At the FDIC, the vice chairman seat has been vacant since last May when Thomas Hoenig stepped down. | Karen Bleier/AFP/Getty Images Finance Trump's failure to name Democrats to agencies stalls enforcement

President Donald Trump has failed to advance Democratic nominees to three key financial regulatory agencies for months, breaking yet another Washington tradition and sparing Wall Street companies from enforcement penalties.

Slots at the SEC, the FDIC and the National Credit Union Administration have gone unfilled because the White House has not nominated Democrats to take them, giving Republicans a bigger voting edge on regulation and enforcement matters at the three agencies.


The lack of a Democrat is most pronounced at the SEC. The two Republican commissioners are in a position to block millions of dollars in enforcement penalties that the agency wants to assess on companies and individuals charged with misbehavior.

"You have these two-two votes that could block accountability,” Sen. Chris Van Hollen (D-Md.), a member of the Senate Banking Committee, which would approve the nominees, told POLITICO. “The gridlock now works in favor of people who are violating the rules.”

A seat reserved for a Democrat at the five-member SEC is now vacant, and Senate Democrats quietly recommended Allison Lee, a former SEC aide and ally of liberal-leaning investor advocacy organizations. Yet Lee's name has languished at the White House, even though the Democrats submitted her paperwork months ago, according to people familiar with the matter.

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The vacancy is likely to matter.

In December, SEC Chairman Jay Clayton, an independent appointed by Trump to head the markets regulator, voted with the agency’s then-two Democratic commissioners to approve at least $4.75 million in enforcement penalties on three companies, including a unit of Spanish bank Santander, over the dissents of the Republican commissioners, according to agency records.

In September, Clayton and the Democrats approved a $34.5 million penalty for pharmacy company Walgreens Boots Alliance Inc., again over Republican objections.

The day after Christmas and hours before the SEC closed amid the government shutdown, the agency reached a $135 million settlement with JPMorgan over the allegedly improper sale of certain securities. It was one of the SEC’s largest settlements with a U.S. bank during Trump’s presidency and one of the last to include SEC Democratic Commissioner Kara Stein, whose term expired at the end of 2018.

Now, Stein is out and no one has been formally nominated to succeed her.

Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, which oversees the SEC, said in a statement: “We already know the SEC is shut down, and it appears the White House nomination process is as well. SEC enforcement efforts were already lagging, and now bad actors have even less to fear.”

White House representatives did not respond to requests for comment.

At the FDIC, the vice chairman seat has been vacant since last May when Thomas Hoenig stepped down. Additionally, the term of FDIC Director Martin Gruenberg has expired. No more than three FDIC directors may be of the same political party, meaning Democrats would have the opportunity to recommend nominees for both FDIC slots.

A similar situation exists at the NCUA. One of the agency’s three board seats is vacant, and the term for Democratic board member Rick Metsger has expired.

Without Democrats nominated and confirmed to these agencies, Trump’s nominees have an unfettered opportunity to rewrite regulations in the months ahead.

At the SEC, like the other agencies, the aim is to keep things as bipartisan as possible, so by law no more than three commissioners of the same party may serve at the same time. The opposition party to the president recommends two candidates who are usually then nominated by the White House. The president, in turn, gets to nominate the chairman, and typically party allies in the Senate recommend other commissioners.

Former President Barack Obama routinely nominated Republicans to the SEC and other regulatory commissions in Washington. The process works best when a Democrat and Republican are nominated at the same time. Stein was paired with Republican Michael Piwowar, and the two breezed through the Senate confirmation process in 2013.

In 2017, Trump stuck with the tradition by simultaneously nominating to the SEC Democrat Robert Jackson and Republican Hester Peirce. They were both confirmed by the Senate in December 2017. In 2018, Trump also nominated a Democrat and Republican to fill vacancies at the CFTC, which regulates financial derivatives.

But the partnering process broke down last year when the Senate confirmed SEC nominee Republican Elad Roisman without a Democratic counterpart.

Without a nominee, the 2-2 enforcement gridlock “could persist for a very long time,” said Urska Velikonja, a Georgetown University law professor who tracks SEC enforcement.

“I don’t see the White House being at all willing to cooperate on anything in particular when it comes to a Democratic nominee for a commission,” Velikonja said.