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President Joe Biden has already completed one-sixth of his presidential term, but infighting among Democrats in Congress over his plans for new taxes and social and infrastructure spending has slowed the Senate confirmation process, leading to significant vacancies at some of the nation’s most important regulatory bodies.
Experts say that delays are related both to a packed calendar in the Senate as Congress tries to avoid a government shutdown, raise the debt ceiling and pass an ambitious legislative agenda in quick succession, and because of a lack of consensus on many nominees within the Democratic Party.
In the immediate wake of the 2020 presidential election, it appeared that Republicans would retain control of the Senate, severely limiting the scope of what Biden could hope to accomplish legislatively, but a surprise sweep of two seats in the Georgia runoff elections handed Democrats a slim majority there and kindled hopes for a robust agenda that would provide momentum headed into the 2022 Congressional elections.
“Seizing the time-limited opportunity to enact major changes via legislation, the White House has deferred large parts of its regulatory agenda as a consequence,” wrote analysts at Beacon Policy Advisors in a Wednesday evening note to clients. “With some exceptions, Biden is reluctant to choose between sides for fear of alienating factions of his party at a time when he needs all Democrats on board for his legislative agenda.”
The Federal Reserve may be the institution that could suffer most from a lack of White House attention, according to Peter Conti-Brown, a professor of financial regulation at the Wharton School of Business.
In a recent analysis for the Brookings Institute, he argued that vacancies at the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency risks a “lack of clarity on what should be accomplished, when and by whom.”
Conti-Brown noted that the Federal Reserve Board of Governors already has one vacancy and that the president must renominate Jay Powell, or name a replacement, to lead the Fed before his term expires in February. Biden also must pick a new vice chairman for bank supervision, before Randy Quarles term expires next month.
“The task of managing the Federal Reserve System is enormous and has only increased in complexity,” Conti-Brown wrote, noting the institutions important roles in setting monetary policy, supervising large banks and ensuring financial stability.
“Each vacancy—and, at this rate, we risk having at least three simultaneously, a low-water mark that was never crossed before the Obama administration and has become something of a new normal in Fed vacancies—adds to the work of governance and risks muddying the work of all those who depend on the Fed’s managerial competence in all of its many areas of responsibility,” he added.
Biden’s recent nomination of Saule Omarova for the role of comptroller of the currency illustrates the difficulty he has had balancing the demands of the progressive and conservative wings of his party. Progressives reportedly thwarted the nomination of Michael Barr, an Obama Treasury Department veteran, for being too friendly to large banks. But Omarova’s nomination is no less controversial due to the perception that she’s too hostile to the banking industry.
Beacon analysts compared her nomination to the failed effort to appoint gun control advocate David Chipman to lead the Bureau of Alcohol, Tobacco, Firearms and Explosives, who failed to win the support of more gun-friendly Democratic senators. “Omarova faces a steep climb to confirmation with lockstep opposition expected from Republicans and industry,” they wrote. “She cannot afford to lose a single Democratic vote in the Senate.”
There remain vacancies at the top of several other important regulators, including the Federal Communications Commission, the Department of Justice’s Antitrust Division, Consumer Financial Protection Agency and the Food and Drug Administration.
The Senate is expected to approve the nomination of Rohit Chopra to lead the CFPB as early as Thursday, but once that happens he will leave his current role as commissioner at the Federal Trade Commission, leaving that agency temporarily deadlocked with two Democrats and two Republicans, even as the administration has made antitrust enforcement a top priority. Biden nominated privacy advocate Alvaro Bedoy to replace Chopra, but the Senate has yet to consider the move.
Dr. John Whyte, chief medical officer of WebMD and former FDA official told Kaiser Health News that “people are just flabbergasted” that Biden has yet to appoint someone to lead the FDA amid the COVID-19 pandemic. “We don’t even have rumors of viable candidates,” he added.
The Securities and Exchange Commission has been an exception to this trend. Biden moved quickly to appoint Gary Gensler who’s credentials as a hard-nosed regulator, former Wall Street Banker and cryptocurrency scholar was enough to garner the backing of all 50 Senate Democrats and three Republicans, including the crypto-friendly Republican Sen. Cynthia Lummis of Wyoming.
“Under Gensler’s leadership, the SEC is going all out in walking and chewing gum on a range of issues,” Beacon analysts wrote, including a taking a tough stand on the crypto industry, a development that has concerned many digital-asset boosters.
However, cryptocurrency regulation is one example that illustrates the need for multiple financial regulators — the Fed, the SEC, the CFPB, the OCC and the Commodity Futures Trading Commission — to be working and coordinating at maximum capacity, especially given that these agencies often lack adequate funding.
If Biden and Democrats and Congress can strike a deal on taxes, infrastructure and social spending by year’s end, there will likely be enough time to confirm leaders of most of these key agencies before the 2022 election puts Democratic control of the Senate in jeopardy, according to the Beacon report.
“Given the disparity in nominations across agencies, those with permanent leadership will be teed up to more rapidly enact the president’s agenda, while others without Senate-confirmed directors will be less prepared,” Beacon analysts wrote. “As the saying goes, ‘personnel is policy’ and the White House’s decisions to prioritize nominating personnel for certain roles will have an impact on the speed and success of its regulatory agenda.”
