Wednesday , May 03, 2017 - 2:19 PM
(c) 2017, The Washington Post.
President Donald Trump has begun putting in place a new regulatory team for the banking industry, which his top advisers hope to leverage in their efforts to ease industry rules and make it easier for financial companies to lend money.
The appointments mark the beginning of what some Democrats fear is an effort to roll back rules put in place after the financial crisis to prevent banks from ripping off borrowers or taking on too much risk.
On Wednesday, the Trump administration announced it would replace the head of one of the industry’s top regulators with banking lawyer Keith Noreika. A day earlier, Trump’s pick to lead the Securities and Exchange Commission, Jay Clayton, was confirmed by the Senate. And Trump is close to filling a vacant position at the Federal Reserve that could play a key role in easing industry regulations.
For Trump such appointments may be the most efficient way of fulfilling his promise to “dismantle” 2010’s financial reform law, known as the Dodd Frank Act. The House is considering legislation that includes may of the changes Wall Street wants, but it has taken a backseat to deliberations over tax cuts, a replacement of the Affordable Care Act and a potential $1 trillion infrastructure plan. Even then, any legislation rolling back Dodd Frank would likely face a protracted battle in the Senate where Democrats have already raised objections to the idea.
By peppering the banking industry’s regulators with new leadership, some of the same goals can be reached more quickly. The latest addition is Noreika, a banking lawyer the Treasury Department said will serve as acting director of the Office of the Comptroller of the Currency beginning on Friday.
“Keith Noreika has deep experience in helping banks operate in a safe and sound manner, provide fair access to financial services, and provide credit needed for business expansion and job growth,” Treasury Secretary Steven Mnuchin said in a statement. “I am confident that he will capably lead the OCC in carrying out its important mission.”
Trump has said that bank regulators went too far after the financial crisis in cracking down on lending practices, creating an environment that has made it hard for businesses and consumers to get loans. Trump has called for both deregulation and a sweeping change in policy that would break up big banks, though he hasn’t articulated how this might work.
Mnuchin is conducting an expansive review of all financial regulations, and is planning to submit a report to Trump in June that will recommend changes in rules and laws to make what he sees as improvements in the way banks are supervised. White House officials have said that if banks can lend more money, it will help the economy grow and create more jobs. Democrats have pushed back against this idea, though, saying that excessive credit - and weak scrutiny of lending practices - fueled the financial crisis in 2008.
The new head of the OCC could play a key role in Trump’s effort to ease regulations. The agency is one of the banking industry’s top regulators and it has tremendous influence in deciding how forcefully to crack down on the nation’s largest lenders. Thousands of OCC employees are stationed inside banks across the country on a day-to-day basis. Former banking lawyers have led the agency, which dates back to the Civil War, before but the OCC has often faced criticism that it too cozy with the banks it is supposed to be supervising. “Regulators that take up office tomorrow or next week will have an immediate affect on enforcement or adoption of rules,” said Bart Naylor, a financial policy advocate for the civic advocacy group Public Citizen. “All of the laws that are contemplated in Congress are implemented or ignored by the regulators.”
Noreika will replace, at least temporarily, Thomas J. Curry, who is stepping down from the top OCC post after spending years clashing with the industry on key issues.
“Comptroller Curry has been a strong, independent watchdog for the nation’s biggest banks, and a dedicated, thoughtful public servant who helped respond to the worst financial crisis in generations,” Sen. Sherrod Brown, D-Ohio, the highest ranking Democrat on the Senate Banking Committee, said in a statement.
“It is disturbing that the president is rushing to replace Mr. Curry with an acting appointee who has clear conflicts of interest, and lacks any experience in running such an important agency.”
White House officials are considering Joseph Otting, who worked closely with Mnuchin at OneWest bank, to replace Curry on a permanent basis. But his nomination could still be months away, said three people familiar with the process, who spoke on the condition of anonymity because the personnel process is not public.
The White House is also close to naming a nominee for Federal Reserve vice chairman of supervision, but the pick could still take some time as paperwork is being finalized. The leading candidate for this post has been Randal Quarles, who held a senior post in the Treasury Department during the George W. Bush administration. He’s now managing director of the Cynosure Group, a private investment firm based in Utah.
The position at the Federal Reserve was created by the Dodd Frank Act to oversee the largest U.S. banks, but former President Barack Obama never filled the job. Filling the position would give the Trump administration a significant opportunity to shape the financial regulation agenda.
And the SEC, considered Wall Street chief watchdog, will be getting new leadership as soon as this week. The Senate confirmed the nomination of Clayton despite objections from Democrats that the Wall Street lawyer was too close to the industry he must now regulate.
These appointments allow “this new administration to gets its hand on the wheel in terms of bank supervision in a very tangible way,” said Marcus Stanley, policy director at Americans for Financial Reform. The new regulators “will be able to make changes that would have otherwise taken new laws, controversial laws.”
One much rumored change may be on hold. The White House appears to be backing away from hastening a change in leadership at the Consumer Financial Protection Bureau. Many bankers and Republicans have sought the ouster of the agency’s director, Richard Cordray, whose term does not expire until next year. White House officials are not expected to seek his dismissal, several people briefed on the planning said.
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