Financial Regulators Struggling with Longer Vacancies at the Top

The process for nominating and confirming presidential appointments is breaking down. Long-running vacancies have become more common at independent financial regulatory agencies charged with overseeing the financial system. In some cases, the comparison to earlier eras is stark and has implications for the effectiveness of the financial regulatory system. BPC’s new research through 2016 has found that the length of the nominations process has more than tripled since the late 1980s, and that has led to agencies routinely being understaffed at the leadership level. For example, at the Federal Reserve Board, it has become as common to have a vacancy in recent years as it once was to have a full complement of seven governors.

The effectiveness of the financial regulatory system is predicated on having high-quality financial regulators in place. The recent financial crisis and ensuing recession demonstrate the ramifications when that financial regulatory system fails. Fixing the nominations process is easier than developing perfect financial regulation. The president and the Senate should commit to ensuring that vacancies are filled in a timely manner. History shows that they can.

BPC’s new research found that:

• The length of the nominations process increased substantially, beginning in the late 1980s. We do not speculate as to the reasons why the shift happened during that period, but the shift is visible at multiple agencies and led us to compare the periods before and after President George H.W. Bush took office in 1989. Since 1989, the process has taken more than three times longer than it did between 1945 (the start of the Harry S. Truman administration) and 1989 (the end of the Ronald Reagan administration).
• Greater Senate delay makes up the majority of the increase in the average length of the process. It has always taken longer for the president to decide on nominees than for the Senate to resolve nominations, but the gap has closed since the 1980s.
• The more time-consuming process has resulted in longer vacancies at financial regulatory agencies, and these vacancies have consequences on how well those agencies function.