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Wall Street has a new top cop. And Elizabeth Warren is a big fan of him

New York(CNN Business) A new sheriff is coming to Wall Street -- and, for a change, he's not a friendly face.

In a win for Elizabeth Warren and progressives, President-elect Joe Biden announced Monday he is tapping Gary Gensler to lead the Securities and Exchange Commission.

Gensler made few friends, and plenty of enemies, during his time as an Obama regulator. As chairman of the Commodity Futures Trading Commission, Gensler helped craft the Dodd-Frank financial reform law that the industry loudly opposed. Gensler then moved to swiftly implement Dodd-Frank much faster than other regulators.

Even though Gensler is a former Goldman Sachs banker, his nomination sends a clear signal that Biden plans to take a tougher stance on Wall Street than not only President Trump but perhaps Obama, too.

"Gensler was the toughest regulator under Obama. That will now be the norm in the Biden administration," former Democratic Congressman Barney Frank told CNN Business.

Frank, who co-authored the 2010 financial reform law, called Gensler's nomination a "very good sign."

"That will relax people who might have been worried that enforcement of our bill wouldn't be strong enough," said Frank, who is now a director at Signature Bank.

A former Goldman banker with the backing of Warren

Warren, a fierce critic of big banks, also sounds very pleased with the Gensler pick.

"He is a tenacious regulator who stood up to the industry titans to rein in their risky behavior," the Massachusetts Democrat said in a tweet Monday. "He will be an excellent SEC Chair during this economic crisis."

Not only did Biden tap Gensler to lead the SEC, he also announced Monday the nomination of Warren ally Rohit Chopra to lead the Consumer Financial Protection Bureau.

Biden fired an early warning at Wall Street in November when he tapped Gensler to lead an agency review team working to shape the Federal Reserve, SEC and FDIC.

Dennis Kelleher, a vocal advocate for Wall Street reform who also worked on the Biden agency review team, praised the Gensler pick.

"Gary is a deeply experienced expert in securities markets," Kelleher, the CEO of Better Markets, said in an interview. "He will be a smart, strategic and bold leader who will return the SEC to the gold standard of investor protection."

Before joining the government, Gensler worked for nearly two decades at Goldman Sachs (GS), where he was an M&A partner, led the bank's media group and co-headed its finance team.

"He is the unique exception to the rule of former Wall Streeters who deliver for Wall Street, not Main Street," Kelleher said.

Frank, the former Congressman, said that is no coincidence.

"Gary Gensler was effective in part because he knew the business so well from his time at Goldman," Frank said. "This should be a rebuttal to friends on the left who think you shouldn't have anyone who worked in industry."

Will Trump judges block Biden's 'market cop'?

Neither the American Bankers Association nor the Bank Policy Institute responded to requests for comment on Gensler's nomination.

Stephen Cohen, a white-collar defense attorney at Sidley Austin, said Wall Street is bracing for much tougher enforcement ahead.

"The industry recognizes his reputation. He will want to demonstrate that the SEC is tough on Wall Street -- not just a market regulator, but a market cop," he said.

Cohen, a former SEC official who worked with Gensler during the Obama administration, called Gensler "extremely smart and confident," but warned he may face legal obstacles ahead.

"The courts are far more conservative than they were four years ago," said Cohen, alluding to Trump's appointment of many pro-business judges. "There will be more successful challenges to aggressive enforcement and rulemaking."

Gensler was also known as a demanding boss -- so demanding that the staff eventually formed a union.

When he took over the CFTC, there were calls to merge the agency with the SEC. Not only did Gensler fight off those efforts, he successfully pushed to expand the agency's jurisdiction.

If confirmed, Gensler is expected to bring a strong focus on investor protection. But he will also be asked to address the rise of cryptocurrency and the worsening climate crisis.

Climate activists want Gensler to establish mandatory, industry-wide rules on climate change disclosure. That is a step that would likely be opposed by parts of corporate America, especially the fossil fuels industry.

"Mr. Gensler will enter his new position with a clear mandate, and clear expectation, to act on the climate crisis," Mindy Lubber, CEO of sustainability nonprofit Ceres, said in a statement.

Tougher than Trump -- and Obama?

Clearly, Gensler represents a sharp shift from the Trump era.

In 2017, Trump tapped Jay Clayton, an elite lawyer with a long history of defending big banks, to lead the SEC. Under Clayton, who stepped down last month, the SEC obtained orders for more than $14 billion in fines and returned a record $3.5 billion to harmed investors, according to the agency.

However, Clayton also presided over a "modernization" effort that critics say often tilted against investor protection.

For instance, the Clayton-led SEC enacted rules that made it harder for shareholders to submit proposals at annual meetings and to get independent advice from proxy advisers.

Last month, the SEC's own Investor Advocate criticized the "troubling recent actions" of the commission and called the agency out for "selectively abandoning its deregulatory posture by erecting higher barriers for shareholders' exercise of independent oversight over the management of public companies."

"While these typically were characterized as efforts to 'modernize' or 'streamline' regulations, they often had the effect of diminishing investor protections," Rick Fleming, the SEC Investor Advocate, wrote in a report.

Under Obama, the SEC was criticized for not being tough enough after the 2008 financial crisis.

"The record of the SEC was pretty disappointing," said Kelleher, the Better Markets CEO.

Mary Schapiro, Obama's first SEC chair, picked Robert Khuzami, a former federal prosecutor who later became Deutsche Bank's general counsel for the Americas, to lead the agency's enforcement division. Obama's second SEC chair was Mary Jo White, a former federal prosecutor who later became a Wall Street defense lawyer.

Kelleher expressed hope that Gensler won't repeat the "fatal flaws" of the Obama-era SEC by hiring Wall Street's lawyers for key agency posts.

"That's going to be the big tell," he said.

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