President-elect Joe Biden and Vice President-elect Kamala Harris wasted little time in early November assembling their transition teams.
Some familiar faces — such as Gary Gensler, former head of the Commodity Futures Trading Commission and Dennis Kelleher, president and CEO of Better Markets — are part of the agency review team responsible for the Federal Reserve as well as the Securities and Exchange Commission and Consumer Financial Protection Bureau.
Agency review team members are responsible for “understanding the operations of each agency, ensuring a smooth transfer of power, and preparing for President-elect Biden and Vice President-elect Harris and their cabinet to hit the ground running on day one,” explains the Biden-Harris transition website.
Gensler and Kelleher are both staunch fiduciary advocates. Gensler is also chairman of the Maryland Financial Consumer Protection Commission, which recommended pursuing a state fiduciary law. The Institute for the Fiduciary Standard awarded Gensler with the 2014 Tamar Frankel Fiduciary Prize.
Kelleher of Better Markets, an advocacy group that supports financial regulation, has been a staunch opponent of the Securities and Exchange Commission’s Regulation Best Interest.
Kelleher said during a Sept. 15 webcast, dubbed “President Trump’s Deregulation of Wall Street Making Catastrophe More Likely,” that the SEC has left investors behind “over the last three years as it protects industry profits first.
You can see that in the refusal to enact the uniform fiduciary duty rule so that brokers are required to always put their clients’ interest first regarding their clients’ own money.”
Reg BI was one of 65 final rules that SEC Chairman Jay Clayton advanced to date from the commission’s policy divisions and offices. Clayton announced in mid-November that he’d be stepping down from the agency by year-end.
Names being floated to replace Clayton in the new administration include Gensler, who also was former co-head of Finance for Goldman Sachs, and Preet Bharara, the U.S. attorney for the Southern District of New York under former President Barack Obama.
The Labor Department sent its fiduciary prohibited transaction exemption to align with Reg BI, dubbed Improving Investment Advice for Workers & Retirees Exemption, was sent to the Office of Management and Budget for review on Nov. 25.
Brad Campbell, partner at Faegre Drinker in Washington and former head of Labor’s Employee Benefits Security Administration, said during a Nov. 5 webcast that Labor’s fiduciary rule to align with Reg BI could be “a dead letter” if Labor failed to send is final version to OMB by mid-November.
If Trump published a final rule before Nov. 20 — 60 days before the end of his term — the Biden administration “typically would have to use notice and comment rulemaking to suspend or modify that regulation,” which is a time-consuming process, Campbell said.
If Trump puts a rule on the books less than 60 days before leaving office, President Biden could squash it “basically with a stroke of a pen,” Campbell added.
The Trump fiduciary rule remains up in the air.
With no “second term of the Trump administration, it’s quite likely that the DOL fiduciary rule, as the Trump administration envisions, is a dead letter.”
That doesn’t mean the fiduciary rule issue is dead.
In fact, with “a Biden administration, we think it’s very likely that they will pursue, again, a fiduciary regulation which likely would be a combination of actually changing the 1975 regulation in material ways — bearing in mind the objections of the 5th Circuit [Court of Appeals], which struck down the Obama-era” fiduciary rule, the attorney explained.
Biden’s Econ Picks
Biden also announced his anticipated picks for his economic team. Former Federal Reserve Board Chair Janet Yellen is his pick for Treasury secretary.
BlackRock executive Brian Deese is the choice for director of the National Economic Council. Other key economic posts named on Biden’s transition website include Adewale Adeyemo — a former senior advisor at BlackRock — as deputy Treasury secretary. Adeyemo is a Nigerian-born attorney and president of the Obama Foundation.
Biden also intends to nominate Neera Tanden to lead his Office of Management and Budget. Tanden is president of the Center for American Progress, a liberal think tank in Washington.
Princeton Dean and economist Cecilia Rouse will be selected to head the Council of Economic Advisers.
Biden also plans to tap two economic advisers from his presidential campaign, Jared Bernstein and Heather Boushey, to be members of the CEA.
Key Issues in December
Two “very important issues” loomed in December, according to Greg Valliere, chief U.S. policy strategist for AGF Investments: avoiding a government shutdown on Dec. 12 and officially confirming Biden’s election victory on Dec. 14.
President Trump signed on Dec. 12 a one-week continuing resolution to fund the government.
During an online Schwab Impact event in mid-November, Valliere predicted the most likely scenario is to pass still another continuing resolution, lasting until a few days before Christmas, or perhaps lasting well into 2021.
The certification of the next president “will begin to unfold soon,” Valliere continued in his email briefing, with states ratifying their presidential election winners.
The Electoral College voted on Dec. 14. Biden won 306 electoral votes to Trump’s 232.
“The key issue, of course, is whether any court of appeals could delay this process, giving Trump a glimmer of hope; thus far, it seems highly unlikely that he can prevail. Whether he concedes is another issue entirely,” Valliere stated.
“This is 2020, the year from hell, as Covid-19 cases explode throughout the country, so anything could happen … ,” Valliere said. “A final Electoral College outcome on Dec. 14 is coming into focus.”
All Eyes on Senate
Michael Townsend, vice president of legislative and regulatory affairs at Schwab, said during the virtual session that “investors need to pay attention to the battle for control of the Senate.
That’s really going to determine what the achievable policy agenda could be for a Joe Biden presidency; if Republicans have control of the Senate, then it’s going to be very difficult for him to get his policy initiatives through.”
That means “all eyes on Georgia,” where there are two runoff elections for Senate coming up in early January, Townsend said. “Even though we’re through [with] Election Day, we’ve got about eight more weeks before we’re really going to know the lay of the land in Washington.”
The Senate, Valliere agreed, “is really important. … For Biden to get along with [Majority Leader Mitch] McConnell, they’re going to have to move to the center. They’ve known each other for decades; they both pride themselves on their ability to cut deals. I think we will get some deals cut.”
Washington Bureau Chief Melanie Waddell can be reached at [email protected].