After Lew nomination for Treasury, Obama pressured on Wall Street reform

After Lew nomination for Treasury, Obama pressured on Wall Street reform

President Obama is coming under pressure from liberals to appoint strong consumer advocates atop the Securities and Exchange Commission (SEC) and for the No. 2 leadership spot in the Treasury Department.

Liberals also want Obama to appoint a proven enforcement director at the SEC and tap Gary Gensler for another term as chairman of the Commodity Futures Trading Commission (CFTC).

“The six largest financial institutions have assets worth $9 trillion, two-thirds the GDP of the United States. I think people understand that the Fed does not regulate Wall Street but Wall Street regulates the Fed,” said Sen. Bernie SandersBernard (Bernie) SandersDems ponder gender politics of 2020 nominee 2020 Dem contenders travel to key primary states After Florida school shooting, vows for change but no clear path forward MORE (Vt.), a liberal independent who caucuses with Democrats.

Sanders said people want the federal government to crack down on high credit-card interest rates and “outright fraud on Wall Street.

“People want the president to being to stand up and address some of those issues,” he said.

Some liberal consumer advocates, disappointed with Obama’s implementation of the Dodd-Frank Wall Street reform bill, had hoped the president would immediately take a harder line against what they view as Wall Street’s freewheeling business practices after being elected to a second term.

“I had thought that, freed from the need to raise money from Wall Street both for his own reelection and for other Democrats, Obama would feel unafraid about putting in a zealous defender of Main Street,” said Bart Naylor, financial policy advocate at Public Citizen.

Those hopes, however, took a dive this week when Obama tapped Jack LewJacob (Jack) Joseph LewBig tech lobbying groups push Treasury to speak out on EU tax proposal Overnight Finance: Hatch announces retirement from Senate | What you can expect from new tax code | Five ways finance laws could change in 2018 | Peter Thiel bets big on bitcoin Ex-Obama Treasury secretary: Tax cuts 'leaving us broke' MORE, who, before joining the administration as White House budget director, worked at Citigroup, where he managed Citi Global Wealth Management and Citi Alternative Investments.

“The last thing the Obama administration needs is to continue having Wall Street insiders and fellow travelers shaping its economic policy,” said Robert Weissman, president of Public Citizen, in a statement Thursday.

Despite Lew’s experience in the private sector, he professes to have little expertise in financial regulatory matters. He disappointed liberals two years ago when he testified before the Senate Budget Committee that he does not think deregulation of Wall Street caused the financial collapse of 2008.

“I don’t consider myself an expert in some of these aspects of the financial industry. My experience in the financial industry has been as a manager, not as an investment adviser,” he said. “My sense is as somebody who has been generally been familiar with these trends is the problems in the financial industry preceded deregulation.”

Sanders praised Lew as “a decent guy” and “a smart guy” but will vote against his nomination.

“I think there are people that could have been appointed to be Treasury secretary who do not come from Wall Street,” he said.

Consumer advocates say Obama should balance Lew’s inexperience on financial regulatory issues with sharp-eyed sheriffs in other oversight roles.

A battle is shaping up over the No. 2 spot at Treasury. Neal Wolin, the deputy secretary of Treasury, is expected to step down.

The banking industry would like to see a Wall Street-friendly pick such as Louis Susman, a former vice chairman at Citigroup Global Markets who served as finance chairman for Obama’s 2008 campaign.

Simon Johnson, a professor at MIT’s Sloan School of Management and expert on financial regulation, said Obama has to make several other important appointments: the chairman and the head of enforcement at the SEC, and deputy Treasury secretary.

Johnson said two people already floated by the administration to head the SEC, Mary Miller, a senior Treasury Department official, and Sallie Krawcheck, a Wall Street executive, “are not credible candidates.”

Miller has since removed her name from consideration.

Johnson said Sheila Bair, the former chairwoman of the Federal Deposit Insurance Corporation, or Neil Barofsky, who oversaw the implementation of the Troubled Asset Relief Program in the wake of the collapse, would make strong candidates.

“The Obama administration should live up to its promises and what it committed to under Dodd-Frank,” he said.

Liberal consumer advocates say the administration’s record in implementing Dodd-Frank has been mixed.

While the underfunded Commodity Futures Trading Association has received high marks, the SEC and Treasury have been showered with criticism.

Many liberals are particularly aggrieved over the SEC, which has completed only about a third of the rules it is responsible for under Dodd-Frank. They are also disappointed in Treasury Secretary Timothy Geithner.

“The Treasury piece has been very weak. It really seem that Tim Geithner’s heart was not in following through on any of those tighter rules or more effective restrictions on excessive risk taking,” Johnson said.

As of Jan. 2, a total of 237 Dodd-Frank rulemaking deadlines have passed and the administration has missed 142 or 60 percent of them, according to a progress report by the law firm Davis Polk.

Weissman, the president of Public Citizen, said the remaining appointments at the SEC and Treasury are “vitally important” for the implementation of Wall Street reform.

“Does it get done? Question No. 1. Does it get done well? Question No. 2, given how far behind they are in getting the mandated rules out,” he said.

Weissman said the second-ranking position at the Consumer Financial Protection Bureau is another crucial job to fill.

Weissman said the administration’s implementation of Wall Street reform has “been very gentle.”

“The number-one problem is the delay in getting rules issued,” he said.

Consumer advocates acknowledge the SEC and other agencies have weathered intense lobbying from the banking industry against new regulations. They also recognize the agencies must proceed cautiously to minimize the chance of courts invalidating their work. But those circumstances do not justify the slow progress, they argue.

Advocates such as Barbara Roper, director of investor protection for the Consumer Federation of America, cite the CFTC as a positive example.

“Here’s a tiny, grossly underfunded agency that’s just kept chugging along. They are getting very close to finishing their rulemaking responsibility,” she said.

But Roper worries the relatively small agency will have difficulty implementing and enforcing the new rules once they are written.

Consumer advocates say Gensler should be appointed to another term as chairman of the CFTC.