Source: Bloomberg
Compiled by: BitpushNews Yanan
Wall Street's fierce counterattack against SEC Chairman Gary Gensler is shaking the foundation of the SEC. In this fierce battle with time and financial giants, he must go all out to complete the mission as soon as possible. Every aspect of his agenda, from market regulation to climate change, seems to be under attack.
At 4:11 pm on January 9, a piece of false news purportedly coming from the U.S. Securities and Exchange Commission (SEC) regarding the approval of a Bitcoin ETF suddenly came out. And just 15 minutes later, SEC Chairman Gary Gensler personally came off the court to reveal the truth.
The SEC chairman calmly pointed out to the outside world through his personal account: The SEC’s official X account has been hacked. Previously, a post on the official account @SECGov claimed that the committee had approved several Bitcoin investment products. However, this was fake news - possibly an own goal aimed at manipulating the crypto market.
“Dude, if you can’t protect your own Twitter account, how can you protect cryptocurrency investors?” someone replied to @garygensler.
As a professional and long-time skeptic of cryptocurrencies, Gensler did not expect this to be the case. However, cryptocurrency and cybersecurity are just two of the many thorny issues he currently needs to grapple with. When Gensler took over the SEC in 2021, he was full of enthusiasm and determined to bring about earth-shaking changes in the financial world. He has fearlessly ventured into all areas—stock market trading, Treasury debt liquidation, executive compensation, private equity, cryptocurrencies, short selling, even climate change risk and artificial intelligence. To him, nothing seems to be untouchable.
However, the good times did not last long. In the past three years, Wall Street has been counterattacking like a tidal wave, using lawsuits as spearheads to target the very foundation of the SEC and those in power. Large financial institutions have said that Gensler has stretched his hands too far and his ambitions have expanded beyond control. They firmly believe that the SEC chairman will pay the price for his reckless behavior.
In this contest, Gensler is in a bit of a difficult position: Other federal agencies have criticized the SEC's strong style under his leadership and feel marginalized. Meanwhile, Republican support is waning. Even those former SEC employees who fought alongside him began to waver, fearing that the rules they had worked so hard to formulate would eventually be overturned by a court decision, leaving the SEC in unprecedented trouble.
The SEC issued a statement stating that Chairman Gensler’s goal is to improve the efficiency, competitiveness and resilience of the U.S. capital market and further strengthen its integrity. The committee also emphasized that they have been "maintaining close cooperation with various regulatory agencies in the government" and recently worked with a number of institutions to successfully formulate new national debt liquidation rules. The SEC firmly believes that the regulations passed under Gensler's leadership have brought tangible benefits to investors and issuers.
However, the hacking incident on January 9 and Gensler's subsequent Twitter storm - although he quickly clarified, the SEC's official announcement that it would approve a Bitcoin ETF has undoubtedly intensified doubts from the outside world. In fact, the SEC has been actively promoting listed companies to strengthen their own network security construction.
In this regard, Brad Garlinghouse , CEO of the encryption company Ripple, was blunt in an interview with CNBC on January 16: “I do think that SEC Chairman Gary Gensler has become a political liability in the United States. He does not seem to really stand on the side of citizens. It makes me very confused to consider the issue from the standpoint of interests and long-term economic growth.” It is worth mentioning that Ripple and the SEC have been engaged in a fierce battle in the field of cryptocurrency products since the end of 2020, and Gensler had not yet Take office.
Garlinghouse’s condemnation further highlights the difficult task Gensler faces as head of the SEC, a regulator that has been unequivocally critical of the crypto industry and firmly believes that the industry has blatantly and brazenly violated established regulations and guidelines. “Encryption companies must operate within the legal framework, otherwise they should cease operations completely.” The SEC emphasized in the statement.
At the end of 2022, the collapse of the cryptocurrency giant FTX provided strong support for Gensler’s view that the encryption industry urgently needs to strengthen compliance. Andrew Park, senior policy analyst at the consumer advocacy group Americans for Financial Reform, said the backlash and attacks on Gensler are not surprising. “Enforcers are trying to address a number of long-standing vulnerabilities,” he said, “many of which have resulted in considerable profits for some individuals.”
Sitting in his sun-drenched Washington office, whose walls are decorated with black-and-white photos and family artwork, Gensler, 66, still maintains the posture of a marathon runner. He seems unfazed by outside criticism and various doubts about the future and takes it calmly. Since becoming the face of Wall Street regulation in the Biden era, he has frequently emphasized the idea that protecting investors is good for the country.
"Ultimately, we exist for investors and issuers and strive to improve the level of competition and operational efficiency in the market." Gensler said.
Nearly everyone who supports Gensler is convinced that he aims to become the most influential SEC chairman since Joseph Kennedy. This makes sense, because Joseph Kennedy, the father of John F Kennedy, was the first chairman of the SEC. He took office during the difficult years of the Great Depression, cracking down on fraud and get-rich-quick schemes with an iron fist, and restoring American people's confidence in Wall Street.
Gensler has repeatedly emphasized that he is in no rush for success. However, after working on Wall Street for many years and being deeply involved in Washington politics for a long time, he did not have much time left.
At the same time, other outstanding alumni of Goldman Sachs Group, such as Hank Paulson, Lloyd Blankfein and Gary Cohn, have already retired and are enjoying a comfortable later life. Only Gensler still harbors the ambition to write history.
If former President Trump or other Republican candidates win the presidential election in November this year, Gensler, like many of his Democratic colleagues, may face the dilemma of being forced to leave his job. If Biden is re-elected, Gensler may continue to serve at the SEC until 2026. By then, he will also enter his seventies.
But no matter what, Gensler will eventually leave the political stage in Washington. Moreover, he may never achieve the goal that many speculate he has dreamed of - serving as Secretary of the Treasury.
And it's not because he lacks ambition or experience. After nearly two decades of experience at Goldman Sachs, Gensler has served as deputy secretary of the Treasury, chairman of the Commodity Futures Trading Commission and other important positions, and now he has the important position of chairman of the SEC. He navigates the intersection of Wall Street and Washington with ease, tasked with setting the rules for financial services.
The SEC dismissed rumors that Gensler was interested in becoming Treasury Secretary, saying it was just a ploy by his opponents to attack his policy agenda. "Chairman Gensler has made it clear on many occasions that he is deeply honored to serve as Chairman of the SEC," the SEC added.
In the eyes of former employees, Gensler is a rigorous and efficient leader. He urged the team to move forward faster and resolutely blocked the backdoor channels of financial lobbyists (many of whom were former SEC employees). At the same time, he vigorously combated gossip and gossip to maintain cleanliness in Washington politics.
However, the SEC Attorney General pointed out in a 2022 report that Gensler's high-intensity work pace has brought considerable pressure to the entire agency and made employees feel tired. The report reminds that if things continue like this, coupled with the problem of staff turnover, the rules set by the SEC may face legal challenges in the future. However, the good news is that subsequent reports show that the number of external recruits to the SEC in 2023 has significantly exceeded the number of resignations, injecting fresh blood into the agency. In addition, an authoritative non-profit organization also ranked the SEC as the third best mid-sized federal agency to work for, which is undoubtedly an affirmation of Gensler’s leadership.
Gensler firmly believes that the SEC must respond quickly to the “significant and existential” challenges posed by the epidemic to the financial industry. In a recent interview, he emphasized this point, adding that any SEC chairman would be bound to shoulder this responsibility.
And he did respond to this challenge with action. Gensler launched an agenda of more than 50 rules, more than half of which have been enacted, most of which have not been legally challenged.
Looking forward, Gensler said the SEC will proceed cautiously within the boundaries drawn by the courts while also making full use of the powerful powers conferred by Congress. During the rule-making process, the SEC will always abide by relevant powers and administrative procedures and legal norms to ensure that every decision is legal and compliant. The SEC will also resolutely fight back in court against any challenge to its rules.
Wall Street has a long history of complaining about rules that they say are preventing them from making money. Industry lobbyists have frequently warned that excessive regulation will stifle the vitality of capitalism.
“What will the market look like when all these new regulations are implemented?” Bryan Corbett, CEO of the Managed Funds Association (MFA), asked this question. For the first time in its history, the hedge fund industry group filed a lawsuit against the SEC in an attempt to block a series of new regulations, including one that would require greater disclosures by short sellers.
The MFA is not the only organization unhappy with onerous regulations. Today, major U.S. businesses share the concerns of conservative legal scholars about federal overreach. An emerging Supreme Court case on fisheries regulation could have far-reaching consequences for federal agencies such as the SEC and their regulatory powers in areas such as finance, health care, and consumer safety.
Professor Jill Fisch of the University of Pennsylvania Law School pointed out that the current SEC may be involved in a broader wave of opposition.
"Our courts have expressed concerns about administrative state interference," Fisch said. She further pointed out that the Supreme Court has sent signals that it may reduce the discretion and administrative power of federal agencies.
If the court limits the SEC's power to protect investors, enforce disclosures and promote transparency, it could have a huge impact on U.S. capital markets, Fisch warned.
Gensler, for example, wants companies from Walmart to major oil companies to more fully disclose carbon emissions information, a requirement that could raise a host of major legal headaches. Additionally, he raised questions about the way stocks are traded. The SEC has proposed a set of rules aimed at ensuring Wall Street firms don't take advantage of retail investors. The rules require ordinary investors to trade stocks more through open, transparent auctions rather than through a link in a Citadel Securities empire led by Ken Griffin.
Gensler's allies agree that market reform is already a necessity.
“The best regulatory strategy is to detect and resolve problems before they turn into major crises,” said Stephen Hall, legal director of Better Markets, a Washington lobbying group. The group often supports Gensler's initiatives.
Not surprisingly, Griffin and his colleagues have a different view.
At an industry conference last November, Griffin commented on a proposal: "This is a living example of how a so-called solution can be born that actually does not solve the problem at all."
In Washington and on Wall Street, some have begun to speculate about Gensler's future and what the SEC might look like if he leaves.
At and before the SEC, Gensler tended to cultivate new lawyers and staff who shared his vision of changing the status quo and increasing market transparency. For these young people, this is undoubtedly a rare opportunity. However, according to insiders, this approach often results in the marginalization of staff experienced in implementing policies and responding to legal challenges.
Given the current legal environment, coupled with the political situation ahead of the November election, Gensler will have to work extra hard to ensure that the course he has set remains unchanged.
The fake news about the Bitcoin ETF is simply dumbfounding. To be honest, whether it is dealing with cryptocurrency or many other issues, Gensler’s approach has not completely satisfied everyone.
But Gensler himself feels that his reform agenda has yielded many fruits. "I'm really happy to see the progress we've made," he said.
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