Trump’s recruitment of watchdog chiefs impeded by talk of regulatory cuts

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Republican enthusiasm for gutting and consolidating many U.S. banking regulators is complicating the incoming Donald Trump administration’s efforts to find heads for those watchdogs.

The issue is particularly acute for the Consumer Financial Protection Bureau, which focuses on how lenders treat customers.The CFPB has been the target of Republican hostility since its creation in 2008 are people familiar with searches.

“Republicans believe the CFPB is unconstitutional, and even if you make progress in protecting middle-class and low-income Americans, Democrats will never give you credit because you’re wearing the wrong color jersey,” said a former senior official. the financial regulator is not interested in the job.

Collection problems are exacerbated by growing friction over the consolidation of banking regulatory and supervisory responsibilities, currently shared between the US Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

Some potential candidates were interviewed by Elon Musk and Vivek Ramaswamy, the heads of Trump’s newly formed advisory committee, the Department of Government Efficiency (Doge), and were asked about regulatory simplification, people close to the process said.

Musk has called for eliminating the CFPB, and Ramaswamy claimed on social media last week that it is “one of the easiest agencies to shut down.” The Wall Street Journal reports that some regulatory candidates have been asked whether it would be possible to eliminate the FDIC. , which has protected bank depositors since the Great Depression.

The Trump transition team’s questions, combined with Republican enthusiasm for leading key committees on Capitol Hill to ease the regulatory burden, could signal the first major effort to reshape banking industry safeguards since the 2010 Dodd-Frank law.

“I think the Trump team might take it seriously,” said Bill Isaac, the former chairman of the FDIC, adding that he had spoken to top players on Capitol Hill about merging the OCC and the Fed’s supervisory functions with the FDIC’s. about his proposal for a new regulator. “The system is broken.”

Tim Scott, the Republican who is set to chair the Senate Banking Committee, has concerns with the current structure of the US bank regulatory system, his spokesman said, but did not specify whether he supports consolidating bank regulators looks forward to working with the incoming Trump administration to find solutions to streamline regulation, cut red tape and increase efficiency while ensuring the continued integrity of our financial system stability”.

But experienced hands in Washington point out that many previous attempts to consolidate the patchwork of banking regulators into one super-watchdog have failed.In 2010, Republicans cast crucial votes to help kill the idea.

“Most regulators support some form of consolidation among bank regulators in the US, but every attempt to do so has failed. After every financial crisis, there is more regulation and more regulators than there were before,” said Aaron Klein, a senior fellow at Brookings and a former Treasury official under Barack Obama.

During Trump’s first term, acting CFPB chief Mick Mulvaney at one point refused to request any funding for the watchdog, but it eventually resumed normal operations.

“Congress is needed for any consequential structural changes, and it’s incredibly difficult to imagine a scenario where this issue gets on the agenda, let alone gets the Democratic support needed to enact it,” said BTIG’s executive director. Isaac Boltanski.

Investor groups and former regulators have expressed alarm at the prospect of a loosening of the FDIC, noting that it is well-known and popular with consumers, in part because most banks tout deposit insurance as part of their advertising.

“The FDIC has a perfect record of protecting insured deposits for over 90 years. Consumer confidence in a brand that provides stability in times of crisis,” tweeted Sheila Bair, former chair of the FDIC.

Patrick Woodall, executive director of policy at Americans for Financial Reform, said: “The FDIC’s stamp of approval has protected depositors and confidence in the banking industry for nearly a century, while the CFPB has a strong track record to protect it. Billionaires’ ideas about consumer protection and financial stability will do nothing for everyday people.”

Even Isaac said he opposes eliminating the FDIC as an independent agency because of its urgent bank takeover responsibilities.

“I don’t think it makes sense,” he said. The idea is for the FDIC to be an independent, bipartisan agency and the Treasury to be anything but.”

Trump’s transition team did not respond to a request for comment.