(Nov. 24, 2021) Leadership at the Federal Reserve would be solidified at least through 2026 if President Joe Biden’s (D) nominations for chair and vice chair of the board, made Monday, are confirmed by the Senate.
Nominated for a four-year term as chair, and a new four-year term for vice chair, Biden tapped Jerome H. (“Jay”) Powell and Lael Brainard to take the two top spots. Biden referred to “decisive action” taken by the pair in helping to steer the nation through the financial impact of the coronavirus crisis and put the economy on the path to recovery.
The president is apparently not done making appointments: the White House indicated that he intends to nominate candidates for three open slots on the Fed Board beginning in December, including that of vice chair of supervision for the agency.
The supervision vice chair appointment has been empty since last month, when the term of Randal Quarles in that job ran out after four years. Quarles has since announced his intention to the leave the Fed Board by the end of next month.
Meanwhile, the term of the current Fed Vice Chairman Richard Clarida (in both that position and as a member of the board) expires in February. Monday’s statement from the White House indicated nothing about keeping Clarida on the board. That position will be one of the three Biden will have to fill, the other two being Quarles’ and a board slot that is now vacant.
Biden said the focus of both Powell and Brainard will be on keeping inflation low, prices stable and “delivering full employment will make our economy stronger than ever before.” He asserted that both share his “deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
“Fundamentally, if we want to continue to build on the economic success of this year we need stability and independence at the Federal Reserve – and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs,” he said.
Powell was confirmed by the Senate for a four-year term as chair of the seven-member board in 2018 after being nominated by then-President Donald Trump (R). His term in that role ends officially in February; his term as a Fed Board member runs to January 2028.
Brainard has served on the Fed Board since June 2014 after being nominated by then-President Barack Obama (D); her terms runs until January 2026. While at the Fed, she has been involved in several key issues related to financial institution regulation. Those include: being the Fed’s point person on reform of rules implementing anti-redlining laws (the Community Reinvestment Act (CRA)) and leading the Fed’s efforts in developing a 24-hour, seven-days-a-week payments system (known as FedNow), expected to debut in 2023.
If confirmed, Powell and Brainard would serve terms as chair and vice chair that end in 2026.
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(Jan. 22, 2021) The new president’s administration was at work reworking the federal regulatory process on the same day that Joe Biden took the oath of office, issuing a “regulatory freeze” order and taking other action.
The regulatory moratorium requires that no new rules be proposed or issued by federal regulatory agencies until a Biden-appointed official has reviewed or approved the rule. The order also requires that all new rules or proposals sent to the Federal Register but not yet published be immediately withdrawn, and that agencies “consider” postponing for 60 days the effective dates of those rules, and also consider reissuing the rules for 30-day comment periods.
However, the impact of the freeze on NCUA actions is not clear. The Trump administration issued a similar freeze four years ago, and the agency asserted that, as an independent agency it did not have to comply. However, the agency agreed to go along with the moratorium (or, as NCUA put it in 2017, “adhere to its spirit”).
There could be much on the line for the agency if the freeze goes into effect for its recent actions, especially those on Jan. 14 when the NCUA Board issued:
- a final rule (effective Jan. 1, 2022) on corporate credit unions’ purchase of subordinated debt (approved 3-0 by the board);
- a proposal, with a 30-day comment period, on lending by credit union service organizations (CUSOs, issued on a 2-1 vote with Board Member Todd Harper dissenting);
- a proposal to add an “S” component (for market risk sensitivity) to the CAMEL rating system (approved 3-0);
- a proposal, with a 30-day comment period, to raise from $50 million to $500 million the asset threshold for defining a credit union as “complex” for purposes of being subject to any risk-based net worth requirement in agency regulations (approved 2-1, Harper dissenting);
- an advance notice of proposed rulemaking (ANPR), with a 60-day comment period, on two approaches to simplify risk-based capital requirements (approved, 2-1, again with Harper dissenting).
None of those actions have yet been published in the Federal Register, which serves as the federal government’s official public notice of its regulatory actions.
Such regulatory freezes do not generally apply to independent agencies such as NCUA (or the FDIC, for example).
Legal analysis from four years ago also noted that such freezes are routine and only apply to executive departments and agencies, and not independent agencies (which make up most of the financial regulators). NCUA, in its own analysis in 2017, agreed with that view and said it would continue to move forward with rules already approved and slated to take effect after that moratorium went into effect. In 2017, that included a new rule on membership eligibility for federal credit unions and an advance notice of proposed rulemaking on capital proposals.
Aside from the moratorium, Congress also has a tool for overturning federal rules through the Congressional Review Act (CRA). Through the statute, Congress may overturn rules issued by federal agencies through special procedures, typically tied to 60 “legislative days” (days that Congress is in session) to take action on a rule once it is issued by an agency. However, it is also unclear if Congress would consider any of the rules finalized by NCUA under the act.
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White House memo: Regulatory Freeze Pending Review
(Jan. 22, 2021) Producing a set of recommendations for improving and modernizing federal regulatory review was ordered by President Biden Wednesday, with an aim of ensuring “swift federal action,” according to a memorandum issued by the White House.
The recommendations, according to the memo, “should provide concrete suggestions on how the regulatory review process can promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations.”
The memo was addressed to the heads of executive departments and agencies, including (presumably), NCUA and other federal financial institution agencies. It also called for proposals designed to ensure that regulatory review “serves as a tool to affirmatively promote regulations” that advance the values outlined. The memo also notes that recommendations should be informed by public engagement with relevant stakeholders.
More specifically, the memo said the recommendations should:
- Identify ways to modernize and improve the regulatory review process;
- Propose procedures that consider the “distributional consequences” of regulation (including in cost/benefit analysis) to ensure regulatory initiatives “appropriately benefit” and do not “inappropriately burden disadvantaged, vulnerable, or marginalized communities;
- Consider ways that the White House’s Office of Information and Regulatory Affairs (OIRA) “can play a more proactive role in partnering with agencies to explore, promote, and undertake regulatory initiatives that are likely to yield significant benefits;”
- identify reforms to promote efficiency, transparency, and inclusiveness of the interagency review process, and determine an appropriate approach with respect to the review of guidance documents.