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The CFPB, FDIC and FHFA face a number of potential scenarios affecting their leadership structure depending on who wins Tuesday night.
November 5 -
The Senate finally confirmed Martin Gruenberg and three others to serve on the FDIC board, but — in an rare omission — did not confirm Gruenberg to serve as chairman of the agency. Thomas Curry, however, was confirmed as Comptroller of the Currency.
March 29 -
Why did the Senate confirm Martin Gruenberg as a board member of the FDIC but not the agency's chairman? We seek to answer this and other questions, including how it will impact banks and the agency itself.
March 30 -
SEC Chairman Mary Schapiro is leaving the agency, after helping turn around its tarnished reputation in the wake of the financial crisis.
November 26
WASHINGTON — A year ago, "Senate-confirmed bank regulator" was almost an oxymoron.
With a divided Congress slow to confirm appointees, only one of the four federal bank regulators had a permanent chief, and the Federal Deposit Insurance Corp. board of directors had just three members. No one on the board was the confirmed head of an agency.
Though there have been speed bumps to arriving at a full slate of regulators, the agencies are set to enter 2013 with more certainty about who's in charge. Unlike "acting" leaders who call the shots in the interim, observers said locked-in terms are likely to make regulators more assertive and efficient in carrying out post-crisis policy, including rules still yet to be implemented under the Dodd-Frank Act.
"It's harder to be bold when you don't know if you're going to be there very long," said Eugene Ludwig, a former comptroller of the currency and now head of the Promontory Financial Group.
Last December, the only confirmed agency head was Federal Reserve Board Chairman Ben Bernanke.
Martin Gruenberg — the FDIC's No. 2 under former Chairman Sheila Bair — had been acting chief and the nominee to succeed her since the prior summer. The Office of the Comptroller of the Currency had been without a confirmed head since August 2010. John Walsh had led the OCC as acting comptroller for well over a year.
The FDIC board was composed of Gruenberg, Walsh and Thomas Curry, who at the time was a non-executive member of the board and also the nominee for comptroller.
Meanwhile, the Consumer Financial Protection Bureau, which under the Dodd-Frank Act was to assume vast powers and an FDIC seat once it had an appointed director, also had an interim leader, Raj Date.
Observers say temporary leaders then faced an arduous task managing agencies in the crucial period following Dodd-Frank.
"Particularly as the head of a banking agency, being in an interim position is very difficult. It's hard to make the tough decisions, especially if you're under consideration to be nominated and confirmed by the Senate," said Ron Glancz, a partner at Venable. "You're always looking over your shoulder at the Senate confirmation."
In January 2012, the administration threw up its hands after being blocked by Senate Republicans and recess-appointed Cordray. The move continues to irk the GOP and bankers, with questions looming over its legality. But Cordray's hiring at least reduced uncertainty about who called the shots at one of the agencies. In the months since, the CFPB has churned out rules without hesitation.
"I don't think he's worried too much about the legal challenge," Glancz said.
But Curry and Gruenberg remained in a holding pattern. Also caught up in the appointments limbo was Thomas Hoenig, who despite having been recommended by Republicans for the job of FDIC vice chairman — an appointment traditionally chosen by the opposition party — was forced to wait for Senate action with the other nominees.
Two factors slowed the process. Republicans appeared to sit on a long list of many appointments — even uncontroversial ones — over objections to contentious picks, such as Cordray, whose recess appointment helped solidify the stalemate. Then, with polls showing a tight presidential race, GOP leaders opted to delay votes on appointees for extended terms to allow a hypothetical Republican administration to choose new nominees.
Last spring, there was movement.
The process finally concluded last month when, following Obama's reelection, Gruenberg and Hoenig
"Having permanent or longer-term appointments in place, you at least have people who have an agenda, and they know how long they have to accomplish what they want to do," said Carolyn Buck, who worked as chief counsel at the former Office of Thrift Supervision.
Uncertainty over appointments has affected other agencies as well. The May confirmations of Jeremy Stein and Jerome Powell as Fed governors meant the central bank's board was fully constituted for the first time since 2006.
And a book could be written about Acting Director Edward DeMarco's leadership of the Federal Housing Finance Agency. With GOP lawmakers having squashed Obama's attempt to appoint an FHFA director, DeMarco — who worked at the agency during the Bush administration — has strived to take charge of the housing agency at a pivotal time without Senate confirmation.
"Whenever you have an acting head of an agency, they're going to have a limited amount of operating room," said V. Gerard Comzio, a partner at Paul Hastings. "In their circumstance … they haven't passed muster in the Senate. They have had to be fairly cautious in jumping out in new directions because they don't have the explicit endorsement of either the administration or the Senate."
Question marks remain over some other key positions. Although the administration has named commissioner
Several names have been floated in the press, meanwhile, for who will succeed Treasury Secretary Tim Geithner — widely expected to step down in early 2013.
Still, more certainty about leadership of the FDIC, OCC and CFPB in the new year means the agencies are more likely to act quickly on a long list of unfinished business, including Dodd-Frank rules dealing with the mortgage sector and new proprietary trading restrictions. There may always be some doubt and angst over Cordray's appointment, but Obama's reelection gives the bureau cover to set policies for the near future.
"Many of the rules to be implemented" from Dodd-Frank "require joint agency action. Having a full complement of confirmed agency heads helps that process," said Ludwig.
"Regulators put themselves on the line every day in their jobs. But they're bound to be more tentative if they don't know what direction the agency will take, because they don't know if the acting head — the person who sets the policy — is going to be there. Uncertainty about leadership makes the whole organization more cautious and slower to act."
Some said having the leadership slate set for the banking agencies could enable regulators even to push back more against administration policies they see as disruptive to the industry, whereas an interim leader may be more reluctant to speak up.
"For Obama's first term, it seemed that the Treasury and the Fed were pretty much in the driver's seat as far as financial services policy went," Comizio said.
"Now Treasury and the Fed will see other agencies like the OCC and the FDIC taking their cuts at how these regulations are going to be implemented. With more appointees in place, it remains to be seen whether that presents an opportunity for collaboration or an opportunity for a number of these agencies to push the respective agendas that they're looking to push."
