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Trump's Banking Deregulation Team Takes Shape With FDIC Pick

Updated on
  • White House selects GOP congressional aide James Clinger
  • Wall Street gains confidence it won’t be overseen by populists

President Donald Trump’s team of officials who will be responsible for easing bank rules is finally taking shape after the White House tapped a longtime Republican congressional aide to lead a key regulator.

On Monday, Trump nominated James Clinger, the former chief counsel of the House Financial Services Committee, to replace Martin Gruenberg as chairman of the Federal Deposit Insurance Corp. Clinger would fill a vacant seat at the agency until Gruenberg’s term ends in November.

The selection means that most of the president’s bank watchdogs are now known. To Wall Street’s relief, they are candidates who will probably focus on dialing back regulations, instead of pursuing policies -- such as breaking up big lenders -- that Trump threatened on the campaign trail.

“For investors who worried that the Trump administration might have nominated populists to run the bank regulatory agencies, Mr. Clinger’s selection is another sign that the Trump administration’s views on banking regulation are mostly mainstream and conventional,” Brian Gardner, an analyst at Keefe, Bruyette & Woods, wrote in a Monday note to clients.

Yellen Roadblock?

The administration previously nominated Joseph Otting, a former lieutenant of Treasury Secretary Steven Mnuchin’s at OneWest Bank, to lead the Office of the Comptroller of the Currency. And for several months, the White House has signaled that it intends to nominate Randal Quarles, a senior Treasury official in the George W. Bush administration, to handle regulatory duties at the Federal Reserve.

Once Trump’s picks are confirmed by the Senate, Janet Yellen will probably be the last holdover from Barack Obama’s presidency who can stand in the way of efforts to bring relief to banks. Yellen’s term as Fed chair expires in February 2018.

Clinger has spent most of his career on Capitol Hill, where he’s worked on legislation that deregulated the finance industry. He helped write the 1999 Gramm-Leach Bliley Act, which overturned much of a Depression-era law that had separated consumer and investment banking for more than 60 years. More recently, Clinger worked for House Financial Services Committee Chairman Jeb Hensarling, who sponsored legislation that would rip up much of the 2010 Dodd-Frank Act.

‘Great Decision’

Hensarling called plans to nominate Clinger a “great decision.”

“Members of Congress trust Jim’s expertise and advice, and I have always admired his character, insight and steady leadership as chief counsel,” the Texas Republican said in an emailed statement. 

Clinger has drawn criticism from consumer advocacy groups such as Allied Progress, which noted last year that he had taken three trips sponsored by the American Bankers Association, one of the industry’s biggest lobbying groups.

Clinger is the son of former Representative William Clinger, a Pennsylvania Republican who as chairman of the House Committee on Government Reform and Oversight investigated various activities of the Clinton administration, according to the Almanac of the Unelected, a reference book on congressional staff. Before the 2016 presidential election, the elder Clinger was among a group of 30 former GOP lawmakers who signed a letter claiming Trump had “proven himself manifestly unqualified to be president.”

James Clinger, who retired from the House Financial Services panel in March, couldn’t immediately be reached for comment.

Treasury Report

The FDIC is one of the three federal regulators of U.S. banks, overseeing many of the smaller institutions that aren’t members of the Fed. Its other chief role is to maintain an insurance fund that protects bank deposits. The Dodd-Frank provisions the FDIC is partly responsible for include the Volcker Rule ban on banks trading with their own capital, powers that allow regulators to wind down troubled firms and annual living wills that lenders must submit on how they would be dismantled in a failure. 

Last week, the Trump administration issued its proposals for overhauling bank regulations. Unlike Hensarling’s bill that would erase much of Dodd-Frank, the Treasury Department plan calls for Obama-era rules to be softened. Much of that responsibility would likely fall to Clinger, Otting and -- if he’s nominated -- Quarles.

It might be some time before they can get to work. 

Jaret Seiberg, an analyst with Cowen & Co., said Monday that the Senate’s August recess will likely push most confirmation hearings until later this year. Seiberg said the Clinger pick represented “progress” toward deregulation, but added that Trump is taking too long to nominate a Fed vice chairman of supervision, the role that Quarles has been linked to. The Fed vice chair is the government’s point person on Wall Street oversight.

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