to high-level SEC officials to get a sense of what’s happening at the agency, said a person familiar with the matter. His appointment as head of the transition team examining the Federal Reserve and banking and securities regulators has set off a stir among SEC workers, some of whom are wondering if it gives him an edge in being nominated for chairman, this person added.
Along with his policy work that includes jobs in Bill Clinton’s Treasury Department, Gensler has clashed with Wall Street in the enforcement arena, spearheading global investigations into the manipulation of Libor that resulted in banks paying billions of dollars in penalties. Still, it’s not clear that Gensler, who led the CFTC under President Barack Obama, would want the SEC job, particularly if a cabinet post or a prominent White House position is on the table.
Bharara, who became U.S. attorney for the Southern District of New York in 2009, might also view the SEC as a consolation prize, as he’s been mentioned as a possible contender to lead the Justice Department. Fired by President Donald Trump in 2017, Bharara was once a top aide to Senate Minority Leader Chuck Schumer.
It’s standard practice for an SEC chairman to step down when an administration changes. Once the head of the agency leaves, one of the commissioners is installed as the acting leader until a permanent replacement is appointed by the president and confirmed by the Senate.
Trump’s SEC Chairman, Jay Clayton, hasn’t yet announced whether he plans to resign or what he might do next after leaving the regulator. Before joining the SEC in 2017, he was a law partner at Sullivan & Cromwell, where his clients included big banks and hedge funds.