Contenders Emerge for Fed Bank Oversight Post, Trump Budget Chief

By Ryan Tracy and Nick Timiraos 

WASHINGTON -- A senior regulator, a former banker and a consultant have emerged as early contenders for one of the most powerful U.S. financial regulatory jobs, as President-elect Donald Trump's transition team looks to nominate a Federal Reserve vice chairman in charge of bank oversight, according to people briefed on the matter.

Meanwhile, David Malpass, a senior economic adviser on the transition team, is being considered to run the White House Office of Management and Budget, according to people familiar with the transition discussions. Mr. Trump met with the former Bear Stearns chief economist on Friday.

Transition officials also are considering Gary Cohn, operating chief at Goldman Sachs Group Inc., for a senior economic position, said people familiar with the matter. Mr. Cohn, who could be in the running for the OMB director role, also met with Mr. Trump last week.

The Trump administration's economic and financial team began to take shape with the Wednesday announcement that former Goldman executive Steven Mnuchin was the president-elect's choice to become Treasury secretary. Now Messrs. Trump and Mnuchin along with transition officials are looking to round out the economic and regulatory team.

Mr. Mnuchin said last week that filling the Fed banking post was a priority for the administration, though officials cautioned the discussions still remain in the early stages and that new candidates still could emerge.

The main contenders for the fed vice chairman role at this point include Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, former BB&T Corp. chief John Allison, and Paul Atkins, a former member of the Securities and Exchange Commission who founded the consulting firm Patomak Global Partners LLC and is playing a leading role on the Trump transition team's work on financial regulatory policy.

The Fed banking supervision post was created by Congress in 2010, but hasn't been filled. Fed governor Daniel Tarullo, who has been effectively doing the job, has used the role to exert significant influence over the largest U.S. banks. His term as fed governor expires in 2022, though he could step down sooner. Any nominee to the vice chairman role would need to be confirmed by the Senate.

All three contenders have been critics of the financial regulatory overhaul that Mr. Tarullo and others led following the 2008 taxpayer-funded bank bailouts.

Mr. Hoenig, a bank regulator for decades as head of the Federal Reserve Bank of Kansas City, supports aspects of the 2010 Dodd-Frank law but has said it didn't go far enough in curtailing the risks at big Wall Street banks. That has made him enemies on Wall Street, but has endeared him to small and midsize banks. A political independent, he is liked by lawmakers on both sides of the aisle.

Mr. Allison led the expansion of BB&T from a small lender to one of the largest banks in the country during two decades atop the firm. He is a libertarian who has said Dodd-Frank created unnecessarily onerous rules and suggested getting rid of the Fed.

Of the three, Mr. Atkins appears to have the least experience in the banking sector. But he has deep experience with securities-market oversight, an area where the Fed has played a larger role in recent years.

Mr. Atkins also appears to be the closest of the three to Mr. Trump's inner circle, having gained a key role in shaping financial regulatory policy and leading "landing teams" Mr. Trump sent to assess bank regulatory agencies. He is expected to gain at least some role in the new administration, including possibly returning to the SEC as its chairman.

Beyond the Fed job, the Trump team has been having active discussions with prospects for OMB director. They raised the idea with Texas Rep. Jeb Hensarling, who also had been on the shortlist for Treasury secretary. Mr. Hensarling turned them down to keep his powerful perch as head of the House Financial Services Committee, where he is planning to lead the charge to overhaul Dodd-Frank.

Now Mr. Malpass has emerged as contender for that slot. Mr. Malpass has served in previous Republican administrations and as a top Capitol Hill staffer, giving him extensive experience on tax, trade and budget issues and in dealing with Congress. The economist worked on the 1986 tax-code revamp, the North American Free Trade Agreement and several congressional budget resolutions.

Mr. Cohn, the operating chief at Goldman, is also under consideration for OMB director, a move first reported by Politico, along with other economic posts. Mr. Cohn joined Goldman and became a partner in 1994, the same year as Mr. Mnuchin.

The OMB job also could serve as a steppingstone to other top government posts. Treasury Secretary Jacob Lew held the post in both the Obama and Clinton administrations.

Nominating a Goldman executive could open Mr. Trump to criticism. He already has tapped two other Goldman alumni, including Mr. Mnuchin and top White House adviser Steve Bannon.

"It does concern me that they would have a lot of swing from one company in major positions in our government," said Sen. Jon Tester (D., Mont.) in an interview. "That is not a good sign. It won't result in good government."

Write to Ryan Tracy at [e-mail] and Nick Timiraos at [e-mail]

(END) Dow Jones Newswires

December 04, 2016 11:44 ET (16:44 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.