McHenry: Banking Regulators Stuck ‘Fighting the Last War’

By this time next year, America’s banking regulators will likely have new leadership.

At a hearing Wednesday (Nov. 20) Rep. Patrick McHenry took the outgoing regulators to task.

McHenry, the North Carolina Republican who serves as chair of the House Financial Services Committee accused officials at agencies like the Federal Deposit Insurance Corp. (FDIC) of being stuck in the past.

While he criticized the heads of three regulatory bodies, McCarthy reserved special focus for FDIC Chair Martin Gruenberg, saying that Republicans had introduced legislation calling for his termination before he could resign.

“It’s clear our banking regulators, under Democrat leadership, have been busy fighting the last war,” he said. “Time and again, your agencies have also worked to stifle the beneficial role that innovation and technology play in our financial system.”

By contrast, McHenry said, lawmakers from both sides of the aisle voted overwhelmingly to embrace a “inevitable technology-based future” by passing a cryptocurrency bill earlier this year. He called that bill the “largest rewrite of financial regulatory law since Dodd-Frank.”

The legislation was criticized by Securities and Exchange Commission (SEC) Chair Gary Gensler, who said it “would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”

McHenry also blasted banking regulators for overlooking interest rate risks on bank balance sheets, arguing this led to three of the biggest bank failures in U.S. history in 2023.

The House Republicans’ efforts come at a time when the financial world is anticipating a more favorable environment under the second Trump administration.

As noted here earlier this week, analysts expect that the new administration will be more likely to approve Capital One’s plan to acquire Discover. It could also, or just abandon, the Consumer Financial Protection Bureau (CFPB) rule that would reduce credit card late fees to $8.

Experts also predict that Trump will roll back other Biden administration efforts, including the Justice Department’s plan to break up Google.

“The election has also seen bitcoin prices reach record highs on investor optimism that the Trump administration will mean a friendlier regulatory environment than the one offered by Biden, or what would have been offered under a President Harris,” PYMNTS wrote recently.