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President Donald Trump promised fewer regulations for business in general, and banks specifically — and events over the past week have pushed that intention closer to reality.
The president didn't have a major direct hand in any of the moves, but each nudges the business climate closer to the environment he envisioned while campaigning. Consider the following:
Those three moves come on top of the president's recent nomination of Jerome Powell to head the Federal Reserve. Also, the Fed's newest member, Trump appointee Randal Quarles, advocated in his first public remarks that the central bank take a top-to-bottom look at regulation, supervision and enforcement.
In all, it's been a definite lurch forward for one of the three prongs in Trump economic's plan of lower taxes, less regulation and more infrastructure spending.
"It's hard to know what the effects of many of these things will be," said Doug Landy, a financial services regulation attorney and partner at Milbank, Tweed, Hadley & McCloy in New York. However, "they're moving certainly in the direction they said they would."
Trump has long criticized the CFPB for its aggressiveness in going after banks, so Cordray's departure represents a major opportunity. The president and congressional Republicans want to decentralize decision making, taking more of a commission approach rather than the top-down executive structure.
In the immediate future, Trump is said to be interested in putting budget director Mick Mulvaney at the helm, and charging him to put together a committee to run the bureau.
While Democrats and financial industry watchdogs bemoaned Cordray's departure and expressed worry over the future of consumer protection, industry advocates cheered the potential for a new direction.
"The Trump Administration and Congress should use this opportunity to improve the CFPB by adding a bipartisan board so key decisions are made in a bipartisan and transparent manner with more than just one person involved," Tim Pawlenty, head of the Financial Services Roundtable, said in a statement.
Rob Nichols, the American Bankers Association president and CEO, also endorsed a five-member commission, joining numerous other agencies in urging a regulatory balance of "consumer protection against access to credit."
Confirmed by the Senate along party lines Thursday, Joseph Otting is an interesting choice for the new Comptroller as he takes over for Keith Noreika, who was appointed interim head in May.
Otting comes to the job from OneWest Bank, where he worked with current Treasury Secretary Steven Mnuchin. The bank has been criticized for its aggressiveness in foreclosures.
His primary task as Comptroller will be to work with banks on compliance with the Dodd-Frank reforms instituted following the financial crisis. Banks have long complained about the measures, particularly in regards to transparency and the requirements of annual stress tests.
Otting "will reflect the administration's desire to reduce burdens on banks and deregulate in a certain manner," Landy said. "They will be looking at where they feel the regulatory burden is in excess of the benefit it provides. How one views that depends on where one sits on the political landscape."
While Trump once had threatened a full repeal of Dodd-Frank, that now appears unlikely. Instead, Congress appears set to work with the new regulators, in order to find ways to tailor the omnibus legislation to maintain the banking industry's safety — all while not gumming up the economy's primary growth engine.
One of the biggest objections the banking industry has had regarding Dodd-Frank is the level at which banks are considered too big to fail — systemically important financial institutions (SIFI), in the legislation's parlance.
A Senate agreement meets suggestions that the level be moved from $50 billion in assets, a level that snares the top 35 banks, to $250 billion, which would cut that list to 10. The move then could reverberate to the Fed and cause it to change its stress tests, or Comprehensive Capital Analysis and Review, which measures the health of 34 institutions.
"If Congress raises the threshold it might send a powerful political message to the Fed about how non-globally systemically important banks should be treated," analysts at Keefe, Bruyette & Woods said in a note. "It could also could give the Fed political cover to further ease the CCAR for banks with less than $250 billion in assets."
An industry that became the focal point of the excesses that caused the financial crisis now finds itself in position for some relief.
In addition to outright Dodd-Frank changes, regulators are likely to change the way supervision and enforcement is carried out, representing an important change from the screw-tightening atmosphere that has prevailed since the crisis.
"Since the Great Depression, whenever you have a new line of laws coming out, after five to 10 years of people living them there always has been an adjustment," Landy said. "Think of it like a pendulum. There's always a center."
In fact, banks aren't really looking for an overhaul. CEOs of the largest institutions largely have said they've learned to live within the Dodd-Frank framework, but believe adjustments are needed, particularly to provisions like the Volcker Rule that prohibits banks from trading for their own benefit.
"They're comfortable with the basic set of provisions that have been provided," Landy said. "They do want less burden, less conflicting requirements, more transparency and things [removed] that they don't think are achieving the goals they were set out to do."