Bloomberg News
The book has all but closed on the Biden administration’s bank regulatory endeavors as top agencies officials agreed to hold off on putting forth or advancing any additional reforms this year.
During testimony in front of the House Financial Services Committee on Wednesday, Federal Reserve Vice Chair for Supervision Michael Barr, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu said while they would not drop ongoing rulemaking processes — including those related to capital, long-term debt and liquidity requirements — they also would not attempt to advance any other changes ahead of the Trump administration’s ascendance in January.
“We have a number of pending rulemakings, and for some of them we’ve extended the comment period,” Gruenberg said. “We don’t think any of them will be ready for action before the end of the year.”
The topic was broached repeatedly throughout the three-hour hearing. Agency officials said they would continue to pursue low-profile initiatives — including certain data collection programs and joint effort on combating elder fraud — but nothing regarding the high-profile rules that have drawn criticism from the agency, such as the so-called Basel III endgame.
Despite the assurances from the Fed, FDIC and OCC, new regulatory pursuits are continuing to emerge from other parts of the Biden administration. Consumer Financial Protection Bureau Director Rohit Chopra, whose agency has championed new causes such as deposit insurance reform in the weeks since the election, was not at the hearing.
Rep. French Hill, R-Ark., one of several committee members vying for its gavel in the next administration, said this month’s electoral outcome demonstrated the American public’s opposition to Biden era regulatory pursuits and urged the testifying officials to respect that.
“The people of the country have elected President Trump. They want change,” Hill said. “We’re going to have change in the independent agencies in the executive branch, and so we don’t want to spend the last few weeks of the Biden administration fighting over bad policy ideas.”
Fed Vice Chair Barr said he intends to resume working on the pending proposals with his new counterparts at the other agencies — Gruenberg announced this week his plan to step down on Jan. 19 and Hsu can be dismissed by the new president at will — and confirmed that he would remain in his position through the remainder of his vice chairmanship, which expires in 2026.
“We serve fixed terms of office, and I intend to serve my fixed term of office,” he said.
Barr has been the subject of much speculation since Donald Trump’s electoral victory earlier this month, amid reports that the president-elect’s transition team is exploring options for stripping Barr and Fed Chair Jerome Powell of their leadership positions or removing them from office altogether.
Echoing a stance laid out by Powell, Barr said his status on the board is protected by “a number of safeguards” and he would not resign if asked by Trump or someone else within the administration. Barr also emphasized his confidence that the Fed can remain insulated from outside political influences despite the once-and-future-president’s desire for greater influence over the central bank.
“The Federal Reserve has been around a long time,” Barr said. “It’s a strong institution. It has independence, it has accountability, it has transparency. And those values have served the American public very well, and I expect them to persist into the future.”
Agency independence was another theme of the hearing. Democrats and Republicans both expressed varying degrees of both support and concern for regulatory independence, though the former were more uniformly aligned with regulators on the topic.
“The independence of our agencies, like the Federal Reserve, has been critical to supporting the stability of our economy for more than a century,” said Rep. Maxine Waters, D-Calif., the ranking member on the committee. “So, I hope my colleagues on both sides of the aisle will join me in supporting you and chair Powell to defend that independence.”
Rep. Patrick McHenry, R-N.C., the outgoing chair of the committee, said he also values the agencies’ abilities to operate based on facts and free of overt political sway. But, he argued that the agencies have jeopardized that freedom by failing to adhere to the Administrative Procedure Act and pursuing policies beyond that statutory mandates.
“This administration’s regulators have repeatedly advanced rules that reduce access and increase costs to the financial products used by everyday Americans because of your actions, the political independence and authority of your agencies is in danger of being reduced, whether it’s by Congress, the president or the courts,” he said.
McHenry also blasted the agencies for fighting “the last war” by focusing on reforms aimed at addressing issues related to the banking crisis of 2008. He said the hearing, which is likely the last time the three Biden-appointed officials would appear before Congress, closes the chapter on their regulatory agenda.
“The era of post-financial crisis regulation is over,” he stated.
But Barr, the Biden administrator’s apparent last survivor, said he is not willing to let go of implementing the reform efforts he helped initiate in the form of the Dodd-Frank Act of 2010.
“I do think it’s important to finalize the Basel process, to raise capital standards to a level playing field across the international system, and to take into account the risks that we saw from the global financial crisis that were not yet fully incorporated into our minimum requirements,” Barr said, adding that the proposal also reflects “lessons learned” from the failure of Silicon Valley Bank about interest rate risk management.
Several Republicans on the committee used the hearing to excoriate Gruenberg for both presiding over a period of rampant sexual harassment and discrimination at the FDIC, and his unwillingness to step down readily.
“The information that has come out about the pervasive harassment, misogyny and toxic workplace culture at the FDIC under your leadership, Chairman Gruenberg, is appalling,” said Rep. Mike Lawler, R-N.Y. “You have no business continuing to lead this agency, preventing the necessary changes from beginning at this agency and for your employees to continue to be a distraction.”
Democrats on the committee praised Grueberg’s efforts to keep the financial system sound and tried to deflect criticism against him by pointing to Trump’s announce cabinet appointees, at least two of whom — Pete Hegseth and Matt Gaetz — are facing sexual abuse allegations.
Waters at one point asked if Republicans “want [Gruenberg to] get up out of his seat and walk out the door?”
“Yes,” a group of Republicans chorused.
Ebrima Santos Sanneh and Claire Williams contributed to this report.
