President-elect Joe Biden is in the process of piecing together key members of his administration, and three of his potential appointees were making headlines on Wall Street over the weekend.
Hard-Nosed Regulators: First, Biden announced Monday he will nominate former student loan watchdog Rohit Chopra as the new head of the Consumer Financial Protection Bureau.
Chopra is currently a member of the Federal Trade Commission, where he worked to publicly push student loan companies to treat their borrowers more fairly during the Obama administration. Chopra also famously objected to a $5-billion settlement from Facebook, Inc. (NASDAQ: FB) following a government probe into privacy missteps, claiming the fine imposed was not large enough.
In addition to Chopra’s appointment, Biden will also be nominating Gary Gensler to lead the Securities and Exchange Commission. Gensler will be replacing Jay Clayton, who earned a reputation for being soft on Wall Street during his tenure as SEC head.
Experts say Gensler will likely take a much more hands-on approach to banks, brokers and other public companies. Gensler enacted a new set of rules for swap trading at the Commodity Futures Trading Commission during his tenure as chairman following the chaos that occurred during the 2008 financial crisis.
He also oversaw the prosecution of several major investment banks during a Libor price-fixing scandal.
Aggressive Stimulus: Finally, incoming Treasury Secretary and former Federal Reserve chair Janet Yellen will urge Congress to “act big” in providing economic stimulus to avoid a prolonged U.S. recession.
Yellen pledged her support for Biden’s recently unveiled $1.9-trillion coronavirus relief package as part of her confirmation hearing in front of the Senate Finance Committee on Tuesday.
“Neither the President-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said in a prepared statement.
Benzinga’s Take: The general consensus among economists and insiders seems to be that Biden’s regulatory team is bad news for Wall Street.
Trump made a point of appointing regulators that took a hands-off approach to oversight, but Biden seems to be going in the opposite direction by selecting regulators with reputations for being aggressive.
The nominations of Chopra and Gensler could be bad news for big tech stocks and banks given the two men’s histories of sticking up for consumers and investors.
Big tech stocks like Facebook, Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL), Apple, Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT) could be in for a tough four years ahead.
At the same time, Gensler’s appointment could be good news for cryptocurrencies and the Grayscale Bitcoin Trust (OTC: GBTC) given he recently taught MIT courses on blockchain and digital currencies.
The market’s positive open on Tuesday also suggests investors care more about Yellen’s bullish stimulus comments than the potential harsh regulatory environment ahead.
More stimulus spending in the near-term is good news for bank margins given the yield curve is steepening. Inflation concerns could be good news for the SPDR Gold Trust (NYSE: GLD). Infrastructure spending could benefit construction material stocks like Commercial Metals Company (NYSE: CMC) and Vulcan Materials Company (NYSE: VMC). And finally, Biden has made his commitment to clean energy very clear, which could create significant tailwinds for funds like the iShares Global Clean Energy ETF (NASDAQ: ICLN).
Janet Yellen, incoming President Joe Biden's nominee for treasury secretary. Benzinga file photo by Dustin Blitchok.
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