Banking

Trump’s 11th-hour pick to run OCC complicates Biden regulatory agenda

WASHINGTON — President Trump’s announcement that he picked acting Comptroller of the Currency Brian Brooks to fill the role on a permanent basis could complicate President-elect Joe Biden’s bank regulatory agenda.

It is still anyone’s guess if the Senate, with just 16 calendar days left until the end of the term and more pressing matters on the docket, could confirm Brooks in time. And many legal experts agree that even if he is confirmed, Biden could fire Brooks after taking office and appoint a Democratic comptroller.

But if the Senate can install a Republican-backed head of the Office of the Comptroller of the Currency in the twilight of the Trump administration, some say the Biden White House may be reluctant to remove him out of concern that GOP leaders will then block Biden nominees for the OCC and other positions.

“To the extent that Trump regulators are able to outlast and eat into [Biden’s] term, that helps defer any progressive new financial services regulatory policies,” said Brandon Barford, a partner at Beacon Policy Advisors.

If Brian Brooks is confirmed to a five-year term, all of the banking agencies would be led by a Trump-chosen, Senate-confirmed head at the outset of the Biden administration.

With the OCC lacking a Senate-confirmed leader, the opening was seen as a way for the Biden administration to put its stamp on regulatory policy out of the gate. Many also predict the president-elect will try to replace the head of the Consumer Financial Protection Bureau following a Supreme Court decision making it easier to fire CFPB directors.

But if Brooks is confirmed to a five-year term, Biden would take office with all the banking agencies led by a Trump-chosen, Senate-confirmed head, although the term of Federal Reserve Vice Chair of Supervision Randal Quarles expires in 2021.

“This basically just stymies Biden’s regulatory agenda because odds are particularly in financial services that he is not getting anything earth shattering in terms of new laws passed,” said Barford. “So he is going to have to rely on the regulatory process.”

However, legal analysts say that the head of the OCC, which is technically a bureau of the Treasury Department, generally serves at the “pleasure of the president.” That means the Biden administration could quickly move to fire Brooks whether or not he is confirmed. In that case, Treasury can appoint a deputy who serves as acting comptroller until a permanent successor is nominated and confirmed.

“The nomination doesn’t make any sense. It’s highly likely that Brooks, whether in an acting or permanent capacity in January, will be removed by the Biden administration,” said Jeremy Kress, an assistant professor of law at the University of Michigan.

Kress said Democrats hoping to wind back the Trump administration’s deregulatory moves have viewed the OCC position as crucial.

“I am increasingly of the view that the comptroller is going to be the most important financial regulatory nomination that Biden makes,” he said. “The comptroller can use the OCC staff to immediately start teeing up a bunch of interagency projects that the Fed and [Federal Deposit Insurance Corp.] could jump on in the coming months or years as their leadership turns over.”

Still, Senate Republicans have already signaled that they want to confirm Trump-appointed regulators before Biden takes office. And a decision by Biden to fire a Senate-confirmed comptroller could compel the GOP to refuse to confirm Biden’s choice to replace Brooks. (Republicans need to win just one of the two Georgia runoff elections in January to hold on to their Senate majority.)

“I think this will enrage progressives and rightfully so if you think you feel like you won the election in terms of the executive branch and you feel like President-elect Biden should be able to put in his team,” Barford said.

Some observers said the Biden administration would face challenges getting a new comptroller nominee through a Republican-controlled Senate.

A former Republican Senate staffer said he expects Biden would at least wait several months before trying to fire Brooks, because the OCC likely isn’t an early priority for the new administration.

“Would Biden fire him? I think he would wait a while,” the former Republican Senate staffer said. “As important of a position as the comptroller of the currency is, it has to be weighed against all of the other fights that the president will have in his first few months of office.”

Sen. Sherrod Brown, D-Ohio, the top Democrat on the Senate Banking Committee, said that the election results sent a signal that Brooks should not lead the OCC.

“The American people sent a clear message in this election: they voted for stability, and they rejected an administration that has failed them in the middle of a public health and economic crisis,” Brown said in a press release. “President Trump continues to ignore the results of the election and nominate unqualified financial appointees who will interfere with a new administration’s attempts to save the economy. Brian Brooks is not on the side of working people, and his nomination must be rejected immediately.”

Republicans have already attempted to fill the last few open regulatory posts before Trump leaves office. Senate Republicans tried to confirm controversial Federal Reserve governor nominee Judy Shelton on Tuesday, but the nomination failed because several Republican senators were not present for the vote and three Republicans opposed the nomination. But Brooks is a “whole lot less controversial than Shelton,” Barford said.

U.S. law appears to allow sitting presidents to remove Senate-confirmed comptrollers. The OCC is not considered an “independent” agency in the same sense as the FDIC or Fed. According to the statute, the comptroller of the currency serves “under the general direction of the Secretary of the Treasury.”

The OCC “shall hold his office for a term of five years unless sooner removed by the President, upon reasons to be communicated by him to the Senate.”

But Isaac Boltansky, director of policy research at Compass Point Research & Trading, said that Biden will need to strategize how he is going to get his prioritized nominees through the Senate.

“I think initially what the Biden team is going to do is look for ways to get a deal on nominees and get the Senate … to ‘Yes,’” Boltansky said. “And dismissing Senate-confirmed individuals is going to be characterized as a move that could poison the well.”

If Biden tried to fire Brooks immediately and replace him with a new comptroller, Senate Majority Leader Mitch McConnell, R-Ky., could block any new nominees to the OCC.

“Potentially you could see McConnell saying, ‘You don’t like the person who was confirmed, well then we are not going to confirm your person,’ which creates all sorts of difficulties for the OCC as an institution,” Barford said. “This makes perfect sense from an exercise in power. It’s basically Mitch McConnell flexing Senate Republicans’ muscle.”

Bryan Hubbard, a spokesperson for the OCC, said in an email that the agency has not issued its own legal opinion on the matter, but that “no President has ever removed a sitting Comptroller” in 157 years.

Hubbard said that Trump “allowed President Obama’s appointee to finish his full term before nominating his own person to the seat.” Former Comptroller Thomas Curry, appointed by Obama, served until May 2017.

To be clear, Brooks still faces an uphill challenge to be confirmed.

“I see no path to it happening before the end of the year,” the former Republican Senate staffer said. “[Tuesday’s] announcement was technically the president’s intent to nominate. There is often a gap of days or weeks between an announcement of intent to nominate and the actual nomination being sent to the Senate. … A hearing, a floor vote, it’s near impossible to see that immediately becoming a priority for Leader McConnell or for the full senate.”

But Barford said that Republicans could attempt to rush Brooks’ nomination through the chamber without a Senate Banking Committee hearing.

“I could potentially see them not bothering with that,” Barford said.



 

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