Clinton’s Progressive Beacon Is a Former Goldman Sachs Banker and Bob Rubin Protégéby
Over tea at Hillary Clinton’s Washington home in late 2014, Elizabeth Warren warned her host that when it comes to Wall Street, what mattered most was the people Clinton surrounded herself with.
Months later, as Clinton launched her presidential campaign, Gary Gensler, who had been a Goldman Sachs banker before he became a senior policy aide and Bob Rubin protégé during the deregulatory years of Bill Clinton’s Treasury Department, came on board, in part to serve as a driving force behind her economic-policy shop. Remarkably, Warren would be one of his strongest supporters.
The deeper explanation is that Gensler is a financial-policy unicorn—a deregulator turned reformer. As head of the Commodity Futures Trading Commission, Gensler became known as one of President Barack Obama’s toughest regulators, willing to buck his friends and former colleagues to tighten rules on the $400 trillion swaps market following the 2008 crisis. His name became an expletive to many on Wall Street, to the delight of Warren and her allies.
Now, Gensler (along with Mandy Grunwald, who works with both women) is a central conduit between Warren and Clinton. “Gary is tough, smart, and principled, and he really understands what it takes to make our economy work better for hardworking families. During his time at the CFTC, he showed that he is willing to take on the big banks and fight to make our financial system safer,” said Warren, who met with Clinton last week after endorsing the presumptive Democratic nominee. “I really respect him.”
That doesn’t mean that Gensler’s history doesn’t continue to shadow him—along with an old adversary, Bernie Sanders. “Unfortunately,” said Warren Gunnels, Sanders’ top policy adviser in the Senate and on his campaign, “Gary Gensler still has not learned the lessons of the late ’90s and of deregulating Wall Street.”
‘More Mission for the Money’
Since he joined the campaign in April 2015, Gensler, 58, has been advising Clinton not just on financial policy but on trade and taxes. With his help, she’s focused in on the so-called shadow banking system—non-bank entities that behave like banks but do not face the same regulations—as a key area in need of more rules. He’s also resisted activist pressure to support a 21st-century Glass-Steagall Act.
His official post, which he requested, is chief financial officer. At Clinton headquarters, signs hang above each department, briefly distilling what each does. The slogan for Gensler’s team could also be campaign manager Robby Mook’s mantra: more mission for the money. It’s not a radical concept, but it is a big change from 2008, when Clinton’s campaign spent more than it raised in its final three quarters and ended with $22.5 million in debt.
Gensler, who tended to high-level surrogates and donors as a senior adviser to Clinton in 2008, had the financial pressures of that race in mind when he told her that the way he could be most helpful this time around was as CFO. Looking at an operation that, if Clinton were to become the nominee, would, along with the Democratic National Committee, need to raise and spend $1 billion and hire 4,000 people, Gensler thought he could make it all work, with enough money for the mission. He’d been counting money since he was a kid, helping his dad’s vending business, and his final job at Goldman Sachs, co-head of finance, included many of the functions of a CFO.
Even for a former regulator, it’s not the most glamorous role; every day, he’s given a big stack of checks to sign. He insisted on using strict accounting practices so that the campaign wouldn’t fall into debt by leaving costs off its balance sheet until bills are paid, as campaigns often do. He hopes to end the campaign in November with nothing left in the bank and no debt, either. Obama 2012 ended with nearly $5.7 million in debt.
Gensler’s portfolio stretches into other areas as well. He, along with campaign lawyer Marc Elias and national finance director Dennis Cheng, led the process last year to create the Hillary Victory Fund, which jointly raises money for the campaign, the DNC, and state Democratic parties. He’s also helping to plan the Democratic National Convention, along with the campaign’s chief administrative officer, Charlie Baker. On debate nights during the Democratic primary, he sat in the war room. Ahead of those debates, where Wall Street was almost always a flashpoint, he helped prepare for debate prep sessions with the candidate.
Like other high-level Clinton aides, Gensler occasionally headlines fundraisers, including one in April hosted by staffers who worked on Dodd-Frank and one this week organized by employees of the Depository Trust & Clearing Corporation, which is regulated by the CFTC, including former CFTC Commissioner Mark Wetjen.
It’s an enormous time commitment. But Gensler’s wife died in 2006 and the youngest of his three daughters just finished her freshman year of college.
What Gary Wants
Gensler has already served in a senior administration job and could afford to never work again (during the early 2000s, he was a stay-at-home dad and caretaker to his wife). Instead, he’s logging 20-hour days not just because he believes in Clinton and wants to help her win but because his ambitions don’t end at what he’s already done.
He’s seen as a possible Treasury secretary for Clinton, if not first out of the gate at the start of her administration then later on (perhaps after Facebook COO Sheryl Sandberg or Federal Reserve governor Lael Brainard, if Clinton chooses to nominate the first-ever woman to lead the department).
Gensler met the then-first lady at end of Bill Clinton’s administration, when he was an aide to Treasury Secretary Larry Summers. They came across each other again during Hillary Clinton’s early years in the Senate and by the time she was running for a second term representing New York, Gensler and his family were hosting a fundraiser for her at their Baltimore home.
Clinton’s infamous e-mail server contains evidence of their relationship. While Clinton served as secretary of state, Gensler occasionally wrote to her private e-mail address to share his thoughts on the global economy and to ask for career advice.
In the weeks after Obama was re-elected, he twice wrote to Clinton asking for some time to talk about his next steps in the administration. “All is well at the CFTC, but it would be wonderful to benefit from your views on how to consider other opportunities to contribute,” he said in one message. He also sent her a link to a glowing profile in Time magazine that declared him to be “The Money Cop.”
The next month, as Clinton recovered from a concussion, he sent notes wishing her well and praising a joint interview she did with Obama. “You sounded and looked wonderful tonight on 60 Minutes,” he said.
Progressive But Practical
Part of Gensler’s influence stems from his temperamental similarities to his candidate.
“Gary’s a progressive but he’s a practical guy,” said Bart Chilton, a Democrat who was a CFTC commissioner when Gensler was the agency’s chair. “He’s not a left-wing nut. Some people might disagree given all the rules we did. But he’s a guy who’s able to say, ‘No, let’s figure out how we get this done that’s actually going to work, not just what you might want to do.’”
Gensler and Clinton share a preference for the nuts and bolts of policy-making over the posturing of campaigns. “Policy-making on a presidential campaign isn’t like it is on Capitol Hill or in the executive branch,” Chilton said.
In many quarters, Gensler’s hiring sent an important signal. Key progressive groups see Gensler as a positive influence on the campaign and, potentially, a future Clinton administration. “If it touches on jobs, growth, the economy, or finance, Gary’s opinion is sought and very carefully weighed,” said Dennis Kelleher, chief executive officer of Better Markets, which advocates for tougher financial regulations.
Gensler’s credibility with progressives is crucial, both because of Clinton’s own Wall Street ties and because of the backgrounds of some of her other advisers.
“There are circles of people whose roles are unclear who are associated with the Wall Street wing of the party. That bothers us,” said a top official at a labor union who asked not to be named speaking before the union had endorsed Clinton.
The locus of these concerns is Gene Sperling, who ran the National Economic Council in the Clinton and Obama White Houses and is an important outside adviser, especially on issues like manufacturing and housing. Some progressives point to pro-Wall Street positions he took in the Clinton and Obama administrations as reason for concern, and also fret that even as the Clinton campaign tries to keep its distance from Summers, the former treasury secretary is influencing the campaign through his relationship with Sperling. Michael Pyle, a former economic aide in the Obama administration who works at BlackRock, is an unpaid adviser to the campaign on finance policy.
Gensler is temperamentally suited to resisting pressure. To those who don’t agree with him—and even sometimes to those who do—his drive to achieve can come off as an unwillingness to listen to others. One Republican who worked with him at the CFTC complained that when the agency started work on a new rule, he already had certain goals in mind and directed the agency’s staff to pursue them without seeking the collaboration and consensus that had been part of how the agency worked under other chairs.
Winning Over the Left
Gensler was once a charter member of the Wall Street wing of the Democratic Party. After earning two degrees at the Wharton School of the University of Pennsylvania, he spent 18 years at Goldman Sachs, rising to co-head of finance before being brought to the Treasury Department by his former colleague, Rubin. He served as assistant secretary for financial markets from 1997 to 1999 and then became undersecretary of the Treasury for domestic finance for the remainder of the Clinton administration. In those roles, he pushed for the passage of the Commodity Futures Modernization Act, which deregulated the over-the-counter derivatives market, and he joined his bosses in supporting the bill that repealed part of the Glass-Steagall Act.
When he was nominated by President-elect Obama in late 2008 to run the CFTC, his work during the last Democratic administration came back to haunt him.
The Democratic majority in the Senate confirmed Obama’s top economic nominees with little resistance, aware that senior jobs needed to be filled in the midst of a deep recession, even as progressives fretted that his picks were heavy on Clinton administration veterans sympathetic to Wall Street. Along with other Senate progressives, Washington state’s Maria Cantwell had concerns about Gensler’s record on derivatives regulation during his time at Treasury Department and also wanted to make a broader point about Obama’s nominees. Sanders also put a hold on the nomination.
In the face of this opposition, Gensler made a concerted effort to show liberal Democrats that he wasn’t a typical Rubinite and, unlike most of Bill Clinton’s economic team, would publicly acknowledge the deregulatory missteps of the late 1990s that contributed to the 2008 crash. “Looking back now, it is clear to me that all of us that were involved at the time—and certainly myself—should have done more to protect the American public through aggressive regulation, comprehensive regulation,” he said during a grilling by then-Iowa Senator Tom Harkin during his confirmation hearing.
When Gensler was nominated, “people were really skeptical about him. He’d come from Goldman Sachs, he’d been in the Clinton administration with a lot of people who were of Wall Street and that’s how they viewed the world,” recalled former Senator Ted Kaufman, the Delaware Democrat who took Joe Biden’s place in the Senate at the start of the Obama administration.
Gensler made the sale with most progressives because he made clear that “he really wanted to do everything we can to fix the problems that caused the financial crisis, make our markets fairer, make our markets safer," Kaufman continued. “He was single-minded about it.”
Gensler played a key role in drafting the Dodd-Frank Act and then used the powers in it to expand the CFTC’s reach to include not just the $35 trillion futures market but also the swaps market, which is more than 10 times larger.
“He’s a good example of someone drawn from the industry who can provide value added,” said Sheila Bair, a Republican who chaired the Federal Deposit Insurance Corporation from 2006 to 2011.
For all the progressives he convinced that he’d left Goldman Sachs and Rubin behind, there was one glaring exception: Sanders.
Sanders opposed Gensler’s nomination for months in early 2009, arguing that a Rubinite could never fit the bill. “Gary Gensler, as part of the Treasury Department under Robert Rubin, pushed for the repeal of Glass-Steagall, the breakdown of those walls, which have led us precisely to where Citigroup is today, where AIG is today,” Sanders said in a March 2009 interview with Democracy Now. “This is a hard-working guy. He is a decent guy. I don’t have any animus against him personally. But I think President Obama has brought around him a lot of the Rubin mentality, which is not only deregulation, it’s unfettered free trade.”
After working to persuade Sanders and other progressives for another two months, Gensler’s nomination finally got a vote on the Senate floor, where he was confirmed 88 to 6. Sanders and five Democrats were the no votes.
While Sanders said that his post might give Gensler the opportunity for a “Nixon in China” moment, he was never fully satisfied with Gensler’s work.
“Senator Sanders was very disappointed in the role he played at the CFTC to not move aggressively to eliminate excessive oil speculation in the commodities futures market,” said Gunnels.
Gensler’s allies rebut that, arguing that he did all he could given that the agency’s lawyers didn’t believe its emergency powers could be invoked.
But Sanders and his team have never revised their opinion. “There’s a myth that he was somehow a strong regulator,” Gunnels said.
Ahead of Sanders’ big Wall Street policy speech in January, Gensler offered a prebuttal for the Clinton campaign, urging the Vermont senator to include proposals aimed at reining in risks in the shadow banking system and chastising him for so far taking “a hands-off approach to some of the riskiest institutions and activities in our economy, which were among the biggest culprits during the 2008 crisis.”
Sanders spokesman Michael Briggs fired back at the time with a statement aimed squarely at Gensler’s pre-2001 résumé: “Senator Sanders won’t be taking advice on how to regulate Wall Street from a former Goldman Sachs partner and a former Treasury Department official who helped Wall Street rig the system.”
Some progressives say that, with regard to Gensler, Sanders went too far.
An aide to another senator involved with financial issues said that “Bernie misplayed his Gary interaction” by turning against Gensler rather than embracing the good he’s done. “He was a tougher regulator than anybody else who was an agency chair and deserves credit for that.”
“It was just kind of jarring in the way that they went after Gary,” the staffer added, declining to be named since his office works with Sanders’ team on many issues.
Gunnels said the whole flap “almost seemed like it was kind of payback for Senator Sanders’ hold he had placed on him.”
Gunnels declined to speculate on whether Sanders would block a future nomination of Gensler but, he added, “I think it’s safe to say that Gary Gensler would not be in a Bernie Sanders administration.”