Quarles declined to comment on whether he would stay on during a Biden administration. McWilliams and Calabria have both publicly said that they intend to finish their terms. The FDIC and FHFA declined to elaborate on their plans.
Calabria’s status demonstrates what’s at stake for financial firms. The FHFA makes decisions that directly impact mortgage rates and the prices on $5 trillion of bonds backstopped by Fannie and Freddie. Hedge funds that own Fannie and Freddie shares arguably have the most to lose if Calabria is pushed out, because he is determined to release the companies from government control, a move that could enrich their investors. The Biden administration would be expected to go in a different direction.
The case that the Supreme Court is scheduled to hear in December will decide whether the president can fire the FHFA director at any time for any reason, as opposed to the current requirement that terminations be justified by cause. Earlier this year, the high court made it much easier for the president to remove the head of the Consumer Financial Protection Bureau, signaling the same may be in store for the FHFA. The FHFA and CFPB have almost identical structures, as both are led by a single director.
Blocking Changes
Trump’s presidency showed how effective squatters can be in slowing down regulatory agendas. The FDIC was led by Martin Gruenberg, who Barack Obama tapped to be chairman, for the first 17 months of the Trump administration. During that period, efforts to ease constraints on banks were often stymied because significant changes are traditionally approved jointly by the Fed, FDIC and Office of the Comptroller of the Currency.
Though Trump squatters may hinder efforts to re-write regulations, there are other ways that incoming Biden watchdogs can make a dent, including through supervision of financial firms and fines for rule violations.
“The appointees will be very, very focused on what they can do quickly,” said Patricia McCoy, a Boston College law professor who specializes in financial regulation. “Setting new enforcement priorities can be done immediately.”
--With assistance from Magan Crane.
This article was provided by Bloomberg News.