Update 294 — Kraninger Confirmed for CFPB; Other Key Noms Cleared by Senate Banking
A mixed bag of nominees for a broad range of critical federal regulatory agency positions cleared the Senate Banking Committee yesterday. All of them, if confirmed by the full Senate, would serve well into a putative second Trump term or into the next administration.
Some of the nominees were not controversial; others made it clear that Republicans remain determined to decimate agencies and rules created after the financial crisis. Kathy Kraninger, widely viewed as Acting-Director Mick Mulvaney’s protégé, was the most controversial nominee, but Senate Banking advanced her nomination anyway. The full Senate confirmation vote is another matter.
More below. Good weekends all…
• Kathy Kraninger, Director, CFPB
Kathy Kraninger’s nomination to head the Consumer Financial Protection Bureau (CFPB) was advanced by the Committee in a razor-thin 13-12 vote along party lines. There was strong opposition to her nomination and a number of Democratic Senators spoke out during the hearing to highlight, in no uncertain terms, her unsuitability for the position.
The Bureau has come under fire for being “unconstitutionally structured” (Judge Brett Kavanaugh’s opinion in a 2016 D.C. appellate court ruling), suggesting the President should be allowed to interfere in the agency’s mandate. During her confirmation hearing, Kraninger stated that it is not her duty to answer the constitutionality question: “the director has a responsibility to carry out the law as it is written and run the agency as it is established.”
Despite her platitudes, Kraninger’s nomination will reinforce the trajectory of the agency under Mulvaney’s stewardship. Ranking Member Sherrod Brown noted her concerning admiration for Mulvaney’s current policies, which are sabotaging and undermining the Bureau. Sen. Catherine Cortez Masto summed-up Mulvaney’s tenure during yesterday’s Committee hearing: “CFPB has been repurposed to serve the interests of Wall Street and payday lenders.”
The CFPB was created in the aftermath of the financial crisis to stand up for the little guy and make sure consumers have an advocate against special interests and big banks. With Mulvaney-stooge Kraninger at the helm, the mission of the CFPB is in jeopardy, and yesterday’s confirmation is a blow to Americans asking the question: Who is fighting for me? The date for the final vote before the full Senate is unclear but could be by the end of September.
• Dino Falaschetti, Director, OFR (Treasury)
The Committee also advanced Dino Falaschetti with a favorable nomination by voice vote to be Director of the Office of Financial Research (OFR). Falaschetti has spent the past several years working as Chief Economist to Chair of the House Financial Services Committee, Jeb Hensarling.
OFR is the research arm of the Financial Stability Oversight Council (FSOC), which is charged with identifying “potential emerging threats to the financial stability of the United States.” One of its most important tools is the power to designate a non-bank financial institution as a systemically important financial institution (SIFI) and subject it to “enhanced prudential standards” devised by the Fed Board of Governors.
Throughout its eight years of existence, FSOC, with the help of OFR, has used its designation authority four times to classify American International Group, Inc. (AIG), General Electric Capital Corporation, Inc. (GE), Prudential Financial, Inc., and MetLife, Inc., as non-bank SIFIs. GE and AIG have since had their designation removed and Prudential’s non-bank SIFI designation is also being re-considered.
Dr. Falaschetti’s current boss, Rep. Hensarling, has called for the abolition of OFR, but Falaschetti indicated in his testimony that he would adopt an “analytical and impartial” approach to his role as director of OFR. His approach will be crucial to ensuring that OFR remains an entity that identifies financial risks before they are upon us as opposed to one that is committed to removing designations.
• Kimberly Reed, President, Ex-Im Bank
Kimberly Reed was unanimously advanced by the Committee to lead the Export-Import Bank (EXIM) as president. Her nomination now moves to the Senate floor for approval. Reed previously headed the Community Development Financial Institutions Fund of the Treasury Department and served as senior advisor to former Treasury secretaries Henry Paulson and John Snow.
Some members of the Committee, particularly Sen. Heitkamp, took time to emphasize the importance of EXIM and the impact of its state of limbo on the US economy. Due to congressional infighting, the EXIM charter lapsed in 2015 for five months. While the charter was reauthorized, some Senate Republicans (Sens. Pat Toomey and Richard Shelby) have blocked nominees for the Board of Directors, leaving EXIM short of the required 3 out of 5 members for a quorum. (Without a quorum, the Bank is unable to approve individual credit transactions over $10 million.)
Reed cleared the Committee once before in December of 2017 when she was nominated to serve as First Vice President of the Bank, but that vote was 20-3, with GOP Sens. Shelby, Toomey, and Sasse voting against. Her unanimous approval yesterday is a good sign for the full Senate vote.
$45B worth of export credit financing is stuck in the pipeline due to the lack of a board quorum. Reed’s approval is the first step towards getting EXIM back to a fully functional state, but as Ranking Member Brown noted in his testimony, two more board members are needed for a quorum and “Sen. McConnell won’t schedule the nominees for a floor vote again because of some extremist ideologues in the Republican party.”
• Elad Roisman: Commissioner, SEC
Elad Roisman was advanced with little controversy to become a member of the Securities and Exchange Commission (SEC). Roisman, the current chief counsel to the Senate Banking Committee, played a key role in the development and drafting of S.2155, the bipartisan legislation passed earlier this year aimed at rolling back parts of the Dodd-Frank Act (DFA).
In his July testimony, Ranking Member Brown emphasized that, if confirmed, Roisman should focus on enforcement, because of the recent downward trend in this area within the SEC. Roisman noted that, if confirmed, he would focus on enforcement to make sure the agency is doing all it can to promote investor confidence. During the same hearing, Roisman stated: “There’s a perception that the markets are rigged against the little guy and I think it’s important for the SEC to try to dispel that notion and one of the ways they can do that is by having a strong enforcement program. A program that holds regulated entities and individuals accountable.”
Roisman will replace former SEC Commissioner Michael Piwowar, who departed the agency on July 7. Roisman, along with Hester Peirce, will be one of the two Republican members of the 5-member Commission. Interestingly, prior to their nominations to serve as SEC commissioners, Roisman, Peirce and Piwowar all served as members of the Senate Banking Committee staff under former Chairman Richard C. Shelby.
The Bureau of Consumer Financial Protection?
Although some of these confirmed nominees appear harmless, a close eye will have to be kept on them moving forward, especially Kraninger. The crown jewel of DFA, the CFPB, is now in the hands of someone who follows closely in the footsteps of Mulvaney, undoubtedly creating a large potential risk to the integrity of the bureau. In one of his more petty attacks on CFPB, Mulvaney changed the sign outside the agency’s HQ to BCFP in an attempt to emphasize the BUREAUcracy and de-emphasize the Consumer. Kraninger’s nomination is further confirmation that consumers do not come first for the Trump Administration.