Trump’s recruitment to head regulators stymied by talk of cutting regulations

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Republicans are keen to eliminate and merge numerous U.S. banking regulators, complicating the incoming Donald Trump administration’s efforts to find their heads.

The problem is particularly acute for the Consumer Financial Protection Bureau, which focuses on how lenders treat customers. The CFPB has been the target of Republican hostility since its creation in the wake of the 2008 financial crisis. Some experienced candidates expressed objections when contacted about the position, people familiar with the matter said.

“Republicans think the CFPB is unconstitutional, and even if you do make progress in protecting middle-class and low-income Americans, Democrats will never give you credit because you’re wearing the wrong jersey color,” a former top financial regulator said. .

The hiring problem has become increasingly serious as banking regulatory responsibilities, now shared between the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., are increasingly consolidated.

People familiar with the matter said that Elon Musk and Vivek Ramaswamy, the heads of Trump’s new advisory committee, the Department of Government Effectiveness (Doge), are evaluating some potential candidates. were interviewed and asked about simplifying supervision.

Musk has called for the CFPB to be abolished, and Ramaswamy claimed on social media last week that it was “one of the easiest agencies to shut down.” The Wall Street Journal reports that some regulatory candidates have been asked about the possibility of eliminating the Federal Deposit Insurance Corporation (FDIC), which has protected bank depositors since the Great Recession.

The questions raised by the Trump transition team, coupled with Republicans’ enthusiasm for forming key committees on Capitol Hill to reduce regulatory burdens, may herald the first serious effort to reshape the banking industry’s guardrails since the 2010 Dodd-Frank law. .

“I think the Trump team is probably serious about this,” said former FDIC Chairman Bill Isaac, adding that he has discussed with key players on Capitol Hill merging the regulatory functions of the OCC and the Federal Reserve and FDIC into one A proposal for a regulatory agency. “The system is broken.”

A spokesman for Republican Tim Scott, who will chair the Senate Banking Committee, said he is concerned about the current structure of the U.S. bank regulatory system but did not specify whether he supports merging bank regulators. Scott “looks forward to working with the incoming Trump Administration to find solutions that simplify regulation, reduce red tape, and increase efficiency while ensuring the continued stability of our financial system.”

But veteran Washington officials note that previous attempts to consolidate the fragmented bank regulators into a single super-regulator have failed. In 2010, Republicans provided critical votes to help kill the idea.

“Most regulatory scholars support some form of consolidation among U.S. bank regulators, but every attempt has failed. Each financial crisis has been followed by more regulators and regulators than before,” Brookings said Aaron Klein, a senior fellow at the Institute and a former Treasury Department official in the Barack Obama administration.

During Trump’s first term, CFPB acting head Mick Mulvaney briefly refused to request any funding for the regulator, but the agency eventually resumed normal operations.

Isaac Boltansky, managing director of BTIG, said: “Any consequent structural changes will require Congress, and it is difficult to imagine that this issue will be on the agenda, let alone gain legislative support. The Democratic Party needed the support.

Investor groups and former regulators have expressed concern about the prospect of weakening the FDIC, noting that the agency is well known and popular with consumers, in part because most banks include deposit insurance as part of their advertising.

“For more than 90 years, the FDIC has a perfect record of protecting insured deposits. Consumers have confidence in the brand, providing stability during crises.

“For nearly a century, the FDIC’s seal of approval has protected depositors and confidence in the banking industry, and the CFPB has a strong record of keeping deposits safe,” said Patrick Woodall, managing director of policy at the Association for Financial Reform. Billionaire on The idea of ​​consumer protection and financial stability does nothing for the average person.

Even Isaac has said he opposes eliminating the FDIC as an independent agency because of its responsibility for emergency bank conservatorships.

“I don’t think it makes any sense,” he said. The idea is for the FDIC to be an independent, bipartisan agency, whereas the Treasury Department is not.

The Trump transition team did not respond to a request for comment.