Unlock the White House Watch newsletter at no cost
Get your comprehensive guide to understanding the impact of the 2024 US election on Washington and the global stage.
Republicans, eager to streamline the myriad of US banking regulators, are making it challenging for Donald Trump’s incoming administration to appoint leaders for these regulatory bodies.
The situation is especially tricky for the Consumer Financial Protection Bureau (CFPB), tasked with overseeing lender-customer interactions. Ever since its inception following the 2008 financial crisis, the CFPB has faced opposition from Republicans. Due to this, several seasoned candidates have been hesitant to engage in discussions about taking the helm, according to individuals familiar with the search.
“Republicans view the CFPB as unconstitutional. Even if you make strides in safeguarding middle-class and low-income Americans, Democrats won’t acknowledge your efforts simply because of partisan differences,” remarked a former high-ranking financial regulator who’s uninterested in the position.
The task of recruitment is becoming increasingly complex as discussions intensify over consolidating the regulatory duties currently split among the US Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
Some of the potential appointees have undergone interviews with Elon Musk and Vivek Ramaswamy, both leading the newly formed advisory group: the Department of Government Efficiency (Doge). During these sessions, they’ve been questioned on their views about regulatory simplification, as shared by those close to the proceedings.
Musk has advocated for doing away with the CFPB, while Ramaswamy recently suggested on social media that dismantling the agency would be a cinch. The Wall Street Journal reported inquiries posed to regulatory candidates about the feasibility of eliminating the FDIC, which has served as a safety net for bank depositors since the era of the Great Depression.
As the Trump transition team poses these queries, paired with the keenness from Republicans poised to steer crucial Capitol Hill committees, this could mark a pivotal move to redefine the regulatory framework governing banks since the 2010 Dodd-Frank Act.
“I believe the Trump team is earnest about this initiative,” noted Bill Isaac, a former FDIC chair, who has discussed his strategy with influential Capitol Hill figures about merging the OCC with the supervisory arms of the Fed and FDIC into a single regulatory body. “The current system is flawed.”
Tim Scott, the Republican slated to lead the Senate Banking Committee, has expressed concerns regarding the present configuration of the US banking regulatory structure. While his spokesperson did not confirm whether Scott supports a consolidation, he stated Scott is eager to collaborate with the Trump administration to streamline regulations, cut through bureaucracy, and boost efficiency while maintaining financial system stability.
However, those with savvy Washington experience highlight repeated unsuccessful attempts to unite the disparate banking regulators into a unified super-agency in the past. Notably, Republicans played a crucial role in thwarting such an approach in 2010.
“Most experts in regulatory affairs advocate for some form of consolidation among US banking regulators, yet every attempt has met with failure. With each financial crisis, more regulation and additional regulators emerge,” explained Aaron Klein, a senior fellow at Brookings and a former Treasury official during the Obama administration.
In Trump’s initial term, Mick Mulvaney, then the acting head of the CFPB, once opted not to request funding for the agency, though normal operations eventually resumed.
“Any meaningful structural reforms require congressional involvement, and it’s exceedingly hard to imagine this issue even making it onto the agenda, let alone garnering the necessary backing from Democrats for passage,” commented Isaac Boltansky, managing director at BTIG.
Investor groups and former regulators have voiced concerns over the potential weakening of the FDIC, emphasizing its strong consumer reputation, partly thanks to banks promoting its deposit insurance in advertisements.
“The FDIC boasts an impeccable record of safeguarding insured deposits for over 90 years. It’s a cornerstone of consumer confidence, offering stability in turbulent times,” tweeted Sheila Bair, a former FDIC chair.
Patrick Woodall, policy managing director at Americans for Financial Reform, stated: “The FDIC’s endorsement has protected depositors — and bolstered confidence in the banking industry — for nearly a century, while the CFPB has consistently advocated for consumers. Billionaire ideas around consumer protection and financial stability won’t benefit ordinary citizens.”
Even Isaac, despite supporting some consolidation, has stated he’s against doing away with the FDIC as an independent entity because of its critical role in emergency bank takeovers.
“Eliminating the agency doesn’t make sense,” he said. The goal is for the FDIC to function independently and inclusively, whereas the Treasury operates under different dynamics.
The Trump transition team has not responded to requests for comment.
