October 29, 2020


TO: FS Vector Clients
DT: October 27, 2020
RE: Washington Blue Wave Impact on Financial Regulation

Election day, now just one week away, has become the end of the beginning of the election.
As of today, over 70 million ballots have already been cast with registered Democrats
outvoting Republicans by a nearly 2 to 1 margin. While it is still too early for Biden to start
measuring the drapes, it is not too early to consider the implication of a “Blue Wave” on
financial regulation. We live by the maxim that “personnel is policy” and given the polling
data, it makes sense to look at the levers of government, specifically the prudential financial
regulators and other key Administration positions, and begin to assess what a change in
control could mean for structure, personnel, and policy.
Much like the fractures in the GOP which have cost two Speakers their jobs, and resulted in
the nomination and election of Donald Trump, the Democratic party is experiencing similar
tectonic shifts as the centrist wing (with DNA back to Al From, Bill Clinton and the DLC)
smashes against a growing and organized progressive wing. Over the decade, one needed
only to look to the Center for American Progress (CAP) to see left-wing policy development
take shape — at least that was the impression inside the Washington bubble. It is now clear,
however, that progressives have toiling in the policy vineyards — inside and outside of
Washington — to develop a progressive agenda. When one examines the roster of Biden
advisors, there are connections not only to CAP, through the Washington Center for
Equitable Growth, but also other left-leaning organizations, like The Roosevelt Institute, who
appear to be an integral part of the Biden policy machine. A Biden Administration would
almost invariably include some familiar names but just as certainly new and capable public
policy experts who may not have previous Administration service (or even government
service) on their resume. We expect this will be the case in the financial services universe.
Does this mean that the Biden financial regulatory apparatus will be staffed head to toe by
progressives? A progressive staffing “wish list” can be found here, however, it is our view
that while progressives have a louder voice than in past Democratic administrations, the
notion that a President-elect Biden will be forced to accept progressive candidates is often
overstated. We continue to believe that cabinet and key policy positions will more often be
staffed by candidates with whom Biden is knowledgeable and comfortable.
In this memo we examine key personnel changes that could accompany a change in
Administration, and snapshot of possible candidates for top-line positions in key financial
regulatory posts. Other Obama Administration veterans, not slot below, may yet find a home
in the West Wing or influence economic policy from the outside, including: Gary Gensler,
Austan Goolsbee, Don Graves, Cecilia Munoz, Gautam Raghavan, and Sonal Shah.
Chief of Staff
The first pick, of the more than 4,000 jobs a Biden Administration would need to fill, is likely
to be his chief of staff. Barring a delay in vote counting, we expect this choice will be named
within 48 hours of the election. Unlike the more than 1,200 executive branch jobs requiring
Senate confirmation, the official role of “Assistant to the President and Chief of Staff” does
not and the President-elect’s selection would move quickly to set an agenda for the first 100
A Biden choice would likely return the chief of staff job to the traditional role of gatekeeper
and tone-setter, as opposed to the Tweet-translator and backslapper favored by the current
President. A short list of long-time Biden confidants are thought to have the inside track on
the job, including Ron Klain, Bruce Reed and Steve Ricchetti. Klain is said to be the “least
objectionable” choice for progressives with Reed shunned for his centrist policy views,
including his leadership of the DLC and the Simpson-Bowles Commission, and Ricchetti
opposed by many on the left for his past lobbying for major corporations like AT&T, GM, and
Big Pharma. If Biden decides to step outside this inner circle, he could buck history and select
a non-white male candidate for the job. One name that has been floated is Louisiana
Congressman Cedric Richmond. A Biden national campaign co-chair, early endorser, and
former Chairman of the Congressional Black Caucus, Richmond’s name has been associated
with a number of cabinet positions and West Wing slots.
Possible candidates: Ron Klain, Bruce Reed, Steve Ricchetti, Cedric Richmond, Jeff
United States Treasury
Biden’s choice for Treasury Secretary will be the clearest signal for how his administration
views the role of the capital markets and consumer finance, and the companies which
facilitate their operation. Experienced observers of the current political climate have gone as
far as to suggest that Senator Elizabeth Warren (D-MA) will be Biden’s choice; anything is
possible, and Senator Warren will have influence over who can be confirmed, but we doubt
that she will be the pick.
Keep in mind that in states with a Republican governor (e.g. Massachusetts and Ohio), the
governor would appoint a replacement for any Senators tapped to enter the Biden
Administration. Whether or not any Senator can serve in the Administration will, in large
part, depend upon the effect the vacancy will have on the Democrats majority. In the case of
Warren, specifically, Republican Governor Charlie Baker would get to pick her replacement
until a special election were held as many as 6 months later. If Schumer’s majority is narrow,
it is hard to see certain senators (or maybe any senator) leaving.
No woman has ever been the Secretary of the Treasury; many would like to see that change,
and recently Fed Governor Brainard has been mentioned by multiple sources to have an
inside track.
Possible candidates: Michael Bloomberg, Lael Brainard, Roger Ferguson, Michael
Froman, Tom Nides, Sarah Bloom Raskin, Robert Smith, Mark Warner, Elizabeth
Consumer Financial Protection Bureau
Given the Supreme Court’s decision in Selia Law LLC v. Consumer Financial Protection
Bureau, it is all but certain that a change in Administration would cost Kathy Kraninger her
job. Should Kraninger be fired or quickly resign, Biden could either promote someone from
within CFPB or install an outside candidate as acting CFPB director.
Certainly Senator Warren will have a strong voice in determining who and how the position
will be filled and it is fairly likely that CFPB will be a place where a tried and true Progressive
will have the advantage.
Possible candidates: Michael Barr, Rohit Chopra, Amanda Fischer, Ted Kaufman,
Katie Porter, Bharat Ramamurthi, Graham Steele
Federal Deposit Insurance Corporation
Jelana McWilliams was installed as the Chairwoman of the FDIC for a 5-year term on June 5,
2018 and will have until June of 2023 to fill out her term. As such, McWilliams will have
several years left as Chairwoman should she decide to serve in a Biden Administration. There
is no provision similar to the CFPB/FHFA structure that would allow Biden to easily remove
her. That said, it would not only be possible, but likely, for Biden to fill the existing FDIC
vacancy with a Democrat as well as change the party affiliation of the CFPB and OCC heads
thereby making the Chairwoman a minority member of her own board. Under these
conditions, it is unclear if McWilliams would insist on serving out her term.
Possible candidates: Marty Gruenberg, Todd Harper, Bharat Ramamurthi, Graham
Office of the Comptroller of the Currency
The OCC has been somewhat of a hot seat during the Trump presidency. Before Trump,
standard operating procedure dictated that the First Deputy Comptroller served as the
agency lead pending confirmation of a nominee by the Senate. However, as in other
instances, President Trump did not follow standard operating procedure and, instead,
installed Keith Norieka as the First Deputy on the same day he became acting Comptroller
when Comptroller Curry vacated his office (his term having expired). Noreika, a regulatory
lawyer from Simpson Thatcher served for just over six months until Joseph Otting was
confirmed to head the OCC.
Otting served a somewhat tumultuous three years from November 27, 2017 until May 29,

  1. During part of this time, Otting also served as head of FHFA.
    In the months leading up to Otting’s resignation, the President once again went outside of
    the OCC, choosing to appoint Brian Brooks to become the First Deputy. This allowed Brooks
    to fill the vacancy as soon as Otting stepped down a short time later. Mr. Brooks now serves
    as Acting Comptroller.
    Should Biden win, pre-Trump protocol suggests that Blake Paulson, Senior Deputy
    Comptroller and Chief Operating Officer, would serve as Acting Comptroller. However, there
    is no guarantee that Biden would choose that route; he, too, could look outside the agency
    and install his nominee as acting Comptroller, pending confirmation. He could also choose
    another Senior Deputy Comptroller, such as Grovetta Gardineer, to be Acting Comptroller.
    Gardineer would be the first woman and the first African American to hold this position.
    Possible candidates: Chris Brummer, Grovetta Gardineer, Maria Vullo
    The Federal Reserve
    Currently, there are two vacancies on the Federal Reserve Board of Governors. President
    Trump has nominated a controversial candidate, Dr. Judy Shelton, to fill one of those
    Christopher Waller, the director of research at the Federal Reserve Bank of St. Louis, has
    been nominated for the other. While Waller received some bipartisan support out of the
    Senate Banking Committee, Shelton’s nomination has been a purely partisan exercise and
    appears stalled by the possible lack of even Republican votes on the Senate Floor needed for
    In addition, during a 4-year term as President, Biden could see additional vacancies. The
    term of Governor Richard Clarida expires in 2022, and Chairman Jay Powell’s term as Chair
    expires in 2022.
    Powell is well liked by Democrats and in a pre-Trump world, he would be the type that could
    serve presidents of both parties. Additionally, he had stated his intention to serve out his
    term. Assuming he does, Biden will have a decision to make regarding the chairmanship
    when Powell’s term as chair expires in February of 2022.
    Portrait Governor Party Term start Term expires
    Jay Powell
    Republican February 5, 2018 (as
    February 5, 2022 (as
    May 25, 2012 (as
    June 16, 2014
    January 31, 2028 (as
    (Vice Chair)
    Republican September 17, 2018 (as
    Vice Chair)
    September 17, 2022 (as
    Vice Chair)
    September 17, 2018 (as
    January 31, 2022 (as
    (Vice Chair
    Republican October 13, 2017 (as
    Vice Chair for
    October 13, 2021 (as
    Vice Chair for
    October 13, 2017 (as
    July 17, 2018
    January 31, 2032 (as
    Democratic June 16, 2014 January 31, 2026
    Republican November 26, 2018
    February 1, 2020
    January 31, 2034
    Vacant January 31, 2024
    Vacant January 31, 2030
    Possible Candidates: Jared Bernstein, Michael Bloomberg, Raphael Bostic, Lael
    Brainard, Chris Brummer, Mary Daly, Peter Diamond, Jeremy Stein
    Securities and Exchange Commission
    Chairman Jay Clayton took office in May of 2017 to serve a 5-year term. Clayton had been a
    non-controversial, steady (if not “reg-lite”) hand at the SEC until June 19, 2020 when
    Attorney General William Barr announced President Trump’s intention to replace Jeffery
    Berman, US Attorney for the Southern District of New York, with Chairman Clayton. The
    ensuing kerfuffle saw Berman refuse to resign until his Deputy — not Clayton — was named
    successor, and key US Senators (including Judiciary Committee Chairman Lindsay Graham)
    backed away from Clayton as a potential successor to Berman. As such, Clayton remains
    Chairman of the SEC.
    Additionally, President Trump renominated Republican Hester Peirce and tapped Caroline
    Crenshaw as a Democrat to fill the vacancy created by Robert Jackson. Each was confirmed
    on August 6th.
    President-elect Biden would have the opportunity to replace Chairman Clayton by no later
    than June 5, 2021. In the past, Democratic Presidents have displayed no particular
    preference when choosing nominees for Chair. Chairwoman Shapiro was a regulator as head
    of the SROs NASD and FINRA, while Chairwoman White had served as the US Attorney for
    the Southern District of New York and practiced at a “white-shoe” law firm.
    Name Title Party Took office Term expires
    Jay Clayton Chairman Independent May 4, 2017 June 5, 2021
    Allison Lee Commissioner Democrat June 20, 2019 June 5, 2022
    Hester Peirce Republican January 11, 2018 June 5, 2020
    Elad Roisman Republican September 11, 2018 June 5, 2023
    seat vacant Democrat – –
    Possible Candidates: Chris Brummer, Roel Campos, Kara Stein, Elisha Tuku
    Commodity and Futures Trading Commission
    The CFTC Commission consists of five commissioners appointed by the President, with
    Senate approval, for staggered five-year terms. The President, with Senate consent,
    designates one commissioner to serve as Chairman. At any point, no more than three
    commissioners can be from the same political party. Currently, the Commission is majority
    Sworn into office in July 2019, Chairman Heath Tarbert will lead the commission until his
    term expires in April 2024. Additional commissioners include Rostin Benham, Dawn DeBerry
    Stump, Dan Berkovitz, and Brian Quintenz. Benham’s position will expire in June 2021,
    Stump’s in April 2022, and Berkovitz’s in April 2023. Quinentz’s term expired in April 2020,
    but has yet to be replaced. Assuming Quintenz’s replacement is appointed before Biden’s
    term, the next Republican to have their term expire will be Stump in April 2022.
    Possible Candidates: Rostin Behnam, Dan Berkovitz , Chris Brummer, Petal Walker
    Federal Housing Finance Administration
    Perhaps no agency will have a larger job — measured both by economic impact and
    political/policy craftsmanship — than the next director of FHFA. Selia Law likely impacts
    FHFA the same way that it impacts CFPB, so a change in Administration would almost
    certainly bring a change to the leadership of FHFA at a critical juncture in the agency’s
    On May 20, 2020, FHFA issued a proposed rule establishing a new regulatory capital
    framework for Fannie Mae and Freddie Mac. The capital regime contemplates the
    enterprises as operating companies free from the constraints of conservatorship. While
    incredibly complex, the timing for finalizing the rule suggests that it is something that
    Director Mark Calabria would like to accomplish ahead of any potential change in
    Administration. The proposed rule has drawn scrutiny from House Democrats who, on July
    28, requested FHFA “pause the rulemaking until the Covid crises passes.” Chairwoman
    Waters and others noted the need to better understand how the proposed rule could impact
    “people of color.”
    It is clear that the manner in which the GSEs are released from conservatorship is likely to be
    contentious and political. Decisions will also have massive economic consequences that
    could move markets. The next Director will have a big job on his or her plate.
    Possible Candidates: Mike Calhoun, Julia Gordon, Bob Ryan, Michael Stegman,
    Sandra Thompson
    Department of Labor
    The Department of Labor is not a prudential financial regulator per se, but the jurisdictional
    reach should not be underestimated. Certainly, the DOL will remain front and center on the
    battle over the fiduciary rule and the Department recently made headlines for the proposal
    to restrict “ESG” investment practices. It goes without saying that a Democrat-led DOL will
    take the opposing view of that which was just proposed.
    Given the emphasis on ESG (as well as diversity and inclusion), DOL has the jurisdictional
    reach to impact the financial services sector.
    Possible candidates: Steve Benjamin, Bobby Scott, Bill Spriggs
    National Economic Council
    In past Democratic administrations, the NEC has played a substantial role in policy
    development and policy deployment, and the directors have had close to unfettered access
    to the President. Our baseline belief is that the core Biden economic team will lean more
    moderate than progressive, and the choice for NEC chair will either prove or disprove that
    thesis. Either way, the NEC chair will have to be a “Biden” person — someone with whom
    the President has familiarity and comfort.
    Possible Candidates: Jared Bernstein, Lily Batchelder, Heather Boushey, Ben Harris
    Office of Management and Budget
    The Office of Management and Budget runs point on Administration budget-making and the
    enforcement of Presidential policy across the breadth of Executive Branch agencies. In so
    doing, it is both the policy implementation and enforcement arm of the Executive Office of
    the President. In the Trump Administration, OMB also plays a significant role in defining the
    metes and bounds of the federal policy-making apparatus. OMB sets administration posture
    over the disposition of rulemakings — including what constitutes a major rule for the
    purposes of the Congressional Review Act. Past Democratic OMB directors have not been
    activists (e.g. Jack Lew, Peter Orzag), and we do not expect Biden to change that. In fact,
    having a core Biden person at OMB is likely as important to the execution of a Biden vision as
    any appointee.
    Possible Candidates: Jared Bernstein, Heather Boushey, Pete Buttegieg
    Office of Information and Regulatory Affairs (OIRA)
    Perhaps the most important policy position that few outside of Washington have heard of is
    the director of OIRA. OIRA, a division of OMB, is charged with the responsibility to review
    agency draft and final regulatory actions. OIRA can stop a regulatory action in its tracks, or
    push it forward. It has been suggested by some that, under Biden, if it continues to exist,
    OIRA should be reconfigured to focus only on the latter.
    Possible Candidates: Cary Coglianese, Emily Hammond, Lisa Heinzerling