Gunning for Gensler

Nov 21, 2022

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PROGRAMMING NOTE: We'll be off for Thanksgiving this Thursday and Friday but back to our normal schedule on Monday, Nov. 28.

Everybody's griping about Gary.

The SEC chair is facing a growing political problem, as his base of support shrinks in Washington, our Declan Harty reports :

"Wall Street and Republicans are out to get him, and even some Democrats are fuming. At the same time, Gensler is facing unrest among SEC staff over a growing workload and return-to-office policies.

"Eighteen months after taking the SEC's reins, Gensler, a veteran of the Clinton and Obama administrations , has drawn widespread ire thanks to an ambitious regulatory agenda poised to shake up much of corporate America. The SEC is pursuing new rules that would force companies to disclose their carbon emissions and fundamentally revamp the stock market's inner workings .

"Gensler's regulatory push has triggered public threats of litigation from Wall Street executives and warnings from their friends in Congress. He's even under pressure from long-time progressive allies who want to make sure he doesn't compromise when it comes to cracking down on big business."

Securities and Exchange Commission Chair Gary Gensler testifies.

Securities and Exchange Commission Chair Gary Gensler testifies before the Senate Banking committee. | Kevin Dietsch/Getty Images

Complaints from all sides: "I've literally in the last 48 hours heard fear of Gary Gensler from a number of industry players and heard frustrations with Gary Gensler for not being aggressive enough from a U.S. senator," said Rep. Jim Himes (D-Conn.), who called Gensler "one of the smartest guys" to lead the SEC.

With Republicans set to take over the House next year, Gensler will be in demand on Capitol Hill as oversight and investigations pick up.

"Gary Gensler might as well bring a cot because he's going to be spending a lot of time in front of the [House Financial Services Committee]," said Rep. Tom Emmer of Minnesota, the incoming No. 3 House Republican.

One big oversight target: The epic collapse of FTX.

In interviews with Declan and our Sam Sutton, regulators, lawmakers, lawyers and other compliance experts say there wasn't much the regulators could do. The Bahamas-based exchange's offshore location and sprawling corporate structure made it a difficult target for federal agencies.

From Sam and Declan : "The oversight gaps that allowed for the disastrous failure of FTX — which until just weeks ago was one of the world's most respected crypto businesses before it was exposed as a house of cards — underscore the deep risks of trading on unregulated digital currency exchanges. It has prompted policymakers in Congress and at federal agencies to consider new laws and more aggressive penalties to head off a future meltdown. Crypto has flourished in a regulatory gray area, where even activities that resemble traditional financial products have escaped oversight."

Of course, not everyone agrees. "Critics such as the consumer group Better Markets have complained in recent days that the CFTC should have pursued red flags surrounding FTX.

In the meantime, Treasury Secretary Janet Yellen wants regulators to start stretching their authority. "Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services."

IT'S MONDAY — Have tips, story ideas or feedback? You know what to do: kdavidson@politico.com and ssutton@politico.com .

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Driving the Day

San Francisco Fed President Mary Daly speaks at 1 p.m. ... Durable goods orders and new home sales data released Wednesday ... University of Michigan consumer sentiment data released Wednesday ... Fed meeting minutes released Wednesday.

FTX CREDITORS — Bloomberg's Jeremy Hill and Claire Boston: "Sam Bankman-Fried's bankrupt crypto empire owes its 50 biggest unsecured creditors a total of $3.1 billion , new court papers show, with a pair of customers owed more than $200 million each."

FTX SWAG — If you went to the Washington Wizards game on Friday, there's a good chance you walked out with a free hat courtesy of FTX. While the Wizards owners — just like everyone else — have canceled their team's sponsorship deal with the failed crypto exchange, the team still plans to move forward with four fan giveaways that have already been produced.

"Monumental Sports & Entertainment has taken the appropriate steps to remove FTX as much as possible from our promotional platforms," the organization told The Washington Post last week.

It's going to take months for the professional sports world to erase its ties to Sam Bankman-Fried's crypto empire.

The Golden State Warriors halted its deal with FTX last week (All Star point guard Stephen Curry was an FTX spokesman). The Miami Heat pulled the exchange's name off its arena. And you won't see FTX's ubiquitous branding on Major League Baseball umpire uniforms moving forward. Tom Brady — who'd been one of Bankman-Fried's biggest boosters — has pulled the 'laser eyes' from his Twitter account.

RAIL UNION VOTE TODAY — Our Alex Daugherty and Tanya Snyder: "The two largest railroad unions will decide Monday whether to ratify a contract with freight railroads — and a no vote could force Congress to step in to avert a rail strike just before the holiday season.

"A strike could happen as soon as Dec. 5 after the first cooling-off period ends for the 12 involved unions. That would leave a short window after the Thanksgiving recess for lawmakers to avert a work stoppage that could impede coal shipments, shut down most passenger rail, imperil drinking water and cost the economy billions per day."

NEW IDB PRESIDENT — Bloomberg's Eric Martin: "Governments from Latin America, the Caribbean and the US chose Ilan Goldfajn to be the next head of the Inter-American Development Bank, making him the first Brazilian to win one of the region's most coveted jobs at a key financial institution."

FIRST IN MM: UNPAID LABOR REPORT — On an average day, 36 percent of working age Americans provide unpaid care for children, parents and other family members — unpaid labor worth $980 billion a year , according to a new report out today from the Progressive Policy Institute. The report explores how "platform work," including companies such as Lyft, Uber and Instacart, can provide an alternative that offers better scheduling and earning opportunities for caregivers. "Rather than requiring a choice between full-time work and no paid work at all, there is a flexible alternative," PPI chief economist Dr. Michael Mandel said.

Regulatory Corner

SHAREHOLDER ACTIVISM — WSJ's Lauren Thomas: "Sinking stock prices and a change in proxy-voting rules are emboldening many first-time shareholder activists to seek changes at some of the biggest names in American corporations.

"Companies, always wary of activist advances, are feeling particularly vulnerable as a result of new rules imposed by U.S. regulators in September requiring the use of a so-called universal proxy card in corporate-director elections, bankers and lawyers say."

Economy

RISING RATES HIT SMALL BIZ — WSJ's Ruth Simon: " Add rising interest rates to the challenges that small businesses are already grappling with, including inflation, labor shortages and strained supply chains. Some small businesses are cutting back on borrowing, paying down debt or delaying expansion plans as interest rates rise. Others worry that rising rates will boost prices charged by suppliers and crimp customer demand."

GLOBAL SLUMP — Bloomberg's Craig Stirling: "A new snapshot of the global economy's weakening growth and persistent inflation will arrive in the coming week, just as surveys reveal headwinds for manufacturers from the US to Europe and Japan.

"The OECD's forecasts on Tuesday will show how officials at the Paris-based organization perceive a loss of momentum gripping countries around the world amid multiple shocks ranging from the energy crisis triggered by Russia's invasion of Ukraine, to surging consumer prices and persisting supply squeezes."

ON BORROWED TIME — WSJ's Harriet Torry: "It is the $1.7 trillion question for the U.S. economy: How long can the savings consumers built up during the pandemic keep their spending going? The answer: about nine to 12 more months ."

That doesn't necessarily mean they're in the mood to go big this holiday season. From WSJ's Rachel Wolfe and Jon Hilsenrath: "U.S. consumers and businesses have trimmed spending plans for gifts, charitable contributions and holiday events , data show."

Markets

BOND MARKET TURMOIL AHEAD — Bloomberg's Michael Mackenzie and Liz McCormick: "As the bond market limps toward 2023, it faces the prospect of a final bout of chaos , exacerbated by dwindling trading volume typical during the last weeks of the year."

DOLLAR TUMBLES — FT's Tommy Stubbington and Kate Duguid: "The dollar has tumbled in the past fortnight from a 20-year high as signs of inflation easing in the US fuel speculation that the Federal Reserve will soon slow down its rate rises. The greenback has fallen more than 4 per cent against a basket of six peers so far in November, leaving it on track for the biggest monthly fall since September 2010, according to Refinitiv data."

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Fly Around

The global economic map is rapidly transforming, with trade and investment between the U.S. and Europe booming as Russia's war in Ukraine and fraying ties between the West and China draw the trans-Atlantic allies closer. — WSJ's Tom Fairless

The gambling industry and its allies got their way with lawmakers after showering them with donations , gifts and dubious arguments. — NYT's Eric Lipton and Kenneth P. Vogel

European politicians are warning of an investment exodus across the Atlantic , driven by U.S. incentives in the Inflation Reduction Act and cheaper gas prices. — FT

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