10 policymakers to watch in 2022

ByBrendan Pedersen, Joe Adler, Kate Berry

December 29, 2021 9:00 PM

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WASHINGTON — Heading into 2022, banks have a better idea than they did a year ago what federal banking policy will look like in the Biden era.

While there were no dramatic reforms over the past year thanks to the deadlocked Congress, the pendulum began to swing left after four years of the Trump administration were friendly toward the financial industry.

Regulators appointed by the administration and Democratic lawmakers pushed a more progressive agenda around climate change risks, affordable housing, diversity in the financial system and pumping the brakes on technological innovations such as cryptocurrency.

The White House slowly installed new appointees such as Consumer Financial Protection Bureau Director Rohit Chopra and acting Comptroller of the Currency Michael Hsu. They set out to unwind certain Trump-era policies and signaled a tougher approach to supervision and enforcement. Chopra and Hsu, both members of the Federal Deposit Insurance Corp. board, even clashed with FDIC Chair Jelena McWilliams (a Trump administration holdover) over who controls the FDIC board.

The pendulum is expected to swing even further to the left in the coming year as the White House — still needing to fill vacancies on the Federal Reserve Board and atop the Office of the Comptroller of the Currency — attempts to add more progressives to the financial policy roster.

Here are the key figures in both the executive and legislative branches who will try to advance (and those who might challenge) Biden's financial policy priorities in 2022:

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CFPB Director Rohit Chopra

Rohit Chopra, the director of the Consumer Financial Protection Bureau, is proving to be one of the most influential financial regulators in the Biden administration.

Chopra sent shockwaves through the capital in December when he and another Democratic member of the Federal Deposit Insurance Corp. board announced a request for public input on bank merger policy. The board's three Democrats had voted in favor of the request without the support of Trump-appointed FDIC Chair Jelena McWilliams. She claimed the move was invalid, but the Democratic appointees countered that the FDIC bylaws allowed them to move forward since they hold a majority.

The brouhaha set off a dispute over the FDIC's governance and even prompted Rep. Blaine Leutkemeyer, R-Mo., to unveil a bill that would strip the CFPB director of voting powers on the FDIC board while also introducing term limits for all board members.

Chopra previously was a member of the Federal Trade Commission and had served in the Obama administration as the CFPB’s student loan ombudsman. At the CFPB, he is moving move quickly to shape policy on competition in financial services, and has said he plans to crack down on repeat corporate offenders and executives that engage in wrongdoing.

Though he has been director of the CFPB for just over two months, he has already ordered six Big Tech firms to turn over information on their payment systems, warned of a crackdown on big banks’ illegal overdraft practices and urged state attorneys general to file more enforcement cases under federal law.

The CFPB also settled a lending discrimination case against the $17 billion-asset Trustmark National Bank in Jackson, Miss., in concert with the Department of Justice.

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FDIC Chair Jelena McWilliams

The Trump-appointed head of the Federal Deposit Insurance Corp.’s influence suffered in 2021 as the addition of the progressive-minded Chopra and Hsu put her in the minority on her own board. But McWilliams will still have a significant say on key policy issues until her term ends in 2023.

This past year was largely a sleepy one for the FDIC as new Biden administration appointees made it difficult for McWilliams to push policy proposals on the board. The agency pursued some administrative initiatives, including a “mission-driven” capital fund to support smaller financial institutions and “tech sprints” to foster fintech and bank collaboration. McWilliams is credited with encouraging innovation among community banks.

But her influence was threatened when Chopra, FDIC board member Martin Gruenberg and Hsu attempted to issue a request for comment on the FDIC’s bank merger policy without McWilliams’ support. She claimed the move was legally invalid, arguing only she can initiative board votes, but the three Democratic board members countered that their majority allows them to approve FDIC policy by notational vote.

The partisan battle over control of the FDIC’s agenda is likely to continue into 2022, especially if the Democratic members on the FDIC’s board attempt more ambitious policy maneuvers without McWilliams’ consent.

But, regardless, McWilliams is still the chief executive of the nation’s deposit insurer, which also supervises the most banks of any federal regulator. As a member of FSOC, she will have a voice on matters related to climate change risks and other financial stability concerns, and she will be a key figure in interagency talks over reforming the Community Reinvestment Act.

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Acting Comptroller of the Currency Michael Hsu

Seven months spent leading the Office of the Comptroller of the Currency gave Michael Hsu plenty of time to reorient the policymaking direction of the national bank regulator, a process that will likely continue in 2022.

Appointing leadership for the OCC has proved troublesome for the Biden administration. Several candidates for the Senate-confirmed position have fallen through for one reason or another, and it took the administration nearly four months to name Hsu as the acting comptroller.

Although he has stressed the limits of his authority as an acting official, Hsu’s tenure has been busy. He urged banks to check with their supervisors before diving into cryptocurrency, previewed climate-related risk guidance for national banks and rolled back Trump-era reforms of the Community Reinvestment Act in an aim develop a new CRA framework with other regulators.

With no nominee pending to run the OCC long-term — Saule Omarova pulled out of the running after failing to get enough Senate support — Hsu will continue to set the agency's agenda in 2022. He has even prompted speculation that he could get the job for the long haul.

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Federal Reserve Chair Jerome Powell

Toward the end of 2021, a game of musical chairs began at the Federal Reserve Board, with ex-Vice Chair for Supervision Randal Quarles announcing plans to leave. President Biden said he was renominating Powell to another term as Fed chair and tapped Gov. Lael Brainard to succeed Richard Clarida in the board’s non-supervision vice chair seat.

But that left three vacant seats still to fill, including that of Quarles’ successor as the Fed’s top regulatory watchdog. Despite the remaining uncertainty about the board positions, the continued leadership of Powell at the helm of the central bank provides some stability on financial policy.

Powell, a Republican appointed as Fed chair by former President Donald Trump, has proven to be somewhat of a swing vote on banking matters.

He approved of measures spearheaded by Quarles — some of which Brainard opposed — to tweak the post-financial crisis regulatory regime for large banks. But Powell sided with Brainard and Gov. Michelle Bowman in supporting the creation of a real-time payments system known as FedNow while Quarles was the dissenting vote. Powell also delegated to Brainard much of the Fed’s policy work around reforming the Community Reinvestment Act.

Brainard’s promotion and new additions to the Fed board will likely give the central bank more of a leftward tilt in 2022. The Federal Reserve System is expected to continue its focus on climate change risk and diversity in the financial services arena, but Powell’s influence as a consensus-builder and arbiter will remain.

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Treasury Secretary Janet Yellen

Although independent agencies such as the Fed and FDIC are largely in the driver’s seat on bank regulatory policy, the Treasury secretary will remain an influential voice on issues such as climate risks in the financial system and the government’s approach to cryptocurrency.

Yellen chairs the Financial Stability Oversight Council, which consists of the heads of the financial regulatory agencies and is charged with designating activities and specific firms as systemically risky. In October, FSOC issued a 133-page report that outlined climate-related financial risks. Some critics noted the report, which among other recommendations stressed the need for better data to gauge the dangers of climate change, could have gone further.

But Yellen defended the report at a recent hearing, emphasizing that the FSOC’s mission was “to identify threats to financial stability of the United States, and to coordinate across regulatory agencies to make sure that they're addressed.”

Yellen is also a member of the President’s Working Group on Financial Markets, which issued a report in November along with the OCC and FDIC that urged Congress to limit stablecoin issuance to banks that have federal deposit insurance. The recommendation elicited pushback from private nonbank stablecoin issuers. In July, Yellen was quoted as saying at a meeting that regulators should “act quickly” to address stablecoin risks.

Yellen will likely remain focused on such issues as well as weigh in on President Biden’s picks for nominees to run the OCC and serve as the Fed’s vice chair for supervision.

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Sen. Sherrod Brown

Senate Banking Committee Sherrod Brown, D-Ohio, made his progressive influence clear on key White House nominations. That is unlikely to change in 2022.

Brown brought considerable political muscle to the nomination process perhaps most notably in the hunt for the next comptroller of the currency. The search has been a yearlong tug-of-war between centrist and progressive Democrats. The White House’s eventual nominee, Cornell University law professor Saule Omarvoa, was a clear win for Brown and like-minded lawmakers — until her candidacy imploded.

The future head of the Office of the Comptroller of the Currency is not the only appointment that must go through the Senate Banking Committee confirmation process in 2022. The Senate will consider Powell's renomination as Fed chair as well as whomever the administration names as Fed vice chair of supervision.

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Rep. Maxine Waters

Rep. Maxine Waters, D-Calif., is expected to hold significant sway as chair of the House Financial Services Committee in 2022 as Democrats seek historic investments in housing and try to improve diversity across the financial sector.

Waters, who has chaired the committee since 2019, has been a high-profile supporter of the push to secure meaningful federal investments in the housing supply — affordable housing in particular — and to make existing housing more resilient to the impacts of climate change.

Her leadership on housing issues will matter in 2022 when congressional Democrats are expected to continue their push to pass the Build Back Better Act. As Congress debated the bill’s price tag in the fall, Waters fought hard to preserve billions of dollars in housing funds that appeared to be on the chopping block. While it remains unclear what form housing investment may take in the next iteration of Build Back Better, Waters and her committee are expected to play a key role in negotiations.

Diversity in the financial system is also likely to remain a top priority for Waters. She has called on banks and regulators to improve the gender and racial diversity of not just their organizations as a whole, but of the senior leadership. Waters has called on the federal bank regulators to take more direct action to preserve and facilitate the success of minority depository institutions and community development financial institutions.

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Federal Reserve Gov. Lael Brainard

During the Trump administration, Brainard’s profile grew as the Fed board’s point-person on CRA reform and a dissenting voice on reg relief measures supported by Powell and then-Vice Chair for Supervision Randal Quarles.

It was well-established in Washington that the Biden administration’s choice for a Fed chair nominee had come down to her and Powell, whom President Biden ultimately decided to renominate to another term as head of the central bank.

But Biden still nominated Brainard to the Fed board’s non-supervision vice chair seat, a definite promotion. It is somewhat unclear what issues she will focus on as vice chair, though she is likely to remain a figure in interagency talks over CRA reform.

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Sen. Pat Toomey

Despite being in the minority, Sen. Pat Toomey, R-Pa., wields influence as the top Republican on the Senate Banking Committee.

The margin of power in Congress is razor thin; the Senate is equally divided between Democrats and Republicans, with Vice President Kamala Harris serving as tie-breaker. Republicans such as Toomey carry weight in trying to defeat Democratic-backed legislation and Biden administration regulatory nominees.

This past year, Toomey was a vocal critic of regulators’ growing focus on climate change risk. He was one of the most outspoken opponents of confirming Saule Omarova, who eventually withdrew as the nominee for comptroller of the currency.

Toomey is not running for reelection in 2022, meaning he could pursue policy objectives without weighing the political considerations that influence candidates for office. He will likely remain a fierce critic of Biden administration policies and could make filling the remaining roster of vacant regulatory positions — including comptroller and the Federal Reserve’s vice chair for supervision — all that much harder.

Acting FHFA Director Sandra Thompson

Sandra Thompson will likely need the unanimous support of all 50 Senate Democrats to be confirmed as the permanent director of the Federal Housing Finance Agency, a job she has held on an acting basis for the past six months.

The FHFA director may be the least-known financial regulatory watchdog in Washington, but Thompson oversees a large slice of the $12 trillion home loan market through the agency’s supervision of Fannie Mae, Freddie Mac and the often-overlooked 11 regional Federal Home Loan Banks.

The government-sponsored enterprises have been in conservatorship since 2008. They continue to be at the center of a furious policy debate over how to release them from federal control, the role of the private sector in housing finance and the status of a government backstop for mortgage-backed securities.

Because Thompson has spent more than four decades in government, she has the bona fides in pledging to restore the GSEs to a sound financial condition. Thompson has worked at the FHFA since 2013, and before that spent 23 years at the Federal Deposit Insurance Corp., ultimately serving as director of risk management supervision.

She won praise early in her brief tenure so far at FHFA from both mortgage lenders and housing advocates for eliminating a roughly $1,400 fee imposed on all refinancings last year by former FHFA Director Mark Calabria, a Trump appointee, to offset potential losses from the pandemic.

Moving forward, Thompson has proposed shifting the FHFA’s focus to expanding affordable housing goals and access to credit for first-time homebuyers, two policy areas that generally have been opposed by most Republicans.