The election will change the face of bank regulation — eventually

WASHINGTON — An odd quirk of the financial regulatory apparatus is that, in many respects, the most important aspects of the presidential race for bankers don't come into play until after the election is over.

When presidential administrations change — and, often, even if a president is reelected — the directors of federal agencies change, and those changes can signal a shift in priorities or even outright changes in policy. But even in this regard, banking regulators are a little different.

The three federal banking regulators — the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency — have a greater or lesser degree of independence from the White House, meaning that any new president is stuck with at least some of their predecessor's appointees until their terms expire.

The severity of that lag varies from administration to administration. When Donald Trump took office in 2017, for example, there were two vacancies on the Federal Reserve Board of Governors, compounded by two more as Fed Gov. Daniel Tarullo and Vice Chair Stanley Fischer resigned that year. Biden, for his part, inherited one vacancy when he took office in 2021, but ultimately appointed four new members of the board of governors and reconfirmed Chair Jerome Powell over the course of his term. 

But a few things have changed between then and now that make this post-election regulatory appointment landscape worth unpacking.

Day one

Some appointments end more or less immediately after a new president takes office. 

The most prominent of these is the Treasury secretary, one of the oldest appointed offices in the country. The Treasury Department notably has none of the trappings of regulatory independence that distinguish the Federal Reserve or the FDIC — the agency serves as a more direct policy arm of the White House, which is part of the reason why they tend to be among the first nominations made by an incoming president, often selected before the president takes office. The Treasury secretary also serves as chair of the Financial Stability Oversight Council and is a critical part of an administration's foreign policy, especially with respect to the application of economic sanctions, money laundering and other international crime prevention.

Treasury Secretary Janet Yellen has been among the least controversial of Biden's financial regulatory picks, winning confirmation in the Senate by a vote of 84-15 and going on to serve as a credible voice on economic matters as former chair of the Federal Reserve. But she may not stick around for a second tour of duty if Vice President Harris is elected, meaning that almost anyone she chooses to replace Yellen will not enjoy the same level of deference and consensus that Yellen has. That dynamic would only be further exacerbated if Republicans take over the Senate (more on that in a moment).

The directors of the Consumer Financial Protection Bureau and the Federal Housing Finance Agency are also fireable at will by the president, thanks to a 2020 Supreme Court decision in Seila Law v. CFPB. That means that both CFPB Director Rohit Chopra and FHFA Director Sandra Thompson will be out on day one if Trump wins, but could be expected to fulfill their five year terms if Harris wins. Chopra's term expires on October 13, 2026, and Thompson's term expires June 22, 2027.

The comptroller of the currency also serves a five-year term, but uniquely may be removed by the president at any time "upon reasons to be communicated by him [sic] to the Senate" — meaning the president need only provide a reason for their removal. But there is no confirmed comptroller of the currency at the moment, so acting OCC Director Michael Hsu likewise could be removed even without that formality of justification by Trump — or Harris.

Federal Deposit Insurance Corp.

The chair of the Federal Deposit Insurance Corp. serves a five-year term beginning from their swearing in, but may be removed by the president at any time. Even so, the political makeup of the FDIC board is such that a president may think twice about doing so: In the case of a vacancy, the vice chair becomes the acting chair, and the bipartisan structure of the agency ensures that the vice chair is a member of the opposition party.

The circumstances of FDIC leadership right now are unique. Chair Martin Gruenberg has said he will resign upon the confirmation of a successor — a kind of quiet quitting designed to ensure that the agency doesn't fall into a partisan stalemate and hold up any decisions or rules. Christy Goldsmith Romero, currently a member of the Commodity Futures Trading Commission, has been tapped to replace Gruenberg, but the odds of her confirmation ahead of the election are at best remote.

But all of that nuance doesn't really amount to much. If Trump wins, Gruenberg will be fired or resign and FDIC Vice Chair Travis Hill will lead the agency, joined by whomever Trump appoints to lead the OCC and CFPB, rendering the agency a 4-0 Republican majority, at least in the short term. If Harris wins, the current state of affairs will prevail — Goldsmith Romero will likely be renominated in the next Congress and they will get to her confirmation in their own time, and Gruenberg will remain at the helm until she is confirmed. 

Federal Reserve

The personnel picture at the Federal Reserve is quite a bit more complicated, which is appropriate for an agency as uniquely engineered as the Fed. Because regulatory policy — rather than monetary policy — is the purview of the Federal Reserve Board of Governors rather than the regional Fed banks, we can cut to the chase and limit the discussion of Fed vacancies to the board. 

Fed governors serve staggered 14-year terms, with one term expiring every two years. There are also three roles — chair, vice chair and vice chair for supervision — that are chosen from among the governors and each last for four years from the nominee's installation. In other words, a governor's underlying term as a Fed governor is fixed from Jan. 31 of an even-numbered year until Feb. 1 — 14 years later — but the terms for those principal positions begin when the nominees are sworn in and end four years later.

The next president will be the first one in a long time to inherit zero vacancies on the Federal Reserve Board upon taking office, but that condition tends not to last. There is something of a tradition of vice chairs resigning after elections — Daniel Tarullo, the de facto vice chair for supervision during the Obama administration, resigned in April 2017 after Trump's election, while Vice Chair Stanley Fischer resigned in October 2017 with about eight months left in his term. Randal Quarles, by contrast, served out his term as vice chair of supervision until it expired in October 2021 but left the board a few months later. 

But Michael Barr, the current vice chair for supervision, wasn't sworn in until July 2022, meaning he has a full two years left in his term after inauguration day. That's a lot of time to leave on the table if he were to resign, and he will likely remain in place until his term expires in July 2026. 

So the next president can reasonably expect to inherit the Fed board as it is now constituted until 2026 — but that's when the new commander in chief will get a chance to put a stamp on the agency in a big way. Three terms — that of Gov. Adriana Kugler, Chair Jerome Powell and Barr — expire in January, May and July of 2026, respectively. Those three nominations will either combine with the remaining Democratic-appointed governors (4) or Republican-nominated governors (2) to solidify a majority for whomever wins the election.

It's worth mentioning that all of this is based on the assumption that Powell, Barr and Vice Chair Philip Jefferson leave the board after their terms in board leadership expire. Powell's term as governor expires in 2028, and while there is technically a path for him to be renominated as Fed chair and serve through 2030, the likelihood of a renomination is extremely remote since Biden dropped out of the presidential race. 

Whether Powell, Barr and Jefferson stay on after their terms as vice chairs expire in 2026 and 2027, respectively, is a reasonable question but highly unlikely. The Fed has a strong tradition of having leaders ride off into the sunset, and with one notable exception they have all done that. It is possible that if Trump is re-elected and follows through on his promises to play a more assertive role in monetary policy that now-seated governors will opt to stay at the board to deny him additional appointments, but such a move would be openly political — something repugnant to the Fed as an institution.

What all of this means in practice is that if Trump wins in November, his bank regulatory agenda will be stalled — at least for any interagency rules — until July 2026. If Harris prevails, however, she will inherit a mostly intact slate of regulators and will likely be free to renominate Kugler and Barr if she chooses, freeing up confirmable Democrats to serve in other roles in government. 

The Senate

The last piece of the nomination puzzle is the Senate, which has been under Democratic control since 2020 — albeit by a very slim margin. The 2024 Senate map is a particularly difficult one for Democrats, who came into the cycle with a one-seat advantage and with virtually no chance of increasing their majority. They have effectively already lost one seat with the retirement of Sen. Joe Manchin, D-W.Va.; Republican West Virginia Gov. Jim Justice, who is running to succeed Manchin, is beating former Wheeling, W.Va. Mayor and Democratic Senate nominee Glenn Elliott by 33 points. 

Democrats are holding up better than that in the most competitive races, and Senate control is by no means a foregone conclusion. But there are more ways for Republicans to retake control of the upper chamber than there are ways for Democrats to retain it.

Should Trump win in November, even a thin majority in the Senate would enable him to confirm his appointments in short order, or at least at his leisure. Senate Republicans stood in the way of some of Trump's nominees to the Federal Reserve Board in his first term, but the Trump campaign is likely more prepared with confirmable nominees than it was after 2016.     

If Harris wins in November, she will be in the enviable position of having many of her top financial regulatory positions already filled and reliably so for a couple of years. But not all of them.  

As we mentioned earlier, FDIC Chair Gruenberg is patiently awaiting the confirmation of his replacement. Goldsmith Romero probably won't be confirmed before the election or in the lame duck session because Senate Majority Leader Chuck Schumer, D-N.Y., has made the confirmation of federal judges a top priority. Goldsmith Romero may very well be renominated by the Harris administration and proceed through regular order, but Republicans — who were muted in their objections to her nomination during her confirmation hearing — could block her progress with a Senate majority if they think they can do better.

There's also an opening at the Office of the Comptroller of the Currency, which has been led on an acting basis by Michael Hsu since 2021. Hsu's second term as acting comptroller began in 2023 and expires on March 31, 2025, at which time Harris will likely feel some urgency to either nominate him or someone else for the post, though under the Vacancies Reform Act he could technically serve indefinitely. The Biden administration had a rough go of confirming comptrollers of the currency and ultimately gave up, resulting in Hsu's long-lasting acting status at the agency. Harris may not have that luxury — or the luxury of a friendly majority in the Senate.