Wall Street regulators are struggling with vacancies that must be filled
© Getty Images

The Senate Banking Committee recently held a hearing on Jay Clayton, nominated by President Trump to head the Securities and Exchange Commission (SEC). If the Senate votes to approve his nomination, Clayton will be the first independent financial regulator confirmed in more than two-and-a-half years.

The process for nominating and confirming presidential appointments has been breaking down for decades. Long-running vacancies have become more common at independent financial regulatory agencies. In fact, new Bipartisan Policy Center research shows that the length of the nominations process has more than tripled since the late 1980s, resulting in agencies routinely being understaffed at the leadership level.


From the Truman administration in 1945 through the end of the Reagan administration in 1989, it took an average of 80 days for the president to send a nomination to the Senate following a vacancy. This is the presidential delay. In that same period, it took the Senate an average of 31 days to resolve those nominations, either by confirming, rejecting, or allowing a nomination to lapse, or having the president withdraw the nomination. This is the Senate delay.


Since then, the typical length of a vacancy has dramatically increased. From the George H.W. Bush administration in 1989 through the end of the Obama administration in 2017, the average presidential delay jumped from 80 days to 211 days, and the average Senate delay increased almost five-fold, from 31 days to 149 days.

Nowhere are these trends more pronounced than on the Federal Reserve Board. Between 1947 and 1986, whenever a vacancy opened at the Fed, it took an average of 93 days to return to a full complement of seven governors. During that period, the Fed had seven governors four-fifths of the time.

Since 1986, immediately following a vacancy at the Fed, it has taken an average of 676 days — almost two full years — to return to seven governors. During that time, the Fed has had seven governors only one-third of the time, while it has been most common for the Fed to have only five governors. The problem has worsened in recent years. Since 2000, the Fed has had at least one vacancy about four-fifths of the time. In other words, it has become as common to have at least one vacancy as it once used to be to have all seven governors in place.

Other financial regulatory agencies have seen a similar trend. Between 1934 and 1988, the SEC had at least one vacancy about one-fourth of the time. Since 1988, it has been about 43 percent of the time. The analogous rate of vacancies at the Commodity Futures Trading Commission (CFTC) jumped from about 37 percent between 1975 and 1987, to about 56 percent between 1987 and 2017.

All of this matters, for many reasons. For one, financial regulatory agencies with too few members can run into quorum issues that affect their functioning. For example, when the SEC has three or fewer members, as it does now, then a single member can stop the agency from acting by simply not attending a meeting. In addition, the Government in the Sunshine Act requires that, when a quorum is present, it constitutes a formal meeting that must be open to the public and noticed in advance in the Federal Register.  When the SEC has two members, they are unable to meet to discuss agency business without it being a public meeting.

In the case of the Fed, having fewer confirmed governors changes the balance of monetary policy. The Federal Open Market Committee (FOMC), which makes Fed monetary policy decisions, was designed to include seven governors, who are nominated by the president and confirmed by the Senate, and five regional bank presidents, who are selected by the boards of directors of those banks. The idea is to include regional views on the FOMC while giving the more publicly accountable Fed governors a voting majority. Since the most common state of the Fed in recent years has been to have five governors, the FOMC’s voting membership has been equally weighted instead.

Having long vacancies deprives financial regulatory agencies of valuable perspectives and bandwidth at the leadership level to fulfill their congressional mandates. The result can be work that is done more slowly, more haphazardly, or both.

Both the president and the Senate should commit to acting in a timelier manner. Presidents should be prepared to name replacements within 90 days of a vacancy opening up. Senate committees of jurisdiction should vote on whether to report or reject those nominations within 60 days of their being received. If a nomination is reported favorably out of committee, the full Senate should vote on it within 30 days.

History shows that the nominations process can work well within this time frame. Given the importance of having highly qualified financial regulators in place, the president and the Senate should make it a priority to act on nominations in a reasonable time frame.

Justin Schardin is director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center. Ashmi Sheth is a policy analyst at the Center.

The views expressed by contributors are their own and are not the views of The Hill.