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Normally, SEC Chair Gary Gensler is one of Biden’s tougher regulators. But on Wednesday, he voted with the two Republican SEC commissioners to bring crypto back from the dead. He did it over the dissents of the two other Democratic commissioners.
The vehicle for crypto’s resurrection is a newly invented device called an exchange-traded Bitcoin fund. An investor, rather than buying Bitcoins directly, can purchase shares in a fund backed by Bitcoin. Eleven of Wall Street’s largest financial firms requested and received SEC approval to operate such funds.
With the SEC’s green light, they wasted no time launching the funds. Yesterday, the first day of trading, $4 billion changed hands. Unlike stocks and bonds and even derivatives, which are backed by actual assets, Bitcoin is backed by nothing at all other than expectations of other speculators’ behavior.
Gensler voted to approve these funds out of fear of being sued and losing, because a federal appeals court last summer sided with another financial firm that had sued the SEC because of the commission’s refusal to grant it permission to launch a Bitcoin fund. But in fact, the court merely remanded the case to the SEC asking for better explanation of its policy.
In a brave and eloquent dissent, Commissioner Caroline Crenshaw wrote that the commission’s action violated the SEC’s core mandate of investor protection. One example:
One form of manipulation that appears to be pervasive in the crypto markets (and specifically bitcoin markets), is wash trading, a practice whereby traders seek to increase the appearance of high trading interest by both selling and buying the same products at the same time, often driving up prices, and then selling to unwitting third party market participants at inflated values.
Crenshaw’s dissent, which you should read in full, should have been Gensler’s statement for a 3-2 majority disallowing these products.
The Coup at USTR. Katherine Tai, the U.S. trade representative, has been pursuing President Biden’s worker-first trade agenda despite a fierce undertow of pressure from an old guard inside and outside the administration trying to resurrect the corporate trade agenda that dominated under previous Democratic administrations, most destructively under Clinton and Obama.
This has been fought out in several policy areas, most recently the details of the proposed Indo-Pacific Economic Framework. Tai has been hobbled by the fact that she doesn’t have direct access to the president that previous trade reps have enjoyed, and because other top trade officials in her own agency have been imposed on her by corporate allies at the White House. Temperamentally, she has tried to be a team player rather than playing hardball.
Yesterday, the corporate crowd succeeded in inserting the worst appointment yet, assuming he can get confirmed by the Senate. President Biden nominated Nelson Cunningham to be deputy U.S. trade rep. Cunningham for most of two decades was president of McLarty Associates, which was previously Kissinger McLarty. Yes, that Kissinger.
McLarty is Mack McLarty, formerly Clinton’s chief of staff and a counselor to him on trade. McLarty Associates consults on trade, and boasts 300 corporate clients. In terms of the revolving door, it doesn’t get any worse.
Earlier in his career, Cunningham worked as a staffer for Biden on the Senate Judiciary Committee. That burnished his connections to the White House. Biden, who often seems out of touch, is clueless if he thinks Cunningham will carry out his trade agenda.
And it gets still worse. Tai had advance notice that Cunningham was under consideration and raised no objections. So this coup against Tai is partly self-inflicted. Because of his web of contacts, he is likely to have more influence at USTR than Tai herself, and is already being touted as her replacement in a second Biden term.
Can Cunningham get confirmed? Maybe not. Sen. Ron Wyden, often an ally of bad trade deals that help Big Tech, put out a statement criticizing the nomination. He chairs the Finance Committee, which must approve the appointment.
Wyden, reflecting his new alliance with Sen. Sherrod Brown, warned: “Experience representing the interests of multinationals is not the same as considering the views of workers in Toledo and small business owners in Medford. While I’m looking forward to fully vetting this nomination and considering how the Finance Committee will proceed, I would like to see candidates with more diverse and representative experience.”
Amen. Biden should pull this nomination to spare himself further embarrassment.
