A recent filibuster rule change to the U.S. Senate’s nominee
confirmation process could have implications on future financial regulatory
Presidential appointments to the U.S. Federal Reserve Board
of Governors, Commodity Futures Trading Commission (CFTC) and the U.S. Court of
Appeals for the District of Columbia Circuit have remained vacant for several
reasons: minority opposition in the Senate, the generally slow pace of Congress
and a high volume of agency staff transitions.
Last month, the Senate voted in favor of procedural changes
to the standing rules, allowing for a simple majority to confirm most
presidential nominees to executive-office and judicial slots, a reversal of the
60 votes formerly needed. Requiring a Senate up-or-down vote expedites the
appointment process, potentially ensuring regulators and judicial overseers are
in place faster and to move forward on policy implementation.
the D.C. Circuit Court
The change came after recent attempts by President
Obama to fill three D.C. Circuit Court vacancies were blocked by Senate
Republicans. Considered the second highest federal judicial body after the U.S.
Supreme Court, the D.C. Circuit Court comprises 11 judges and rules on cases
involving federal regulations and serves as center stage for legal challenges
to key provisions of the Dodd-Frank Act. From CFTC-imposed position limits on derivatives,
to proxy-access rules written by the SEC, much of the financial regulatory
policy debate has moved from U.S. Congress to the D.C. Circuit court.
With only 51 votes now needed in the Senate to advance
President Obama’s three Democratic court nominees—Patricia Millet, Corneilia
Pillard and Robert Wilkins—the full judicial panel would create a 7-4
Democratic majority. While this would seemingly tilt the court in favor of
White House initiatives, the effect on financial regulatory cases may not be hugely
dramatic. That’s because the 11 judges serve on a randomly-selected, rotating
three-judge panel with a supplemental group of more senior judges who assist
during high caseloads. These senior judges generally are Republican appointees.
Still, as financial regulators continue to roll out the
Dodd-Frank Act, future challenges heard by the D.C. Circuit will continue to be
a key hurdle in the final outcome of financial regulation. The latest rule
stemming from Dodd-Frank is a big one that could spark a legal battle—the
so-called Volcker Rule, which banks oppose.
the Federal Reserve
Although Federal Reserve Chair nominee Janet Yellen is expected
to be easily confirmed, President Obama has three other vacancies to fill on
the Fed’s seven-member board of governors, including Yellen’s current post as
Fed Vice Chair.
In addition to its traditional role managing monetary
policy and open market operations, the Fed is working on a host regulatory
matters involving stability of the financial industry, as prescribed by Dodd-Frank.
These include overseeing prudential regulation of systemically risky large
institutions, implementing the Volcker Rule and creating a governing framework
for over-the-counter derivatives trading, including margin requirement rules. Three
Obama appointees on the Federal Reserve board, along with Yellen as Chair,
would seemingly clear a path for quicker Dodd-Frank rule implementation.
The CFTC is chiefly focused on reforms to the derivatives
market. Legal challenges from the financial industry have stymied much of the
CFTC’s efforts to govern the largely unregulated swaps market. The Senate will
consider three nominations to the commission, including a new Chair.
Retiring at the end of the year, Chairman Gary Gensler is
set to be succeeded by Timothy Massad, Assistant Treasury Secretary for Oversight
of the Troubled Asset Relief Program (TARP).
Commissioner Jill Sommers also will leave the CFTC at the
end of the year. Sommers is one of two Republicans on the commission. She is
set to be replaced by Christopher Giancarlo, a Republican who currently serves
as chairman of the Wholesale Markets
Also leaving December 31 is Commissioner Bart Chilton, a
champion for stronger swaps regulation. Senate Democrats have insisted that
Chilton’s replacement be an equally strong advocate for financial reform.
Left: 113th Congress, 1st Session
With just two weeks left this year and much of that time
committed to a tight December 13 budget deal deadline and confirming Yellen, who
already cleared the Senate Banking Committee, the Senate is unlikely to move on
additional confirmations until 2014.A simple up-or-down vote on
Presidential nominees will not force a tectonic shift on financial regulation.
But for the White House the Senate rule changes would seemingly make the Obama
Administration more capable of defending and implementing its policy
initiatives and doing so with greater flexibility during the vetting process.
The Administration certainly would enjoy greater leverage to enforce its policy
initiatives moving into 2014 and beyond.