Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
Republican enthusiasm for culling and combining the many US banking regulators is complicating efforts by the incoming administration of Donald Trump to find heads for those watchdogs.
The problem is particularly acute for the Consumer Financial Protection Bureau, which focuses on the way lenders treat customers. The CFPB has been a target of hostility from Republicans since its creation after the 2008 financial crisis. A number of experienced candidates have demurred when contacted about the position, people familiar with the search said.
“Republicans think the CFPB is unconstitutional, and even if you do make progress in protecting middle-class and low income Americans, the Democrats will never give you credit because you’re wearing the wrong colour jersey,” said a former senior financial regulator who is not interested in the job.
Recruiting issues are becoming more serious because of growing ferment around consolidating banking regulatory and supervisory responsibilities that are currently spread among the US Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Some potential candidates have been interviewed by Elon Musk and Vivek Ramaswamy, the bosses of Trump’s newly created advisory committee, the Department of Government Efficiency (Doge), and have been asked about streamlining regulation, people close to the process said.
Musk has called for eliminating the CFPB and Ramaswamy asserted last week on social media that it was “one of the easiest agencies to shut down”. The Wall Street Journal reported that some regulatory candidates have been asked whether it would be possible to eliminate the FDIC, which has protected bank depositors since the Great Depression.
The Trump transition team’s questions, combined with enthusiasm from the Republicans due to run key committees on Capitol Hill for lightening the regulatory load, could herald the first serious effort to reshape the guardrails for the banking industry since the 2010 Dodd-Frank law.
“I think the Trump team might be serious about this,” said Bill Isaac, a former FDIC chair, adding that he has talked to leading Capitol Hill players about his proposal to merge the OCC and the supervisory functions of the Fed and FDIC into a new regulator. “The system is broken.”
Tim Scott, the Republican in line to chair the Senate Banking Committee, has concerns with the current structure of the US’s bank regulatory system, his spokesman said, but did not specify whether he supported consolidating banking regulators. Scott “looks forward to working with the incoming Trump administration to find solutions to streamline regulation, reduce red tape, and increase efficiency while ensuring the continued stability of our financial system.”
But experienced Washington hands point out that multiple prior attempts to consolidate the patchwork of banking regulators into a single super-watchdog have failed. In 2010, Republicans provided crucial votes to help kill the idea.
“Most regulatory scholars support some form of consolidation among bank regulators in the US, but every attempt at doing this has failed. After every financial crisis, there is more regulation and more regulators than there were before,” said Aaron Klein, a senior fellow at Brookings and former Treasury official under Barack Obama.
During Trump’s first term, the acting head of the CFPB Mick Mulvaney at one point refused to request any funding for the watchdog, but it eventually resumed normal operations.
“Congress is needed for any consequential structural changes and it is incredibly difficult to envision a scenario where this issue makes it on the agenda, let alone gets the Democratic support necessary for enactment,” said Isaac Boltansky, managing director at BTIG.
Investor groups and former regulators have expressed alarm at the prospect of weakening the FDIC, noting that it is well known and popular with consumers, in part because most banks tout its deposit insurance as part of their advertising.
“FDIC has a perfect record of protecting insured deposits for over 90 years. Strong consumer confidence in the brand, providing stability during crises,” tweeted Sheila Bair, a former FDIC chair.
Patrick Woodall, managing director for policy at Americans for Financial Reform, said: “The FDIC stamp of approval has safeguarded depositors — and confidence in the banking industry — for nearly a century, while the CFPB has a strong track record of standing up for the little guy. Billionaire ideas about consumer protection and financial stability will do nothing for everyday people.”
Even Isaac said he opposes eliminating the FDIC as an independent agency, because of its emergency bank takeover responsibilities.
“I don’t think that makes any sense,” he said. The idea is to have the FDIC be an independent, bipartisan agency and the Treasury is anything but.”
The Trump transition team did not reply to a request for comment.
