Slideshow Key policymakers to watch in 2018

  • January 01 2018, 10:00pm EST
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Key policymakers to watch in 2018

Over the past year, the focus of several banking policymakers has been how much the regulatory pendulum might swing back toward the industry’s liking.

That theme will likely continue in 2018, with the key policymakers being those at the center of the regulatory-relief debate. New regulators will take the helm of agencies that now have a much different focus than they did following the crisis. The key agency heads will likely be weighing changes related to capital requirements, a new federal fintech charter and regulatory treatment of industrial loan companies.

In Congress, key lawmakers will try to continue their progress in passing a bipartisan regulatory-relief bill while also tackling other big legislative issues such as reforming the government-sponsored enterprises.

The still-volatile political environment in D.C. could still have reverberations for banking policy. The leadership shuffle at the Consumer Financial Protection Bureau will likely continue to spark a partisan backlash as decisions by acting CFPB Director Mick Mulvaney (whose oversight of the agency is still being challenged in court) will be put under the microscope. There will also likely be a guessing game over who the Trump administration will nominate long term for the CFPB and other agencies.

The 2018 midterm elections mean there is potential for more political shifts, with Democrats hoping to ride the momentum of their early special-election victories to take back control of the House or Senate, or both. That would shine a light on key Democratic leaders eyeing committee gavels and other high-profile roles in the new Congress.

Here is a list of the key policymakers to watch in 2018:

Acting CFPB Director Mick Mulvaney

Not only has Mulvaney’s appointment at the CFPB angered Democrats and led to a legal challenge, but the White House budget director is making a splash with his early policy moves. Upon arriving at the agency, he announced a freeze on hiring, enforcement actions and policymaking. But he is also drawing attention for steps that seem intended to more closely align the bureau with the Trump administration’s policies, namely his decision that he will hire more political appointees for the agency and pair them with career-level senior managers. How boldly Mulvaney looks to reshape the agency will be a continued focus in 2018.

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Comptroller of the Currency Joseph Otting

The new head of the Office of the Comptroller of the Currency is still somewhat of an unknown in Washington. But the former banking executive now turned regulator is thought to share policy approaches with other Trump administration officials, such as Treasury Secretary Steven Mnuchin. (They both were on the management team of OneWest Bank in California.)

Otting’s regulatory policy positions will likely come into clearer view in 2018. Perhaps most notably, the new comptroller will get to decide the fate of the OCC’s fintech charter proposal. The agency began constructing a new charter under former Comptroller Thomas Curry, but it is not clear whether the agency will move forward on accepting applications. In his first comments to reporters since being sworn in, Otting indicated that he does see a future for a fintech charter, though the exact parameters of such a charter are still unclear.

Jelena McWilliams

As the nominee to chair the Federal Deposit Insurance Corp., McWilliams — now Fifth Third Bank’s top lawyer — is positioned to be a key member of the team of Trump-appointed regulators weighing potential regulatory reforms. If confirmed, she could also hold the key to whether the FDIC approves the application by the payment processor Square to charter an industrial loan company.

Jerome Powell and Randal Quarles

Fed Gov. Jerome Powell, the nominee to run the central bank, and Randal Quarles, the vice chairman of supervision, are the one-two punch of the Fed’s bank regulatory policy unit. With the central bank’s post-crisis regime still a work in progress, Powell and Quarles will attract focus for any coming changes to stress tests, capital requirements and other aspects of the Fed’s supervision of large banks. So far, they have signaled a willingness to implement some of former Fed Gov. Daniel Tarullo’s vision to simplify components of the regime and increase transparency about the stress test process.

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Senate Banking Committee Chairman Mike Crapo, House Financial Services Committee Chairman Jeb Hensarling

Over the coming year, the two GOP leaders of the banking committees will likely run point for continuing efforts to pass regulatory relief, as well as a likely legislative push to reform the government-sponsored enterprises. Crapo’s targeted regulatory relief bill crafted with a bloc of moderate Democrats is headed toward likely passage, and will probably form the basis of negotiations with the House. Hensarling, meanwhile, plans to leave Congress at the end of next year and likely wants to add another legislative achievement to his name, but his regulatory relief bill, the Financial Choice Act, is viewed as too extreme in the Senate where it would not have enough support to pass.

Key Democrats in Congress

The GOP majority in both chambers of Congress will hold until at least the end of 2018, and key Democratic senators such as Sherrod Brown of Ohio, the Banking Committee’s ranking member, have been on the sidelines of the most recent regulatory relief negotiations.

But the profile of Democrats such as Brown, Sen. Elizabeth Warren of Massachusetts and House Financial Services Committee ranking member Maxine Waters, could rise dramatically next fall if either chamber (or both) flips to Democratic control in the midterms. Analysts say that is increasingly possible after Democratic victories in recent special elections. If the Senate changes hands, and Brown wins his reelection campaign, he will be the likely Banking Committee chairman starting in 2019. If the House falls under Democratic control, Waters will likely chair the Financial Services Committee.

A GOP successor to Hensarling

If the Republicans maintain control of the House next fall, they will still need to select a new chairman of the Financial Services Committee, since Hensarling has announced he will not run for reelection. Possible successors include Ed Royce of California, Patrick McHenry of North Carolina and Blaine Luetkemeyer of Missouri.

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Mark Calabria

Most of the Trump administration’s regulatory roster is set, but the White House still must nominate a permanent CFPB director, as well as a successor to Federal Housing Finance Agency Director Mel Watt, whose term expires in 2019. This could broaden the focus on administration officials who are experts on financial policy.

Calabria, who now services as chief economist to Vice President Mike Pence, is increasingly seen as an important figure in the administration on financial services issues. A former GOP congressional staffer, Calabria could be considered for open regulatory positions, but he also may have a key role in advising the White House on its positions regarding GSE reform, the structure of the CFPB and other issues.

FHFA Director Mel Watt

Watt is one of the few Obama appointees holding policy levers in the administration, and will be a key figure in ongoing discussions over the status of Fannie Mae and Freddie Mac. Not only is he seen having a role in GSE reform, but he faces an important decision over whether Fannie and Freddie will continue to pay dividends to the Treasury Department under the agreements of the mortgage giants’ conservatorships. Those dividends are seen as pushing the companies into an even deeper financial hole, as they are restricted from holding on to any profits and will take an additional hit from deferred tax asset write-downs spurred by comprehensive tax reform legislation.