Richard Cordray announced he will step down from the Consumer Financial Protection Bureau.

With the move, the Trump administration will soon be in full control of the financial regulation structure.

The Trump-led agencies could seriously change their enforcement purview.



Without any major legislative victories on his watch, President Donald Trump has been quick to fall back on his record when it comes to regulation.

Trump often touts his ability to roll back "red tape," particularly around the financial sector, as a positive for businesses and the country.

Richard Cordray's impending resignation from his post as director of the Consumer Financial Protection Bureau provides an important step for Trump to further that agenda. Trump will have keys to all of the major banking and financial oversight agencies and it could reshape the way businesses operate — for better or worse.

Trump targets financial regulation

To Trump and his administration, stripping away regulations on businesses and the financial sector has been an important economic driver and one of the crowning accomplishments of the White House's first 10 months.

"Since January of this year, we have slashed job-killing red tape all across our economy," Trump said in an October speech in Harrisburg, Pennsylvania. "We have stopped or eliminated more regulations in the last eight months than any president has done during an entire term. It’s not even close."

Particularly, Trump has taken interest in what he sees as the burden on the financial sector.

"So many people, friends of mine, that have nice businesses, and they can't borrow money," Trump told JP Morgan CEO Jamie Dimon at a meeting of business executives in February.

Already, Trump appointees are in control or waiting for confirmation to lead the Securities and Exchange Commission, Office of the Comptroller of the Currency, and the Federal Reserve's Vice Chair for Banking Supervision.

With Cordray's resignation from the consumer watchdog CFPB, Trump now has control over the last of the financial regulatory agencies. He can reshape oversight in the way he wants, said Jaret Seiberg, an analyst at the Cowen Washington Research Group.

"We believe this will complete the Team Trump takeover of the regulatory agencies. It should mean by summer there are Republicans running all of the banking agencies," Seiberg wrote in a note to clients on Wednesday.

The future of the CFPB

Consumer Financial Protection Bureau Director Cordray Thomson Reuters The CFPB has been instrumental in implementing new rules on auto lending and mortgage practices, as well as involvement in enforcement actions such as penalties against Wells Fargo.

In the short-term, said analyst Issac Boltansky of the research firm Compass Point, Cordray's resignation will scuttle some of the bureau's current work.

"Following Director Cordray's departure, the CFPB's rulemaking agenda will grind to a halt and its enforcement profile will dramatically diminish," Boltansky said in a note to clients Wednesday.

Seiberg said Cordray's departure and a potential Trump appointee likely would be a positive for many lending sectors.

"There should be less focus on technical violations and more on actual consumer harm," he wrote. "This could convince lenders to take more risk and it could result in relief for loan servicers and debt collectors."

Looser enforcement could, in theory, provide a broader access to credit and be potentially stimulating to the economy. On the other hand, many measures of credit worthiness show borrowers' credit profiles are deteriorating and the number of people falling behind on payments is on the rise. Further loosening of lending restrictions could end up in a worrying debt situation for consumers.

Most analysts believe Trump will make Treasury Secretary Steven Mnuchin the acting director of CFPB with a Treasury official handling day-to-day duties. Most possible replacements, however, will still be more favorable to the financial industry, Boltansky said. But they can't make the CFPB toothless.

"The CFPB will face substantive changes in the years ahead as policymakers recalibrate the regulatory environment, but Director Cordray's work ensures that the Bureau will continue to play a fundamental role in the consumer finance ecosystem for the foreseeable future," the analyst wrote.

The results of the Trump regulatory agenda, and the possible future for the post-Cordray CFPB, are already showing up at other regulatory agencies.

Data shows that the Securities and Exchange Commission, where Obama appointee Mary Jo White stepped down at the end of January, filed only 612 enforcement actions so far this year — the fewest in four years. The SEC also only collected $127 million in penalties against companies from February through September, down from $702 million over the same time period last year.

Additionally, new SEC Director Jay Clayton — a former lawyer who defended many Wall Street firms — said the group shifted its focus away from corporate action to more direct-harm cases.