How Hillary Jilted Wall Street

By Michael Hirsh, Politico

18 April 15

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t a small Washington dinner party in 2013, the topic of discussion was Gary Gensler’s elbows—specifically how very sharp they can be. Present were Brooksley Born, Gensler’s legendary predecessor at the Commodity Futures Trading Commission, and Mary Jo White, the then-new chairwoman of the Securities and Exchange Commission. Gensler, the mild-voiced CFTC chairman, was proving to be not only the scourge of Wall Street but a major irritant to America’s closest allies. The reason? Gensler was insisting on rules that would allow U.S. regulators to oversee trading by the big Wall Street banks even if the banks operated abroad. He wasn't going to let Goldman Sachs (his former employer) or anyone else escape whipping by shifting a complex derivatives deal from New York to some affiliate in London, or Bonn, or wherever. Gensler was in effect standing alone against the entire financial world—and he just wouldn’t back down. British and European regulators were aghast over Gensler’s efforts to tread on their turf.

“Boy,” said Mary Jo White—no slouch herself at elbowing opponents—“does he have sharp elbows.”

That should be taken as a warning for the future, especially if Hillary Clinton wins the presidency. The reported selection of Gensler this week as chief financial officer of Clinton’s campaign follows several days in which the just-announced Democratic candidate—on the road in Iowa championing “everyday people”—has offered up more progressive rhetoric and turned Wall Street into her campaign bugaboo. “There’s something wrong when hedge fund managers pay lower tax rates than nurses,” Clinton said on the trail, taking a rhetorical shot at some of the same billionaires who have been underwriting her preparations for months.

Now the choice of Gensler to become in effect the financial manager of a billion-dollar-plus campaign, and part of Clinton’s senior leadership team, may be the surest sign that Hillary Clinton isn’t going to just sound populist but intends to distance herself from her Wall Street friends (though she’ll still take their money, of course). The goal seems clear: to reassure and inspire the party’s liberal base, or what’s become known as the “Elizabeth Warren wing,” and tamp down cries for a liberal challenger to rise up and take her on in the primaries.

In recent months Clinton has gone out of her way to meet with and praise Warren, and in February POLITICO’s Mike Allen reported that Tom Nides, a vice chairman at Morgan Stanley and Clinton’s main liaison to Wall Street, would stay out of a formal role in the campaign—that in effect, Nides wouldn’t get the prized job to which Gensler has just been named.

Neither Gensler nor a Clinton campaign spokesman, Nick Merrill, responded to requests for comment, but close associates said Gensler is pumped up about his new role in the campaign, vague though it now sounds. And given his history—and sharp elbows—long-time associates say that Gensler is unlikely to end up as is a mere symbol of progressive thinking, somewhat in the way Paul Volcker did early in the Obama administration (when the president appointed the former Fed chief to head an advisory council and then largely ignored him for a year). “No one who knows Gensler would ever hire him to just be some kind of statement and nothing else,” says one Gensler admirer and fellow Wall Street scourge, former Sen. Ted Kaufman, D-Del. “He has a view about the way things are going to go, and he’s not going to keep quiet. It would be a mistake to hire him just to get a story out that says, ‘We’ve got Gary Gensler.’”

Gensler is also known to be intensely ambitious. He was deeply disappointed when, as his CFTC tenure ran down at the end of 2013, he wasn’t offered another post inside the Obama administration (“No one has mentioned his name for Treasury or any other post,” lamented a close ally of Gensler’s at CFTC at the time.) Having served as under secretary of Treasury under Bill Clinton already, he was said to be angling for the deputy Treasury secretary spot in Jack Lew’s department. But allies believe he created too many tensions with the previous Treasury secretary, Tim Geithner, over his zeal in reining in the banks’ proprietary trading in derivatives.

Interestingly, Gensler’s long progression in public life from Wall Street employee and loyal “Rubinite” (part of the cabal around former Treasury Secretary Robert Rubin who deregulated Wall Street in the 1990s) to true believer in regulation mirrors to some extent Hillary Clinton’s own efforts to shed her reputation as a Street creature. (On a less positive note, Gensler may also have, like Hillary, an email problem. The CFTC’s inspector in a report released in May of 2013, found that Gensler used his personal e-mail address during the agency’s response to the collapse of futures broker MF Global in 2011.)