With Biden declared winner, what’s next for banks?

The incoming Biden administration could move swiftly to appoint a new director of the Consumer Financial Protection Bureau focused on helping vulnerable consumers who are struggling financially during the pandemic.

CFPB Director Kathy Kraninger is likely to submit her resignation or be fired, according to experts, given that the Supreme Court ruled earlier this year that the bureau’s director can be fired by the president without cause.

In that case, the next director, who may serve on an interim basis until a permanent director is confirmed by Congress, would move immediately to address pandemic-related issues. For example, mortgage servicers, auto lenders and debt collectors could be in the spotlight for how they implement forbearance policies. The three credit bureaus could also come under the microscope.

Whoever Biden nominates to run the agency — the CFPB’s third permanent director in its history — is likely to pursue a robust consumer-focused agenda, including rolling back the regulatory relief granted to payday lenders in a recent rule, strengthening restrictions for debt collectors and ramping up enforcement actions. Helping consumers deal with student loan debt and overdraft fees could also be priorities. Still, it is possible a Biden administration would need to choose a director amenable to Senate Republicans if the GOP holds on to the upper chamber of Congress.

Experts also expect that staff restructurings at the agency under the Trump administration, which deemphasized enforcement actions and fair-lending investigations, will be reversed to revive an Obama-era focus on enforcement. The Biden transition team also may focus on personnel including bringing back some staff who worked under former Director Richard Cordray. Some even believe a Democratic-led CFPB will seek to restore a rule restricting mandatory arbitration clauses, which was repealed by the Republican-led Senate in 2017.

The Biden administration’s ability to shape the future of Fannie Mae and Freddie Mac depends on the outcome of a Supreme Court case challenging the single-director structure of the Federal Housing Finance Agency.

If the high court rules the same way it did in a case challenging the same structure at the Consumer Financial Protection Bureau, Biden would be able to fire current FHFA Director Mark Calabria and replace him with someone new, although a new FHFA leader may need the support of Senate Republicans. Biden could potentially attempt to fire Calabria before the court rules by citing CFPB case as precedent.

But the Biden team’s priorities for reforming the housing finance system are still unclear. It’s possible the new administration could align itself with various Capitol Hill proposals touted by Democrats like Sen. Sherrod Brown, D-Ohio, that envision spinning out Fannie and Freddie into a government utility. Biden may also view Fannie and Freddie as a tool to bolster affordable housing and homeownership.

If the new president-elect does not replace Calabria, the new administration will still wield significant power over the government-sponsored enterprises by virtue of the Treasury Department.

Much of Calabria’s work to release Fannie and Freddie from conservatorship has been done in concert with Treasury Secretary Steven Mnuchin, who shares Calabria’s goals of privatizing Fannie and Freddie. But a Treasury secretary under Biden could make Calabria’s plans more difficult.

Besides Kraninger at the CFPB and potentially Calabria at the FHFA, Biden may have the chance to make other regulatory appointments early in his administration, but those are less certain.

A lot of what Biden can do depends on actions by the Senate and the Trump administration between now and his inauguration.

There is currently a vacancy atop the Office of the Comptroller of the Currency, with Brian Brooks currently serving as acting comptroller. If Brooks is still acting when Biden takes office, the new president would be able to quickly nominate a permanent successor to former Comptroller Joseph Otting. But Trump could try to appoint a permanent comptroller in the lame-duck period.

Meanwhile, two Trump nominees for the Federal Reserve Board — conservative economist Judy Shelton and Christopher Waller, the director of research at the Federal Reserve Bank of St. Louis — are still awaiting Senate confirmation.

Although Waller’s nomination is noncontroversial, it remains to be seen if Shelton has enough Republican support to be approved. If the Senate fills both seats, Biden won’t be able to nominate anyone to the Fed until Vice Chairman for Supervision Randal Quarles’ term expires in 2021. Fed Chair Jerome Powell’s term, meanwhile, expires in 2022, and Biden could very well choose to re-nominate him given Powell’s bipartisan popularity.

Federal Deposit Insurance Corp. Chair Jelena McWilliams can stay in her role until 2023, but she could decide to offer her resignation to Biden, as former FDIC Chair Sheila Bair did at the end of 2008 to Barack Obama’s transition team. (Obama asked Bair to stay on.)

An FDIC spokesperson told American Banker in August that McWilliams “was confirmed to a five-year term and she intends to fulfill it. Any speculation to the contrary is just that, speculation.”

But any Biden nomination to run one of the bank regulators may require approval from Senate Republicans if the GOP holds on to power in the upper chamber of Congress.