Biden faces time crunch to pick financial watchdogs
President Biden has a growing list of vacancies to fill at top financial watchdog agencies before he and his party risk losing control of the Senate.
Biden has roughly a year to nominate and confirm some of the most important officials overseeing the financial system before the November midterm elections, in which Republicans are thought to have a good chance to recapture the Senate.
“2022 is going to be a very busy year on the administrative agency level in large part because if the Democrats lose control of the House and Senate in 2023 it changes a little bit of a dynamic,” said Jason Rosenstock, partner at Washington, D.C., lobbying firm Thorn Run Partners.
“It just makes it a little bit harder to move their agenda. So I think this is the year to pounce, so to speak.”
The Senate will see confirmation fights over up to five Federal Reserve nominees within the first months of the year, including the top three positions on the Fed board. But Biden has yet to name three of those nominees — including one to be Fed’s top regulatory official — despite teasing an announcement before the end of 2021.
Biden must also nominate a new leader for the Office of the Comptroller of the Currency, two members of the Securities and Exchange Commission (SEC) and cement two nominees to the Commodity Futures Trading Commission through the Senate before he could be forced to cut deals with a GOP Senate majority.
Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams’s resignation last week added another major vacancy to Biden’s list, forcing the president to prioritize his picks with limited time to shepherd them through the Senate.
“Agencies have by and large been able to discharge their core missions even in the absence of key appointments,” said Hilary Allen, a banking and financial law professor at American University, in an email.
“However, without key leadership positions filled, it is very difficult for agencies to pivot to start addressing new problems or to take innovative approaches to longstanding problems,” she continued, highlighting the rise of financial technology, cryptocurrencies and climate finance issues.
While the Senate could still confirm nominees after the midterm elections, Congress spends much of the final six week before election day on the campaign trail and out of the Capitol. A second push to pass aspects of Biden’s Build Back Better plan could also suck up Senate floor time necessary to move nominees.
With just nine months until campaign season is set to pick up, Biden must navigate a dwindling timeline to cement many of his top picks. The president must also contend with a small and fractious group of Senate Democrats who’ve derailed several of his previous picks.
“They’re running up against the clock with the elections in November,” said Ian Katz, director at research consultancy Capital Alpha Partners.
Biden has struggled to pick financial regulators who could win enough support from both progressive and moderate Democrats to make it through the Senate without substantial GOP support. SEC Chairman Gary Gensler and Consumer Financial Protection Bureau Director Director Rohit Chopra are Biden’s only two major non-Cabinet financial regulatory nominees confirmed since he took office, and several other posts have gone unfilled amid internal squabbling.
The president took until September to nominate a comptroller of the currency who could win the support of liberal Democrats only to see his pick, Cornell law professor Saule Omarova, derailed by several centrist members of his own party. Biden is also facing intense pressure from the left over his pick for Fed vice chair of supervision, particularly after renominating Fed Chairman Jerome Powell, a Republican appointed by former President Trump to the post in 2017.
“A lot of the nominees that have come forward would be more aligned with, you know, what people would think of a Warren presidency rather than how Biden had sort of been seen,” Rosenstock said, referring to Sen. Elizabeth Warren (D-Mass.), the architect of the CFPB who ran for president in 2020.
“If you look at a Venn diagram, that sort of sweet spot in the middle of who satisfies both sides is very small,” he said.
Katz added that the power struggle at the FDIC that led to McWilliams’s resignation could also spur further backlash from Republicans and taint the water for any crossover votes.
“There’s not much goodwill between the parties,” Katz said. “This episode at the FDIC, which has really angered Republicans who are on the relevant committees in Congress, just makes it that much tougher.”
McWilliams, a Republican appointed by Trump, announced her resignation on New Year’s Eve weeks after the Democratic majority on the FDIC board attempted to launch a review of bank merger practices without her approval. She and other Republicans denounced the move as a “hostile takeover,” while Democrats insisted McWilliams was obstructing a legally binding action taken by the board’s majority.
Sen. Pat Toomey (Pa.), the top Republican on the Senate Banking Committee, condemned Biden for supporting the “extremist destruction of institutional norms and unprecedented action to undermine the independence and integrity of our financial regulators.”
“President Biden should move swiftly to fill the two vacant board seats and Interim Director [Martin] Gruenberg’s seat with qualified individuals who will respect the FDIC’s tradition of operating free from partisan political interference,” Toomey said in a Friday statement.
Even so, Katz said the intense Republican backlash won’t derail the Democratic agenda so long as Biden can nail down the support of his own party.
“If they have all the Democrats, they can get through who they want. But they really need to make sure they do,” he said.
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