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SEC Head Gary Gensler Testifies Before Senate Banking Committee

Gensler back in the hot seat

Securities and Exchange Commission Chair Gary Gensler has never been the most popular man in Washington.

But criticism from the business world, political right and even some lawmakers on the left has reached a fever pitch — all as Gensler testifies before the House Financial Services Committee today.

Republicans, particularly in the House, have all but declared war on the SEC over the past two years, and Gensler and his agency have been top oversight targets for the party.

But today’s hearing could be a new high watermark for that opposition. Lawmakers will be sure to pummel him with questions about the agency’s rulemaking blitz, a starkly unpopular custody rule, its aggressive oversight of the crypto sector and more.

House Financial Services Committee Chair Patrick McHenry (R-N.C.) chided Gensler in an interview ahead of today’s hearing.

“He’s lit so many fires. He thinks that’s to his advantage — that there’s so many rulemakings, he thinks the volume will help them get more through,” McHenry told us. “It’s deeply problematic because there are a lot of details to each one of these rulemakings that they’ve not gotten right. They’ve been sloppy.”

It’s not just Republicans: In the Senate, Democrats, including Sens. Jon Tester (Mont.) and Elizabeth Warren (Mass.) have grown frustrated with Gensler’s performance. Tester is concerned that the former MIT professor could go too far with climate risk disclosures, echoing industry concerns of paperwork overload for farmers and other small-business owners that work with public companies.

Warren, on the other hand, says Gensler hasn’t moved quickly enough to implement his progressive agenda.

“We need strong rules and we need them now,” Warren told us. “I appreciate that Chair Gensler is trying to negotiate very difficult terrain, but ultimately, he works for the American people.”

Eyes on crypto: The most consequential focus from the House Financial Services Committee over the past year has been a potential legislative reset for the crypto sector. One of those packages, via McHenry and Rep. French Hill (R-Ark.), would change the “market structure” for crypto.

The legislation could meaningfully alter the SEC’s mission with new limitations on what parts of crypto it would be authorized to regulate. Meanwhile, a much smaller federal agency — the Commodities Futures Trading Commission — would be empowered to regulate more of crypto. (The industry is thrilled.)

We still view market structure reform for crypto as a long shot. But we also don’t want to downplay the significance of the McHenry-Hill bill. It has Democratic support from McHenry’s committee. The package was also a joint effort with the House Agriculture Committee, where it received Democratic support.

“This is not just coming from Republicans,” said Rep. Zach Nunn (R-Iowa). “This is coming from both Democrats and Republicans in the House. We’re saying the overreach needs to stop.”

The clock is ticking in the meantime: Several Biden administration SEC rulemakings haven’t been finalized, including its momentous new climate risk disclosure framework.

If Gensler and other regulators can finalize their most ambitious or controversial rules early enough, they could escape the Congressional Review Act chopping block.

Should completion of these rules come down to the wire, though, lawmakers could overturn much of Gensler’s regulatory legacy — if Republicans control the federal government in 2024. No sure thing.

Both House and Senate Democrats have remained mostly — but not universally — supportive of Gensler’s SEC. The Senate Banking Committee, led by Chair Sherrod Brown (D-Ohio) has largely shrugged off serious crypto reform.

But there are some Democratic SEC detractors in the House, as evidenced by the limited-but-present bipartisan backing for McHenry’s crypto bill. Rep. Jim Himes (D-Conn.), who supports McHenry’s market structure bill, said it was a step toward order for a sector defined by chaos.

“Look, I’m a crypto skeptic,” Himes told us. “But chaos is not a good thing, and we’re seeing immense amounts of chaos in the crypto asset market. So I think the incremental approach of trying to bring some clarity is better than staying in the world of chaos. Right?”

— Brendan Pedersen

Presented by The Coalition to Project American Jobs

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Editorial photos provided by Getty Images. Political ads courtesy of AdImpact.