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A good number of appointees throughout the government serve at the pleasure of the president, and Biden should use that power.
Seila Law v. CFPB was one of the sillier cases in recent Supreme Court history. It used the absurd premise that the nation stood at risk of a runaway federal official going too far in safeguarding consumers from financial scams to reach what, in the near term, would be a perfectly comforting result. The president of the United States can now fire the director of the Consumer Financial Protection Bureau at their discretion, and install a replacement more in line with their views.
For Joe Biden, this means that he can immediately terminate the tenure of Kathy Kraninger, the Mick Mulvaney protégé who has been irrelevant if not actively harmful in the cause of consumer protection. Previously, Kraninger would have been able to serve through the end of 2023 and could only be fired “for cause.” Although not doing her job would surely be a sufficient cause, the Supreme Court made this much easier for Biden. Kraninger can just be shown the door, on day one. Special thanks to the Supreme Court for that one.
Kraninger is not alone. A new report from the Revolving Door Project identifies numerous officials from critical agencies who can be fired, demoted, or otherwise removed from their jobs at the beginning of the Biden administration. This includes hundreds of U.S. attorneys and inspectors general, the leadership at the FBI and IRS, the general counsel of the National Labor Relations Board, the two top officials at the Social Security Administration, and the chairs of at least 12 multimember commissions. In particular, Biden could use this authority to completely transform the financial regulatory leadership, putting the deregulatory posture of the Trump years firmly in the past.
Typically, leaders at these agencies step down at the close of an outgoing administration, rather than serve a new president. But the Trump regime was, shall we say, unique. Several Trump loyalists have been burrowed inside the government in the civil service, with protections against being fired, and the clear ability to sabotage the incoming president. But that doesn’t apply to the political leadership in the aforementioned positions, who are similarly poised to enact a lot of mischief at the outset of Biden’s term.
That presidents have the authority to place their own people in most leadership roles is not in dispute. A good number of appointees throughout the government serve at the pleasure of the president, meaning that they can be fired at will. In March 2017, for example, Donald Trump asked 46 U.S. attorneys held over from the Obama administration to resign. Trump has already crushed the norm about how continuity dictates that some top officials stay in power from one administration to the next. Given the rogues’ gallery Trump has put into those positions, the Revolving Door Project argues, Biden must do the same in order to preserve the early days of his tenure.
What’s interesting is how many of these positions involve financial regulation, where the Trump administration’s directives have been very clear from the beginning: deregulate everything. Thanks to Seila Law, Biden can immediately fire CFPB director Kraninger; head of the Federal Housing Finance Agency Mark Calabria, who is deeply invested in privatizing mortgage giants Fannie Mae and Freddie Mac (he just raised their capital requirements) and returning to the financial-crisis posture of giving implicit guarantees to private investors; and the head of the Office of the Comptroller of the Currency (OCC), the chief regulator for nationally chartered banks.
Out of nowhere last week, Trump nominated Brian Brooks, the acting head of OCC, to a full five-year term, which would keep him in power until after the next presidential election. This would be pretty bad: Brooks was a crony of Steve Mnuchin’s at OneWest Bank who in his first week at OCC last June enabled predatory lenders to charge exorbitant rates on consumer loans, tried to exempt national banks from coronavirus lockdowns at the state level, and weakened requirements that banks lend into low- and moderate-income communities. That was week one. Just last Friday, OCC proposed a rule preventing large banks from declining to lend to disfavored businesses, a subtle boost to Arctic oil drillers, which have been shut out of financing by the likes of Bank of America and others.
Fortunately, even if Mitch McConnell’s Senate confirms Brooks, on day one Biden can fire him. And given Brooks’s track record, Biden would be wise to do so. President Obama failed to fire George W. Bush’s OCC head, John Dugan, or his successor and former chief of staff John Walsh. Throughout the key years of the financial crisis, Obama’s OCC was openly hostile to any renewed bank regulation, including trying to preempt Dodd-Frank rules, undermining bank capital requirements, and ignoring foreclosure fraud. (By the way, Dugan is now chairman at Citigroup.) Obama didn’t have to put up with that and neither does Biden.
While some Trump-installed heads of independent commissions can’t be fired, they could be demoted, with a Democratic official taking their place. The Federal Deposit Insurance Corporation’s Jelena McWilliams could be demoted to vice chair, and the heads of the National Credit Union Administration, Commodity Futures Trading Commission, Federal Communications Commission, and Federal Trade Commission could all similarly be replaced. In the case of the FTC, Republicans will control the commission until 2023 unless one of their commissioners resigns. But Joseph Simons doesn’t have to remain the chair; he could be replaced by one of the commission’s Democrats.
Biden could use this authority to completely transform the financial regulatory leadership, putting the deregulatory posture of the Trump years firmly in the past.
One of the only agencies that has thus far adhered to presidential-transition tradition is the Securities and Exchange Commission. Jay Clayton, the current chair, will leave at the end of the year, giving Biden an opportunity to name his replacement. It is here, and in financial regulation more generally, where the potential promise of an aggressive strategy of rooting out Trump loyalists could be realized. Practically every Democrat who’s ever been in the SEC or considered for it is lobbying for the chair’s job, according to my sources, but one person could sew up the position if he wants it: Gary Gensler, Obama’s former Commodity Futures Trading Commission chair.
As I noted recently, Gensler, a Goldman Sachs veteran, became a surprisingly energetic financial reformer during Obama’s presidency, earning the enmity of colleagues who were more of the bank-friendly Tim Geithner model. If offered, Gensler reportedly would take the SEC job, an important perch for protecting ordinary investors and cracking down on malfeasance at publicly held corporations.
Gensler is also running the Federal Reserve, Banking, and Securities Regulators agency review team for the Biden transition, with a rock-star group of reformers by his side. That puts him in a position of influencing personnel across the regulators. If Biden carries through with changes at the top of the alphabet soup of the FDIC, NCUA, CFTC, FTC, CFPB, FHFA, and OCC, he could with one series of announcements sweep aside the Trump deregulatory agenda, and install Gensler and his comrades across the agencies to do the important work of re-regulating the financial system.
This is all available to Biden just by following the powers given to a president to name his own team. He shouldn’t pass up the opportunity.
