As the U.S. approaches the crucial election date of November 5, speculation surrounding former President Donald Trump’s potential return to the White House grows. A key area that may witness significant shifts under a Trump administration is the financial regulatory landscape. Should he emerge victorious, Trump is poised to implement sweeping changes to the country’s financial regulatory bodies, which have seen an increase in stringent regulations under President Joe Biden. Here’s an in-depth look at how Trump could reshape the regulatory environment starting from January 20, 2025.
The SEC: A Target for Immediate Change
One of Trump’s first moves could be aimed at the Securities and Exchange Commission (SEC). He has publicly stated his intention to fire SEC Chair Gary Gensler on day one of his administration. While legal experts note that the president may not have the direct authority to dismiss the SEC chair, he can replace Gensler with one of the two Republican commissioners, either Hester Peirce or Mark Uyeda, who could serve in an acting capacity until the Senate confirms a permanent replacement.
Though Gensler would likely remain a commissioner until his term ends in 2026, Trump’s replacement would fundamentally shift the agency’s priorities. A Trump-led SEC could pivot towards deregulation, lessening the compliance burden on corporations and potentially rolling back policies seen as overly burdensome.
Overhaul at the CFTC
The Commodity Futures Trading Commission (CFTC) would also be a focal point for Trump’s financial regulatory agenda. The law regarding the president’s power to remove the CFTC chair is ambiguous. However, Trump would have the authority to replace current CFTC Chair Rostin Behnam with another commissioner, potentially opting for Republican commissioners like Summer Mersinger or Caroline Pham.
By placing a Republican commissioner at the helm, Trump could steer the CFTC towards a less regulatory and more market-friendly approach, affecting the futures and derivatives markets significantly.
The Consumer Financial Protection Bureau (CFPB)
Another agency ripe for overhaul is the Consumer Financial Protection Bureau (CFPB). In a landmark decision in 2020, the U.S. Supreme Court granted the president increased authority over the CFPB, enabling him to fire its director at will. Trump is expected to remove Director Rohit Chopra on his first day in office.
The question of who would serve as the acting director remains contentious, given the historical disputes over the CFPB’s leadership. Trump’s administration previously claimed authority under the 1998 Federal Vacancies Act to install an acting director. Drawing on the Supreme Court ruling and circuit court decisions, Trump could assert his right to appoint a new interim director, allowing him to direct the agency’s focus and policies swiftly.
The Comptroller of the Currency
In the case of the Office of the Comptroller of the Currency (OCC), Trump could immediately replace Acting Comptroller Michael Hsu with another acting comptroller. This appointment would empower Trump to influence national banking regulation and policy significantly, potentially steering the agency’s direction for years to come.
Navigating the FDIC Landscape
The Federal Deposit Insurance Corporation (FDIC) presents a more complex scenario. Following a sexual harassment scandal, Democratic Chair Martin Gruenberg has indicated that he will step down once Congress confirms his successor. However, the confirmation process for Democratic nominee Christy Goldsmith Romero has stalled in the Senate, leaving uncertainty about when a transition will occur.
Legal experts are divided on whether the president can remove the FDIC chair solely for cause, with some arguing that Biden could have dismissed Gruenberg based on leadership failings outlined in an independent probe. Regardless, Trump could leverage the situation to remove the other two Democrats on the five-member FDIC board, thus establishing a Republican majority. This shift would enable Trump to block rulemakings initiated by the chair and influence critical votes on regulatory issues.
Impact on the Federal Reserve
While Trump would face challenges at the Federal Reserve, particularly regarding Vice Chair for Supervision Michael Barr, who can only be removed for cause, he could still exert considerable influence. By replacing Hsu and securing a Republican majority on the FDIC board, Trump could significantly affect the regulatory agenda that intersects with the Federal Reserve’s initiatives.
This control could obstruct critical projects, including proposed capital hikes, long-term debt requirements for regional banks, and liquidity measures during economic stress. By limiting the Fed’s ability to implement new policies in collaboration with other regulatory bodies, Trump could shape a more favorable landscape for financial institutions.
Conclusion: A New Era of Financial Regulation?
If Trump secures victory on November 5, the financial regulatory environment in the U.S. is likely to undergo substantial changes. His plans to overhaul the SEC, CFTC, CFPB, OCC, and FDIC reflect a desire to shift regulatory priorities towards deregulation and a more market-friendly stance.
The implications of these changes could ripple through the financial markets, affecting everything from bank operations to consumer protections. As Trump prepares to potentially reclaim the presidency, the business world will be watching closely to see how his administration could redefine the financial regulatory landscape for years to come. Whether these changes lead to enhanced economic growth or increased risk in financial markets remains a pivotal question for voters and stakeholders alike.