Speaker 1: Hello, and welcome to the Votes in Verdicts podcast hosted
Speaker 1: by the litigation and policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. Bloomberg Intelligence has five
Speaker 1: hundred analysts and strategists working across the globe and focused
Speaker 1: on all major markets. Our coverage includes over two thousand
Speaker 1: equities and credits, and we have outlooks on more than
Speaker 1: ninety industries and one hundred market indices, currencies and commodities.
Speaker 1: This podcast series examines the intersection of business policy and law.
Speaker 1: I'm Elliott Stein, an analyst with Bloomberg Intelligence covering financials litigation, and.
Speaker 2: My name is Nathan Dean, and I'm an analyst with
Speaker 2: Bloomberg Intelligence covering financials policy.
Speaker 1: We are delighted today to have our guest Kathy Kraininger,
Speaker 1: CEO of the Florida Bankers Association. Prior to that role,
Speaker 1: she was VP of Regulatory Affairs for Solidus Labs, where
Speaker 1: she built the fintech Startups global policy and engagement strategy,
Speaker 1: and before that, she was Director of the Consumer Financial
Speaker 1: Protection Bureau, better known as the CFPB from twenty eighteen
Speaker 1: to twenty twenty one. Previous government service has also included
Speaker 1: being an Associate Director in the Office of Management and
Speaker 1: Budget the OMB from twenty seventeen to twenty eighteen, serving
Speaker 1: in the Peace Corps in Ukraine from nineteen ninety seven
Speaker 1: to nineteen ninety eight, and in turning for Representative Shared Brown,
Speaker 1: who is now, of course, a US Senator from Ohio.
Speaker 1: So with all that, Kathy Kraminger, welcome to the Votes
Speaker 1: and Verdicts podcast.
Speaker 3: Thank you so much, Elliott Nathan. Fantastic to be with
Speaker 3: you today.
Speaker 1: So our first question that we ask of all our
Speaker 1: guests is about their history. You know, I just mentioned
Speaker 1: the highlights of your official bio. It's obviously very impressive,
Speaker 1: but we'd love to know a little bit more about
Speaker 1: how you got to where you are, what took you
Speaker 1: into government service, and more recently, what took you to
Speaker 1: the Florida Bankers Association.
Speaker 3: Yea happy, happy to give you a bit of the
Speaker 3: rundown of that circuitous route that I took, largely through
Speaker 3: government service, and it really came from a love of
Speaker 3: policy and a love of Washington, d C. I'll say
Speaker 3: these days that sounds very naive and nice, I guess quaint,
Speaker 3: but I really always loved Washington and I said, you know,
Speaker 3: if I could work in the US capital, if I
Speaker 3: could work for the American people and do good for.
Speaker 4: The country, you know, that's all worthwhile.
Speaker 3: And so I feel very blessed that I had that career.
Speaker 3: I went to Washington, d C. Following my Peace Corps service,
Speaker 3: as you mentioned, and worked at the Department of Transportation.
Speaker 3: Had a fantastic really first boss in a full time
Speaker 3: role forgetting my internship, but working for Secretary Normanetta, who
Speaker 3: was the Democrat in in the Bush cabinet, and nine
Speaker 3: to eleven, of course happened. It changed everything that we
Speaker 3: were working on. One day we're talking about whether and
Speaker 3: how Mexican trucks should enter the United States, and the
Speaker 3: next day we're talking about, you know, obviously how planes
Speaker 3: fly into buildings, and what we need to do to
Speaker 3: further secure aviation and all transportation and immigration borders. You know,
Speaker 3: the rest of it is now history with the stand
Speaker 3: up of DHS that I was involved in in TSA.
Speaker 3: So I really do feel very blessed to have been
Speaker 3: engaged in really what were the big public policy issues
Speaker 3: at the time and looking to solve them. Moving through
Speaker 3: homeland security and a lot of the things that I
Speaker 3: worked on there, including infrastructure protection and cyber and disaster response.
Speaker 3: Of course, we had major hurricanes we responded to also
Speaker 3: over the last two decades that I had a role
Speaker 3: at least in the policy and funding side on. But
Speaker 3: a lot of that got me introduced into and actually
Speaker 3: financial crime enforcement too, got me introduced into financial services
Speaker 3: and the conversations that were happening there.
Speaker 4: Certainly the financial crisis and the creation of the.
Speaker 3: CFPB, A lot of that came out of that. And
Speaker 3: so as you look at moving into my time in
Speaker 3: the Trump administration, when I was at OMB, I was
Speaker 3: involved with the Economic Policy team from that vantage point,
Speaker 3: talking about housing finance, talking about where we should go
Speaker 3: on a lot of exciting regulatory reform arenas. We had
Speaker 3: the opportunity in that administration to replace the CFPB director,
Speaker 3: and you can imagine that as the President was looking
Speaker 3: around and there are a lot of things that he
Speaker 3: likes to do that are going to surprise people. There
Speaker 3: were Republicans who basically said the agency should not exist,
Speaker 3: and they would go into.
Speaker 4: To really neuter it, I suppose you could say, in
Speaker 4: a nice way, uh.
Speaker 3: And then on the other side, it was you know,
Speaker 3: who's going to run the agency. It has a legal responsibility.
Speaker 3: You know, we want to you know, surprise people and
Speaker 3: put in a Republican that is going to govern and
Speaker 3: follow the law.
Speaker 4: And so that is how my nomination came to be.
Speaker 3: And that was my you know, last service in government
Speaker 3: and leaving the CFPB, I had the chance to say,
Speaker 3: you know, I want I want to help start building,
Speaker 3: build a business, understand what was happening internationally, which is
Speaker 3: how I ended up at Solidus Labs. And then I
Speaker 3: also said, you know, it wasn't scaling fast enough. I
Speaker 3: also have a lot of my history in you know,
Speaker 3: how do we build an organization, how do we scale,
Speaker 3: how do we take things to the next level. And
Speaker 3: so I still am a huge supporter of that company
Speaker 3: and and you know, want to see them do well
Speaker 3: and excited to see progress in the regulation of the
Speaker 3: crypto markets. It was a great opportunity to come to Florida,
Speaker 3: really and it was part of my decision making process too,
Speaker 3: to say am I going to be in Washington for
Speaker 3: the rest of my life or am I going to
Speaker 3: go venture out?
Speaker 4: So I did, in fact do that.
Speaker 3: In taking this job, but I'm following a long time CEO,
Speaker 3: So twenty six years Alex Sanchez was here in Florida
Speaker 3: and really looking at the changes that have been happening
Speaker 3: for the banking industry, and that the opportunity to remind people, frankly,
Speaker 3: why banks are so important in their communities and putting
Speaker 3: customers and communities first and foremost in terms of how
Speaker 3: we talk about the real impact of the policy process
Speaker 3: on these institutions. It's not about the impact on the
Speaker 3: banks themselves.
Speaker 4: It's how that.
Speaker 3: Changes the services and products and support that banks can
Speaker 3: give to their communities and to their customers. So being
Speaker 3: at the forefront of that is definitely where we are
Speaker 3: as FBA and as really associations represent bankers.
Speaker 2: So you talked about how much you love Washington as
Speaker 2: we currently film this or it's currently ninety seven degrees
Speaker 2: with thunderstorms. So I would love to talk about your
Speaker 2: time in Florida because that's where I wish I was
Speaker 2: right now. So you know, as you have been at
Speaker 2: the Florida Bankers Association, what are the highest priorities for
Speaker 2: you in the organization that you see over the next year.
Speaker 3: So, certainly the regulatory environment is huge. We are seeing
Speaker 3: what is aptly called the tsunami of regulatory changes coming
Speaker 3: out of every agency in Washington, and frankly a trend
Speaker 3: that is migrating into the States too, as the States
Speaker 3: are taking you know, political postures and saying, you know,
Speaker 3: is this the industry that we want to see or
Speaker 3: is this how we want to see business operate? So
Speaker 3: those dynamics are real, and as I said before, that
Speaker 3: impacts communities, That impacts real people, That impacts the type
Speaker 3: of credit products and support and risks that banks can
Speaker 3: take when they know their communities and know their customers,
Speaker 3: but they have to justify that to regulators, and those
Speaker 3: regulators are looking for a standard credit box and saying,
Speaker 3: you know, afterward, you know that Monday morning quarterback role
Speaker 3: is always a much nicer place to be to come
Speaker 3: in afterwards and say like, well, how did you approve this?
Speaker 3: But not approve that? And that's the role we're in
Speaker 3: in many respects. We're turning banking into a commodity and
Speaker 3: turning it into, you know, something that is cookie cutter
Speaker 3: or a utility, and that is definitely not what made
Speaker 3: these institutions really serve their communities and help small businesses.
Speaker 4: So I think that that whole.
Speaker 3: Regulatory environment and the conversation and pushback you're seeing is
Speaker 3: fundamentally about what community support should look like. So that's
Speaker 3: issue number one by far. I'd say the second one
Speaker 3: is also the next generation. We are very much pushing
Speaker 3: for making sure that people understand.
Speaker 4: What opportunities there are in banking.
Speaker 3: And helping, you know, shape that as an opportunity for people,
Speaker 3: particularly as I said, in Florida, and there's there are
Speaker 3: a lot of things happening in Florida that are positive
Speaker 3: for sure.
Speaker 2: Well, Elliott and I both came up out of the
Speaker 2: banking world, so we will join you and say that
Speaker 2: if anybody's listening, join the banks. Don't go to tech
Speaker 2: or healthcare or anything. You know, we love the banks too.
Speaker 2: So I'd like to talk a little bit about the
Speaker 2: Basle three endgame. You know, this is a Federal Reserve
Speaker 2: ftic OCC proposal which under the proposed language, could increase
Speaker 2: capital requirements for the regional banks around five to six percent,
Speaker 2: the g SIPs, the Bank of Americas, the JP, Morgan's
Speaker 2: and so forth, the up to nineteen percent. We've seen
Speaker 2: reporting that the FED is going to have broad and
Speaker 2: material changes and that these overall capital requirements are coming down.
Speaker 2: But one of the things that I've also been very
Speaker 2: struck as we go through this process is that there's
Speaker 2: been a lot of outreach for from community banks and
Speaker 2: from small banks and small businesses on why the Bosle
Speaker 2: three endgame would ultimately hurt them. So does Florida? Does
Speaker 2: the Florida Bankers Association stand anywhere on the proposal? And
Speaker 2: if so, should the proposal drastically changing? If you know,
Speaker 2: should there even be a reproposal at this point?
Speaker 3: So I will say yes, absolutely, it is. Basle three
Speaker 3: endgame is part of that. And I think one of
Speaker 3: the things that I've been most encouraged by in terms
Speaker 3: of the way the associations in Washington at the state
Speaker 3: level have approached this. We have the US Chamber, State
Speaker 3: Chambers to the Florida Chamber and local chambers of commerce
Speaker 3: that are right there with us fighting on on Basle
Speaker 3: three endgame. And you've got you know, I can't remember, frankly,
Speaker 3: if it was a Super Bowl I tend to like
Speaker 3: to fact check, but I think it was a Super
Speaker 3: Bowl commercial frankly out puzzile free endgame. So you get
Speaker 3: to what is a very arcane regulatory capital requirement note
Speaker 3: as you noted, and mixing it with that, so it
Speaker 3: has reached common vernacular and understanding that this is not
Speaker 3: just about how much capital the banks have to hold.
Speaker 3: It is about what really that lending environment looks like
Speaker 3: and what impact that has again on businesses of all
Speaker 3: sizes and their ability of these institutions to support and
Speaker 3: serve them, which means it has an impact on employment,
Speaker 3: it has an impact on the economy.
Speaker 4: We just saw a.
Speaker 3: I think it was PwC, but a study that was
Speaker 3: just done in the last couple of days on exactly this, saying, look,
Speaker 3: this is this regulation, if it were implemented, would have
Speaker 3: a massive impact on the economy and on GDP in fact,
Speaker 3: so you get to things that just don't make sense fundamentally.
Speaker 3: So yes, we're opposed to it as it was proposed
Speaker 3: and think there is a better way to go about this,
Speaker 3: And in fact, it sounds like with all of the
Speaker 3: pushback that particularly the Federal Reserve has been, you know,
Speaker 3: leading the charge on this and thinking about it.
Speaker 4: Though it is a.
Speaker 3: Multi agency banking regulation, there are going to be pretty
Speaker 3: significant changes to it, and that means it's going to
Speaker 3: have to be a reproposal, and it also sounds like
Speaker 3: they're slowing things down a little bit in terms of
Speaker 3: not rushing this next iteration out. So I would say
Speaker 3: I am personally at least hopeful that this gets to
Speaker 3: a better place.
Speaker 1: So, you know, assuming the rule gets watered down once finalized,
Speaker 1: whether it's you know, via a reproposal or a finalization
Speaker 1: of the current proposal, but assuming it gets watered down,
Speaker 1: do you think there's any chance that it gets watered
Speaker 1: down so much that that industry doesn't sue the government
Speaker 1: over it, or do you think, you know litigation is inevitable.
Speaker 3: Well, you know, I certainly wouldn't want to opine on
Speaker 3: that a bitter early to do that. I do think
Speaker 3: there's going to be a reproposal. All directions seem to
Speaker 3: point to that. So giving them that opportunity to say, yes,
Speaker 3: there are enough changes from that last proposal that it's
Speaker 3: worth going to comment again. I'm guessing your listeners tend
Speaker 3: to know that process, but it is an important one
Speaker 3: because if you change enough, you can't go final and
Speaker 3: so there is a much longer tail now on when
Speaker 3: that can be finalized and another comment period. So I
Speaker 3: see all of that as definitely positive and would say
Speaker 3: we should reserve judgment on litigation.
Speaker 4: It's not and you both know this too.
Speaker 3: It is not an easy decision to decide to litigate
Speaker 3: and sue your regulator and your primary regulator. It's not
Speaker 3: something that the banking industry has tended to do very frequently.
Speaker 3: And I will say in the last two years you
Speaker 3: see a lot, or the last three years, you see
Speaker 3: a lot of it, and I think with good reason.
Speaker 1: Like you know, we've talked about this on this podcast
Speaker 1: many times, so we're sort of in this perfect storm
Speaker 1: right now where you have very aggressive value and at
Speaker 1: least a federal judiciary who is, you know, skeptical of
Speaker 1: government overreached. So thus the many lawsuits, speaking of which
Speaker 1: I want to ask you a little bit about your
Speaker 1: time at the CFPB, where you were director from twenty
Speaker 1: eighteen to twenty twenty one. You were there as the
Speaker 1: sale of law case was won in through the courts
Speaker 1: and eventually reached the Supreme Court. And for those who
Speaker 1: don't know or don't remember, the issue in sale a
Speaker 1: law or some pronounced it seal a law, I pronounced
Speaker 1: it sale a law was whether the president could fire
Speaker 1: the CFPB director at will or not. The Supreme Court
Speaker 1: ultimately held in June of twenty twenty that the president
Speaker 1: could indeed fire the CFPB director at will before the
Speaker 1: director's five year term ended, and that you know, the
Speaker 1: president didn't need cause to remove the CFPB director. And
Speaker 1: the result, of course, was that the CFPB director then
Speaker 1: became less independent from the president more aligned with the
Speaker 1: political priorities of you know, whoever the president was at
Speaker 1: that time. If I recall, the CFPB originally took the
Speaker 1: position that the four cause removal restriction in Dodd Frank
Speaker 1: was fine, it was constitutional. Under your tenure, the CFPB's
Speaker 1: position changed, I believe, and in the Supreme Court, the
Speaker 1: cfb's official position was that the four cause removal restriction
Speaker 1: was unconstitutional and the president should be able to fire
Speaker 1: the CFPB director at will. I'd love to know your thoughts,
Speaker 1: you know, on why you think it's important that the
Speaker 1: president should be able to fire the CFPB director at will.
Speaker 1: It ultimately that decision ultimately wound up in you know,
Speaker 1: your removal from the agency when President Biden.
Speaker 3: Came in, Yes, which is certainly the outcome that we
Speaker 3: knew was possible. Given a presidential election year, but one
Speaker 3: that certainly I thought was the right decision.
Speaker 4: Look that that four.
Speaker 3: Cause terminology is frankly, you look at some of the
Speaker 3: dynamics happening politically today and you could just eviscerate someone
Speaker 3: if you want to come up with or debate what
Speaker 3: the cause truly is and and really tear somebody to shreds.
Speaker 3: I did not see that as productive. So I would
Speaker 3: say there are some who argued that there was the
Speaker 3: ability to remove regardless, but you you'd literally do it
Speaker 3: by destroying a person's reputation and having perhaps uh you know,
Speaker 3: some some a lot of different ways to do it
Speaker 3: at any rate. So it really came down to was
Speaker 3: that meaningful or not meaningful in terms of some kind
Speaker 3: of limitation and if if there needs to be the
Speaker 3: appointment of a CFPB director, of course that is the
Speaker 3: purview of the president. So you get to the right
Speaker 3: to a point, but not the right to remove.
Speaker 4: And so it does get.
Speaker 3: You know, from a practical standpoint, some of those things
Speaker 3: were things that we thought about and considered and looking
Speaker 3: in general at you know, what what exactly makes an
Speaker 3: independent agency? We could have a lot of conversation about
Speaker 3: that as a lawyer myself. Whether there are any truly
Speaker 3: independent agencies and what that actually means and whether that
Speaker 3: was foreseen in the Constitution at all is also an interesting,
Speaker 3: you know, process for lawyers to debate. But my personal
Speaker 3: belief was that it really.
Speaker 4: Did not make any sense.
Speaker 3: And as we looked at the law and the history here,
Speaker 3: as I said, the appointment, the ability to appoint, but
Speaker 3: not remove the ability or remove for cause, But what
Speaker 3: does that really mean if you're practically talking about it
Speaker 3: that in some respects it got to be a distinction
Speaker 3: without a difference. And I believe too that the president
Speaker 3: should have the right to actually appoint he was elected
Speaker 3: by the public. That is not and by our process
Speaker 3: with the Electoral College. It's not that agency heads should
Speaker 3: just be able to live on and operate outside of
Speaker 3: that elected process. So that's also part of this. But
Speaker 3: when we looked at really the decision that the CFPP
Speaker 3: had taken in the past, I get it. The law
Speaker 3: was passed and signed by democratic You had Democrats in
Speaker 3: that role and they were looking to uphold that congressional action.
Speaker 3: We came in with a different posture and perspective on it.
Speaker 3: So it the position made sense to me in terms
Speaker 3: of changing what had been the agency's position based on
Speaker 3: you know, looking at the Constitution and being a constitutional officer.
Speaker 3: It was absolutely an odd situation to be sitting there
Speaker 3: listening to oral arguments inside the Supreme Court when they
Speaker 3: were talking about my job and my.
Speaker 4: Name even came up a few times.
Speaker 3: So those things that was that was definitely a surreal experience.
Speaker 3: And as you noted, it is how you know, the
Speaker 3: President was able to ask for my resignation and I resigned.
Speaker 3: In fact, I was very prepared to resign, recognizing that
Speaker 3: that was what was going to happen. But I do
Speaker 3: think it the president should have the ability to put
Speaker 3: the team around him in these agencies or again in
Speaker 3: the future, around her.
Speaker 4: So that that's an important, I think.
Speaker 3: Message to send and it and it is definitely the
Speaker 3: direction that that seems to be going with other agencies too.
Speaker 1: I was at that argument as well. And but but
Speaker 1: I'm wondering, you know, we had, uh, we had Mark
Speaker 1: Calabria on on this podcast a few weeks ago, who
Speaker 1: former director of the f HF a similar issue with him,
Speaker 1: and in fact, you know, he talked about how the
Speaker 1: case that affected the fh F HF A director was
Speaker 1: Collins versus Yellen, and he was, you know, uh wait,
Speaker 1: he was refreshing the Supreme Court website just like I do,
Speaker 1: you know, waiting for your decision, and he was waiting
Speaker 1: for the Collins decision, and ultimately it came out and
Speaker 1: then he got, you know, asked to resign. But I'm
Speaker 1: wondering if you think it varies, you know, whether your
Speaker 1: view changes depending on the agency. I mean, he was
Speaker 1: of the view that the f hif a director should
Speaker 1: be should be independent, should not be terminable at will.
Speaker 1: You know, one of the arguments is that it provides
Speaker 1: for more continuity in terms of policies. But you know,
Speaker 1: I was wondering what your thoughts on are on that.
Speaker 3: Yeah, I won't I won't get in too much of
Speaker 3: an argument with Mark over that. He is a good
Speaker 3: friend and he actually supported his senators in writing the
Speaker 3: law that created FHFA too, so he felt he certainly
Speaker 3: felt some affinity to Hara end upholding Congress's purview and
Speaker 3: setting it up, and so I appreciate where he was.
Speaker 4: Coming from on that.
Speaker 3: But but I think that you know, you get to
Speaker 3: if the agency head is the way to maintain consistent policy,
Speaker 3: I think we're we're talking about other challenges that we
Speaker 3: have as a society. I frankly think that there is
Speaker 3: way too much pendulum swinging, you know, in all of
Speaker 3: these processes. If we are are looking and I don't
Speaker 3: think it's what the American people want, and it's certainly
Speaker 3: not the way I tried to govern. But if you
Speaker 3: want literally to see things go from from you know,
Speaker 3: everybody putting one set of policies into place, and then
Speaker 3: every four years you're literally undoing what the last you know,
Speaker 3: administration did completely and try to put in your own policies.
Speaker 4: That is not going to be good for our economy.
Speaker 3: It's not good for business, and it's definitely then therefore
Speaker 3: not good for the American consumer and American people. So
Speaker 3: I think there is probably some other things that we
Speaker 3: should talk about in terms of how you bring stability
Speaker 3: and consistency of philosophy into how you govern.
Speaker 1: I want to ask you about, you know, the most
Speaker 1: current litigation challenging the CFPB's existence really had to do
Speaker 1: with how it's funded, because it's not you know, funded
Speaker 1: out of the normal congressional appropriations process, and its funding
Speaker 1: comes out of the Federal Reserve. You know, obviously the
Speaker 1: Supreme Court decided that in May it upheld the current
Speaker 1: funding mechanism. But now there's rumblings of new arguments challenging
Speaker 1: the funding mechanism based on you know, what the term
Speaker 1: earnings means in Dodd Frank and you know that the
Speaker 1: funding has to come out of its earnings. But the
Speaker 1: argument is that because the FED hasn't been profitable since
Speaker 1: like twenty twenty two, it doesn't have earnings, and you know,
Speaker 1: there's a dispute as to what that term actually means.
Speaker 1: I'm curious your thoughts on this whole issue. Is it
Speaker 1: time for industry groups to stop challenging the cispb's you know, existence,
Speaker 1: whether it's in terms of its funding or its constitutional structure.
Speaker 1: Is it time to move on and focus on other things?
Speaker 1: Just curious about your thoughts on this.
Speaker 4: No, I.
Speaker 3: Was also for a good part of my career and
Speaker 3: appropriation staff or so I'm and working at the Office
Speaker 3: of Management and Budget on federal budget issues, so it's
Speaker 3: not an issue that I'm unfamiliar with. I certainly think
Speaker 3: that the Supreme Court, you know, took a fair look
Speaker 3: at this, and I can appreciate that people wanted to
Speaker 3: raise the issue. Fundamentally, I don't think this is the
Speaker 3: right way to fund an agency, but that's a policy consideration,
Speaker 3: that's not a constitutional position that I would take, or
Speaker 3: even you know, whether it's lawful to fund the agency
Speaker 3: the way it has been funded. I think that is
Speaker 3: a you know, if there are other and I have
Speaker 3: heard the kind of the latest argument as you as
Speaker 3: you laid it out, Elliott, I've heard it. I don't
Speaker 3: know that I find it all that compelling. But at
Speaker 3: the same time, if that is one that people want
Speaker 3: to raise and bring to the courts, I would say,
Speaker 3: in this day and age, it's helpful actually to have
Speaker 3: the courts opining on some of these issues. So it's
Speaker 3: it's not necessarily a bad thing, but I do think,
Speaker 3: you know, it is challenging for the CFPB to be
Speaker 3: in this position constantly, and and so you know, we
Speaker 3: know the agency was created, it has a legal mandate
Speaker 3: to do certain things. I think it is going far
Speaker 3: beyond that legal mandate personally in terms of what is
Speaker 3: happening there. And I've written at least a little bit
Speaker 3: about that. I tend to be fairly measured so the
Speaker 3: fact that I'm willing to say what I just did
Speaker 3: is a demonstration perhaps of where I really.
Speaker 4: Think things are.
Speaker 3: But it is an important role to be, you know,
Speaker 3: making sure consumers have information to make the best decisions
Speaker 3: that there is not you know, that things are fair.
Speaker 3: There's a deception and abuse in the system in terms
Speaker 3: of how products and services are sold to consumers. So
Speaker 3: I do think all of that is fundamentally important, but
Speaker 3: you really do have to carry that out in a
Speaker 3: measured way.
Speaker 4: It's a fine line between.
Speaker 3: Telling to making sure consumers have the right information to
Speaker 3: make a good decision on their own and limiting what
Speaker 3: decisions they're actually able to make for themselves, and trying
Speaker 3: to take all risk out of the process in general,
Speaker 3: because I think without risk, there's really no life. So
Speaker 3: how do we balance those things out? Not an easy
Speaker 3: thing to do, but definitely kind of part of that
Speaker 3: core you know, thought process for the agency as they
Speaker 3: look at how they should carry out their mandate.
Speaker 2: You know, one of the questions, or I guess one
Speaker 2: of the theories that I've had over the CFBB is
Speaker 2: that it's been a very subdued CFBB under director Rohit
Speaker 2: Chopra until that Supreme Court decision came out. And now
Speaker 2: that the Supreme Court decision has come up and is
Speaker 2: upheld the CFPB's funding. My theory is the Director Chopra
Speaker 2: is going to be jumping at the gun, if you will,
Speaker 2: trying to pursue a lot of other you know, we've
Speaker 2: seen talk on overdrafts, credit card late fees, and so
Speaker 2: forth like that. I'm curious for your banks, for the
Speaker 2: Florida banks that are in particular, so the smaller banks.
Speaker 2: How much of a concern is CFPB compared to other regulators.
Speaker 2: It's is it something that the banks stay up at
Speaker 2: night wondering about when that CFPB examiner is coming in?
Speaker 2: Or is it still just more of a Washington exercise
Speaker 2: that it hasn't hit the ground yet.
Speaker 3: It is, It is definitely a significant concern. I think
Speaker 3: though if I had to rate it, this CFPB is
Speaker 3: not at the top of the list. It really is
Speaker 3: fundamentally the posture that regulators have been taking that does
Speaker 3: swing and I don't know that it should. I mean,
Speaker 3: it's there, are you the empire calling you know, balls
Speaker 3: and strikes or are you literally looking to make sure
Speaker 3: that everything that touches the line is identified and therefore
Speaker 3: blown out or proportion because that's not over the line yet,
Speaker 3: but it's on the line, and therefore, you know, we
Speaker 3: should call you out on it and tell you how
Speaker 3: close you are. Those are the dynamics that I think
Speaker 3: are being faced now.
Speaker 4: It's you all know this too. But for an institution
Speaker 4: to get.
Speaker 3: An MRA or other, you know, let's call it, some
Speaker 3: some kind of of notice that there might be a
Speaker 3: potential risk or concern that is.
Speaker 4: A big deal in this endy.
Speaker 3: And so to have those that, you know, you've got
Speaker 3: to then follow up of course with your boards, and
Speaker 3: you've got to take all of the mitigating and remediation
Speaker 3: actions and report out and it usually has a very
Speaker 3: long tail to close out those types of examination findings.
Speaker 3: And so we are in a posture now where if you,
Speaker 3: as an examiner come in and don't identify something, then
Speaker 3: you didn't do your job.
Speaker 4: So you know, they're they're literally.
Speaker 3: Sitting there having to just anything that maybe looks anything
Speaker 3: at all like something that might potentially sometime in the
Speaker 3: future be an issue. They need to identify it now.
Speaker 3: And so that is a different posture that is being taken,
Speaker 3: and that's not just at this at the CFPB. That's
Speaker 3: that's really the experience the bankers are having and they're saying, look,
Speaker 3: where did this become the new standard and how can
Speaker 3: we possibly meet that?
Speaker 1: Yeah, I mean at the agencies, no one wants to
Speaker 1: be the person who missed made off for who mans
Speaker 1: FTX or who missed SVB. I have one one more
Speaker 1: question about your time at the CFPB, Just curious to
Speaker 1: get your thoughts on you know, what you're proudest about
Speaker 1: about your time there and if you have any regrets
Speaker 1: about things you wish you could have gotten accomplished but didn't.
Speaker 3: Look certainly, there are so many things that the pandemic
Speaker 3: intervened on and lives lost and people who suffered quite
Speaker 3: a bit. So that is that is the one thing
Speaker 3: that was obviously a massive wild card in my tenure.
Speaker 3: I had one year and three months prior to that,
Speaker 3: you know, that shutdown, and so we were really making
Speaker 3: a lot of progress. I had brought actually all of
Speaker 3: Washington headquarters into one headquarters building. It was not because
Speaker 3: I was looking to you know, actually reduce the head
Speaker 3: count or anything. It was walking around a building that
Speaker 3: was brand new and we had spent a ridiculous amount
Speaker 3: of funding to renovate, and most of the offices were
Speaker 3: empty because we had a pretty liberal work from home policy,
Speaker 3: so as you look at just space utilization and efficiency
Speaker 3: and bringing people into one place, we brought everyone into
Speaker 3: one building. We also moved the Southeast headquarters, the Southeast
Speaker 3: Region headquarters to Atlanta, so it was really closer to
Speaker 3: its workforce of examiners and it was actually you know,
Speaker 3: in the Southeast instead of being out of headquarters. And
Speaker 3: so those two moves were big in terms of again
Speaker 3: streamlining how we operate and getting everybody in one place
Speaker 3: at headquarters. So we had literally in February of twenty twenty,
Speaker 3: had a little, you know, kind of celebration to get
Speaker 3: us all aligned in the headquarters building and then pretty
Speaker 3: much everyone went home.
Speaker 4: So I will say I did save quite.
Speaker 3: A bit of money from the agency that year because
Speaker 3: I wasn't paying for two empty buildings, I was only
Speaker 3: paying for one.
Speaker 4: I would wander around.
Speaker 3: But that is something in terms of how we were
Speaker 3: really trying to bring the agency together, really focusing on
Speaker 3: the four things that I said it were its mission.
Speaker 3: You know, it's really about preventing harm. So that's that
Speaker 3: upfront education of consumers and that's doing the right job
Speaker 3: by regulation and supervision and then when you need to
Speaker 3: using the enforcement hammer. And so we were really kind
Speaker 3: of consistent on that drum beat.
Speaker 4: So if there were.
Speaker 3: Any regret, it's that I didn't get to kind of
Speaker 3: carry that through forward beyond a one year focus that
Speaker 3: was really focused on that. But I'm also really proud
Speaker 3: of the things that we did in responding to the pandemic.
Speaker 3: You know, we at the CFPB, we're really in the
Speaker 3: middle of helping you know, IRS and SBA and Treasury
Speaker 3: on a lot of the communications issues, particularly as it
Speaker 3: comes to you know, PPP and looking at trying to
Speaker 3: counter some of the fraud and again making sure people
Speaker 3: were getting the benefits that Congress pass asked for them.
Speaker 3: And so those kinds of things were things that we
Speaker 3: did spent a lot of time on. Did a bunch
Speaker 3: of moratoriums again to make sure that servicers were able
Speaker 3: to clearly communicate with consumers and they could take actions
Speaker 3: that were appropriate. And so, you know, all of those
Speaker 3: things were I think were very positive, but definitely.
Speaker 4: Not not what I went in planning to do. For sure.
Speaker 2: Well, I will say for any non Washingtonians that are listening.
Speaker 2: The CFPB headquarters is one of the best locations of
Speaker 2: all the financial regulators in Washington because they're right next
Speaker 2: to the White House. They're not over it by Union
Speaker 2: Station with the SEC or so forth like that. But
Speaker 2: I bring up the SEC because I want to talk
Speaker 2: a little bit about crypto and you know, the SEC
Speaker 2: in particular has been fairly aggressive in terms of their
Speaker 2: enforcement actions, and they've taken a position that's a little
Speaker 2: bit different than the CFTC, for example, in terms of
Speaker 2: whether bitcoin and maybe ethereum should be securities subject to
Speaker 2: SEC jurisdiction. And we're wondering on your thoughts on what
Speaker 2: do you think the SEC should do? Maybe what would
Speaker 2: the SEC do under a Trump administration? And has the
Speaker 2: SEC gotten anything right or wrong? Or should Congress step
Speaker 2: in and say legislation is needed.
Speaker 3: I mean I right now, in terms of the FBA,
Speaker 3: I can say I'm speaking for myself.
Speaker 4: I'm not speaking for.
Speaker 3: The FBA as I talk about this topic. I am
Speaker 3: very excited with the fact that we have a lot
Speaker 3: of fintech activity and you know, really kind of cutting
Speaker 3: edge things that are happening in Florida, and so later
Speaker 3: on in the in the FBA's agenda, we'll definitely be
Speaker 3: talking more about that, because we do have some banks
Speaker 3: doing some innovative things, and we do have some banks
Speaker 3: that are that are working with crypto and thinking about it,
Speaker 3: though the regulators are less excited about that. So look, personally,
Speaker 3: I do think that it is necessary for Congress to
Speaker 3: step in. I mean, even with the topics we've been
Speaker 3: talking about, in general, Congress has been abdicating its responsibilities
Speaker 3: to legislate and therefore leaving the door or open for
Speaker 3: you executive agencies to go well beyond what their sphere
Speaker 3: is in regulating. And so I think this is another
Speaker 3: example of it. I personally thought, and I still do again,
Speaker 3: you've got to look at each token or project separately
Speaker 3: and certainly apply what are the typical at least notwithstanding
Speaker 3: I have Congress acted, they could change, but what the
Speaker 3: typical interpretations are of what is a security and what's
Speaker 3: a commodity. But I tend to think that most of
Speaker 3: the tokens or commodities, and so the CFDC is a
Speaker 3: more natural regulator. But I'd also tell you I spent
Speaker 3: a lot of my time overseas, talking to regulators across
Speaker 3: the globe, talking to policymakers across the globe about this topic.
Speaker 3: And point of fact too, we have too many regulators
Speaker 3: in the US. We actually have way too many regulators.
Speaker 3: It is. It is an unusual thing to have two
Speaker 3: markets regulators, much less to have the number of banking
Speaker 3: regulators we have and everything else, much less to have
Speaker 3: a dual system. So we have the system we have
Speaker 3: right now. But I do think that is something that
Speaker 3: eventually is worth looking at because at the end of
Speaker 3: the day, that's that's creating now perhaps more friction and
Speaker 3: more challenges for US competitiveness than you know, than it
Speaker 3: has in the past, when when regulators probably more clearly
Speaker 3: knew their lanes and when the world was just less complicated.
Speaker 3: I think that's also the dynamic that you see. But
Speaker 3: I think it creates it creates a lot of regulatory
Speaker 3: arbitrage opportunity.
Speaker 4: And that's another thing that is happening.
Speaker 3: You see playing agencies against each other, which again I
Speaker 3: don't blame anyone who's doing that, but you start going
Speaker 3: down that road, and where does that again leave the
Speaker 3: consumer or the investor or the public.
Speaker 1: So would you would you advocate from merging the SEC
Speaker 1: and the CFTC into one.
Speaker 3: I'd say personally, I have seen the merit in those
Speaker 3: who have argued it. I don't know that I would
Speaker 3: necessarily argue it yet, but I think it's certainly worth
Speaker 3: looking at.
Speaker 1: Because it's one of our favorite memes on Twitter, you know,
Speaker 1: where there's like some global problem and someone says, oh,
Speaker 1: you know this would be solved if the SEC and
Speaker 1: CFTC had emerged.
Speaker 3: Yes, it just that I know it would create other
Speaker 3: problems too. I mean, frankly, at the end of the day,
Speaker 3: where you have any seams or gaps, or even where
Speaker 3: you have things consolidated, there'll be other gaps if that
Speaker 3: were to happen. But it is certainly something worth looking at.
Speaker 2: So you mentioned fintech, and that's one of the things
Speaker 2: that I love, is one of our emerging themes, just
Speaker 2: because it's such a broad theme. But you know, for
Speaker 2: the Florida banks that you're working with, when they are
Speaker 2: engaging with fintech fintech projects, are they looking for Washington
Speaker 2: to be a leader in terms of standards or like
Speaker 2: to tell them how the rules of the game should
Speaker 2: be played, or is Washington a hindrance for them.
Speaker 3: Ah, I would say, I'm you know, I'm seven months
Speaker 3: on the job, So I don't know that I can
Speaker 3: answer that definitively on behalf of my membership, But I
Speaker 3: can tell you my my personal perspective on that. I
Speaker 3: think it's a it's a it's a little bit of both.
Speaker 3: I think fundamentally, you know and and every company in
Speaker 3: this day and age, particularly when you're talking about it
Speaker 3: or any tech components, when it comes to cyber or
Speaker 3: other things, everything's interconnected. You absolutely have to do your
Speaker 3: due diligence and appropriate you know, risk mitigation when it
Speaker 3: comes to any third party relationship or service provider. So
Speaker 3: I mean that that comes first and foremost. But again,
Speaker 3: the banks already know what that should look like. That's
Speaker 3: that's absolutely the case. I'll say some of the FinTechs don't,
Speaker 3: but they if they fast learn if they want to
Speaker 3: work with banks, they're gonna they're gonna have to figure.
Speaker 4: That out pretty quickly too.
Speaker 3: So that is that is one area where I don't
Speaker 3: think you're gonna find much much daylight.
Speaker 4: But then when you get to the all.
Speaker 3: Right, now, what why are regulators actually dictating what things
Speaker 3: can and cannot be, you know, partnerships.
Speaker 4: There clearly is a bias.
Speaker 3: Right now against you know, really any third party relationships.
Speaker 3: And you get to that point you say, okay, why
Speaker 3: why is government making those decisions? You know what basis
Speaker 3: is there for that, if it is properly managed, the
Speaker 3: business should be able to make that decision about which
Speaker 3: things need to be in house and which things can
Speaker 3: be best done, you know, through a third party relationship
Speaker 3: and not you know, inherently interfering with that, but it
Speaker 3: but it is the direction that it seems to be
Speaker 3: coming out of the regulators is very much more of
Speaker 3: you know, we know better. It's a risk you can't
Speaker 3: mitigate because we've decided it's so significant that you just
Speaker 3: shouldn't have these third party relationships.
Speaker 4: And I don't think that's the right role for them.
Speaker 1: So I think in the interest of time, we are
Speaker 1: gonna wrap up the substance of questions. But we always
Speaker 1: i'd like to end our podcast episodes with a little
Speaker 1: fun question, and we asked this of all our guests,
Speaker 1: and it is, if you were stranded on a desert island,
Speaker 1: what three pieces of music would you want to take
Speaker 1: with you? Or have with you, you know, and it
Speaker 1: could be an album or a song or an artist.
Speaker 1: We're pretty flexible in the rules here, but we're curious
Speaker 1: to get your thoughts on that.
Speaker 3: No, and trust me, out of all the things we
Speaker 3: just talked about, I struggled mightily on this question.
Speaker 4: I even had to phone a friend.
Speaker 3: I've owed my brother, who is one of the people
Speaker 3: that supplies like all of my music collection always because
Speaker 3: I have very eclectic taste. And if I had to
Speaker 3: literally pick three, I don't know what I would do,
Speaker 3: but I would say one thing is my mother was
Speaker 3: is I guess I should say, is a big lover
Speaker 3: of music and musicals, so I love musical theater. I'll
Speaker 3: say the Angel Lloyd Weber era and having those songs
Speaker 3: all played through our house.
Speaker 4: It's, you know, a whole bunch of you know.
Speaker 3: I still listen to that periodically, so it certainly makes
Speaker 3: me think of her and all of those shows. Billy
Speaker 3: Joel was at least my first kind of good, you know,
Speaker 3: quality concert. I think I saw quite a few that
Speaker 3: I don't even want to admit to now prior to that,
Speaker 3: but but.
Speaker 4: I definitely where that show.
Speaker 3: It was in Cleveland, at the old Yeah, exactly, at
Speaker 3: the old Richfield Coliseum, So that was where where I
Speaker 3: saw and I've seen him several times since, and there
Speaker 3: aren't that many people I've seen more than once, So
Speaker 3: Billy Joel's greatest hits would definitely have to be on
Speaker 3: that list too. And then the other thing is my
Speaker 3: my brothers and I getting ready for you know, school
Speaker 3: in the morning. All of the rap that would come out,
Speaker 3: just early rap music, and you know, there's there are
Speaker 3: just too many. And then you know, Michael Jackson really
Speaker 3: pop music too in the eighties, so all of that
Speaker 3: stuff getting ready for school is also brings back fond memories.
Speaker 3: So I guess that's that's my list, though I'm I
Speaker 3: I expanded quite a bit on your three.
Speaker 1: I think, yeah, yeah, you want you went you went
Speaker 1: to four. But that's okay. Again, the rules are flexible
Speaker 1: and it is an eclectic mix, and I think you're
Speaker 1: the first guest to listen musical theater as as one
Speaker 1: of your choices, so kudos. No, that's a good list,
Speaker 1: all right. I think with that we'll wrap up this
Speaker 1: episode of Votes and Verdicts. We are extremely grateful to
Speaker 1: Kathy Craininger for appearing on this episode. As a reminder
Speaker 1: to our listeners, you can read all of our Bloomberg
Speaker 1: intelligence research on the Bloomberg terminal at b I Go.
Speaker 1: Thank you for listening, and have a great day.