In the two-minute video, the viewer feels like they are watching a low-budget video and feels a shiver. The transitions are set up quickly and clumsily. The atmosphere is that of a high school audiovisual arts club – except for the presenter in the video. He looks like a stock image of a government employee, wearing a dark gray suit and a blue shirt. His wide eyes never stray from the camera; nor do his hands stop gesturing.
Gary Gensler Shares the Episode with His Twitter Followers
Gary Gensler shared the episode with his Twitter followers on October 3, 2022, and it was notable as it coincided with major news: the U.S. Securities and Exchange Commission secured a $1.26 million settlement from Kim Kardashian related to her failure to disclose that she received payments to promote a fraudulent cryptocurrency on Instagram. The video was posted at the start of Monday morning’s news cycle and had the desired impact: it was covered by the media from CNBC to the New York Post. The SEC and Gary Gensler were everywhere.
Gary Gensler and Facing Criticism
It was unusual for heads of federal agencies – who are typically considered types of conservative lawyers – to devote their time to filming somewhat awkward social media videos. However, Gary Gensler has posted over 30 episodes of “Office Hours”, each of which could attract media attention. In an interview in early November with Fortune magazine, Gary Gensler described “Office Hours” as a fundamental part of his mission. Protecting and educating investors, “interacting with the public,” is what the SEC needs to do more of, in more creative ways, he says – to provide investors with the information necessary to make good decisions. “It’s about clarifying what this reform agenda is,” he says.
Gary Gensler and His Strong Approach
Gary Gensler’s strong approach has made him one of the most prominent figures in Washington. In the middle of his tenure at the SEC, he has never had more authority to influence the lives of investors. He has sought to implement the priorities of the Biden administration, which include disclosing corporate climate risks, tightening oversight of investment advisors, and combating products that target consumers and rely on technology like Robinhood and cryptocurrency ventures.
The Impact of Gary Gensler
To gauge Gary Gensler’s impact, Fortune magazine spoke with over 30 financial experts, politicians, and current and former staffers at all levels of the SEC and the Commodity Futures Trading Commission (CFTC), including agency leaders. Many of them only spoke behind the scenes, given the immense influence Gary Gensler wields in Washington – and the fact that he still regulates or oversees many of them.
Gary Gensler and His Challenges
The final image projects a leader with undisputed drive – but many fear that he may be leading his agency in the wrong direction. “If you’re never losing, you’re not pushing the boundaries as much as you can,” says Lee Reiners, a lecturer at the Duke University Financial Economics Center and a fan of Gary Gensler. However, a former SEC staffer expresses a darker mood, describing the unrealized ambitions and internal strife at the agency: “These pressures and frustrations are building up,” the staffer says.
Gary Gensler and His Role at the CFTC
In late 2008, the United States was grappling with a major financial crisis, and President Obama turned to Gary Gensler for a top position. Obama appointed him to lead the Commodity Futures Trading Commission – an obscure agency tasked with reins on the deep financial derivatives that helped accelerate the market collapse.
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At first glance, Gary Gensler seems like one of Washington D.C.’s symbols who work in government to help their former colleagues. He joined Goldman Sachs in 1979 after earning an MBA from Wharton University at just twenty-one years old, and later became one of the youngest partners in the bank’s history. He had served in government before, but at the Treasury Department during the Clinton administration, in an era of weak oversight. This background made him unpalatable to radical people. Bernie Sanders was among the senators who delayed his nomination for nearly five months.
In his response, Gary Gensler relied on one of his superpowers: talking on the phone. Tyson Slocum, director of the energy program at the leftist consumer organization Public Citizen, was surprised to find himself on the other end. Gary Gensler spent two hours pleading his case in Slocum’s office in Dupont Circle. Shortly thereafter, he received Slocum’s endorsement. When Slocum faced criticism about Gary Gensler from other radicals, he would respond: “None of you have met Gary Gensler in person.”
In the end, Sanders yielded to Gary Gensler’s nomination, and soon after, Gary Gensler helped draft a key provision of the Dodd-Frank Act that granted the Commodity Futures Trading Commission broad powers. He spent the next five years on an aggressive campaign to enact numerous new regulations. Far from being a friend of Wall Street, he transformed himself into an enemy of the financial world. As one staff member who joined the CFTC right after Gary Gensler stated, “He was a god.”
Gary Gensler and the Challenges at the CFTC
Many people close to Gary Gensler say that the death of his wife in 2006 pushed him to reassess his priorities after finding himself alone with three daughters to raise. In an interview with Time magazine in 2012, Gary Gensler recounted how he washed a few bags of dirty clothes for his eldest daughter after she returned from a trip. (Gary Gensler has not remarried.)
When he sat down with Fortune magazine on the sidelines of a financial technology conference in Washington, Gary Gensler dismissed the idea of changing his principles regarding regulation. While he worked in the mergers division at Goldman Sachs, he says clients saw him as a source of compliance – in a positive way. “It’s a good thing that we have some road rules,” he recalls thinking.
Gary Gensler still speaks with an accent in his conversation, just as he did in his childhood in Baltimore, where his father provided cigarettes and beet machines from which he helped collect nickels. He and his twin brother earned college degrees, unlike their parents. Gary Gensler taught accounting at university when he was in his twenties, a decision the university later made naïvely. “He’s one of the active people,” says Bartlett Naylor, a financial policy advocate at Public Citizen. “It’s clear he is the bright light even among other lights.”
However, this activism weighed heavily on his colleagues at the CFTC. Gary Gensler pushed the agency, which typically operated from nine to five, to adopt Wall Street hours, much to the displeasure of employees who worked continuously. One longtime employee recalls how Gary Gensler – who is considered poor despite his wealth from Goldman – bought a new car after his wife’s old one was no longer safe to drive. Gary Gensler’s daughters set up Bluetooth in the new car, leading to a nightmare situation for colleagues. “You can’t get him off the phone,” the employee told Fortune magazine. “After a while, your arm just gets tired from holding the phone.”
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Gary Gensler’s tenure at the Commodity Futures Trading Commission (CFTC) is marked by overreach and an uncompromising approach that would precede his time at the U.S. Securities and Exchange Commission (SEC). In one instance, he angered bankers both domestically and abroad by implementing what became known as the “bank elevator guidance,” which expanded the agency’s oversight of foreign transactions. While Gensler and others defended the guidance as a late improvement, the step “burned bridges with international counterparts,” according to a former CFTC official. “It left others to clean up the mess.”
Current employees at the CFTC state that Gensler, in his quest to bolster the agency’s authority, pushed initiatives before ensuring funding to pay for them—especially concerning real estate. Gensler signed contracts nationwide, assuming that he would be able to fill offices with new staff. The CFTC’s office space increased by nearly 75% during his five-year tenure. However, Congress did not approve the massive funding that would fill the offices with employees. A report from the Government Accountability Office in 2016 showed that at that time, 20% of the agency’s headquarters in Washington was unoccupied, 32% of its offices in New York, and nearly 60% of its offices in Kansas City were unoccupied.
Gary Gensler and His Relationship with Elizabeth Warren
Gary Gensler joined Hillary Clinton’s presidential campaign in 2016 as the chief financial officer after leaving the CFTC. But before Clinton lost to Donald Trump, colleagues noted how close Gensler became to Senator Elizabeth Warren—and earned the nickname “Elizabeth’s advisor” from a senior staffer in Clinton’s camp. Warren, a practical woman from Oklahoma who became a law professor at Harvard University, is a prominent political figure thanks to her biting populist critiques of the financial system and her work with Gensler on shaping the Dodd-Frank Act.
Four years later, Warren lost in the Democratic primary to Joe Biden, but she seemed to win the battle over regulation, pushing the nominee to adopt her aggressive stance toward Wall Street and banks. Some sources say that Gensler and Warren helped shape the Biden administration’s approach to financial regulation—especially since Biden appointed Gensler as chairman of the SEC before his inauguration.
Gary Gensler and the Challenges in Cryptocurrency
Gensler says in an interview, “Even though you might think otherwise, I don’t spend most of my time on cryptocurrency.” He mocks Fortune magazine for its coverage of his battles with the industry—but ordinary people could be forgiven for believing that Gensler is working on cryptocurrency all the time.
After his time on the Clinton campaign, Gensler was invited to teach a class at the Massachusetts Institute of Technology (MIT). He noticed that there was no available class on blockchain technology. “Someone should do that,” he recalls thinking, and in 2018 he became that person. “I did my best to try to teach it from the middle,” Gensler says. “Without being too doctrinaire about Bitcoin or Bitcoin maximalism.”
Many cryptocurrency enthusiasts were able to attend the course, which was recorded by a faculty member and posted on YouTube. Gensler delved into the technical aspects of blockchain and explored the legal implications of the technology and its potential impact on investors. He appeared balanced and curious, and his appointment as SEC chair raised hopes in some circles that he would be forward-thinking regarding cryptocurrency.
Things changed
Gary Gensler’s positions, however, once he took office. During the transition period, amid the COVID-19 pandemic, a new generation of cryptocurrency speculators emerged: the value of Bitcoin and other currencies soared, and fraudulent schemes multiplied with the growing hype.
The U.S. Securities and Exchange Commission became clearly more aggressive after the bubble burst and the collapse of major cryptocurrency projects like Terra, Celsius, and FTX in 2022. It launched lawsuits against celebrities like Kardashian for promoting cryptocurrency projects without disclosing that they were being compensated. It also filed lawsuits against Coinbase and other exchanges that it believed were playing by the rules; the agency argued that they were offering unregistered digital currencies as securities, among other things.
Gary Gensler states that these actions clearly fall within the protective jurisdiction of the agency. “There are a lot of people trying to sell a better future for investors, even though [crypto advocates] have not shown many uses in this space,” Gary Gensler says. “You see company after company, leader after leader, misleading the public and going bankrupt.” He often refers to Franklin D. Roosevelt, under whom the SEC was established, pointing to that president’s goal of “full and honest disclosure” to curb the chaotic stock market following the crash of 1929.
However, Gary Gensler has no equivalent in the new United States. (Nor the enthusiasm enjoyed by cryptocurrency pioneers and advocates – many of whom are true meme masters.) Gary Gensler regularly posts satirical messages on social media targeting the cryptocurrency industry and its cartoonish villains. On Halloween, he tweeted a joke about cryptocurrencies: “If Satoshi Nakamoto went as Satoshi Nakamoto for Halloween, would we be able to recognize him?” (We can explain, but… ask your kids.) He then said that cryptocurrency companies that deceive investors should begin to “treat them” with legal compliance. When we speak a few weeks later, he proudly says he had the idea for the tweet; his public affairs manager helped craft the language.
However, most cryptocurrency leaders consider themselves compliant with the laws – and believe that Gary Gensler should create rules to help them serve customers better instead of punishing them based on outdated rules that do not fit the technology. In his early days at the SEC, Gary Gensler told Congress that he believed new legislation was needed to regulate the industry. But Congress, which is suffering from paralysis, has not passed any legislation.
Despite hastening to fill the gap by enforcing existing law, Gary Gensler has sparked controversy in the legal field: whether cryptocurrencies are commodities like gold bars or securities like stocks or bonds. Everyone agrees that Bitcoin is a commodity – it was classified as such in 2015, before the broader industry took off. But Gary Gensler argues that all other cryptocurrencies are securities, a tool that enables people to invest and profit from a joint venture.
Gary Gensler speaks with the same style to cryptocurrency companies whenever he gets pulled into testimony in Congress: “Come in and register,” just like securities brokers and exchanges do. “We don’t allow the New York Stock Exchange to list unregistered stocks,” says Hilary Allen, a law professor at American University. “Why should we allow a cryptocurrency exchange to list unregistered tokens?” Many in the industry find the call suspicious, arguing that new and decentralized business models cannot fit within existing securities laws.
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At the same time, Gary Gensler has hesitated to draw clear lines around specific digital currencies. (When I spoke with Fortune, he refused to take a position on whether the digital currency Ether is a security, a hesitation that one former employee of the U.S. Securities and Exchange Commission says “makes the agency look foolish.”) As a result, the stalemate continues. The outcome is a lack of clarity for investors, especially with traditional funds adopting digital currencies through major offerings like Bitcoin and Ether ETF funds.
Additionally, the dispute between the SEC and the Commodity Futures Trading Commission has strained their relationship. Summer Mersinger, a member of the Commodity Futures Trading Commission, references a judicial action against a Coinbase employee caught trading digital currencies with insider knowledge. The Commodity Futures Trading Commission intended to file its own case but informed the SEC that it would treat digital currencies as securities. Mersinger worried that the courts might dismiss the lawsuit due to jurisdictional issues. “We used to have a good relationship between our enforcement divisions, but I think that has been significantly strained,” she says.
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