Trump Nominates FDIC’s McKernan for CFPB Director: Does it Signal the CFPB is Saved from Destruction?

Yesterday, February 12, 2025, in the midst of another whirlwind week at the CFPB, President Trump officially nominated a permanent Director to take the helm of the beleaguered agency, Jonathan McKernan.  McKernan is a former Republican FDIC board member with time in both private legal practice and other federal agencies. 

McKernan announced earlier this week that he would resign from the FDIC to make way for another incoming Republican board member, Acting Comptroller of the Currency Rodney Hood, per federal rules that prohibit more than three members of the five-member board from belonging to the same political party. 

Unlike the two Acting Directors appointed by Trump over the past couple weeks under the Federal Vacancies Reform Act (which I wrote about here), McKernan will need Senate confirmation, so the current turmoil at the Bureau will likely continue.  But what makes McKernan an interesting pick as Director is that at the FDIC he wasn’t proposing to tear down financial regulation.  In fact, he supported the regulation of Wall Street giants while at the FDIC, an issue on which he and former CFPB Director Chopra saw eye-to-eye.  Might this be a clue as to how he will run the CFPB as Director?  Or will he, like Vought and Musk, set out to “delete” it (which I wrote about here)?

McKernan’s Apparently Reasonable Views on Financial Regulation

As noted above, interestingly, one of McKernan’s key positions while at the FDIC put him on the same side as Chopra.  Despite political differences, both regulators pushed for stricter oversight of large asset managers’ ownership stakes in banks.  While at the FDIC, McKernan supported efforts to prevent the “Big Three” asset managers (BlackRock, State Street, and Vanguard) from having too much control over FDIC-supervised banks in which they invest.  He stated in a January 2024 speech, “I think we at the FDIC, as well as the other banking regulators, should revisit the regulatory comfort that we have provided some of the Big Three as to how much they can own, and what activities they may engage in, without being found to ‘control’ a banking organization.”  In the same speech, McKernan appeared to support FDIC supervision over self-certification of compliance with existing FDIC guidance by the asset managers, stating, “the FDIC currently relies primarily on self-certifications of compliance.  We should do more. We should consider taking a close look at the Big Three themselves….”  Last year, the FDIC announced an agreement with Vanguard to ensure it remained a passive investor in the banks where it held major stakes.  McKernan backed these moves, emphasizing that clear passivity agreements improve oversight and enforcement.  Chopra, sitting on the FDIC board at the time through his position as CFPB Director, also supported McKernan’s policy viewpoint.  In a public statement, Chopra said, “I agree with my colleague, Director Jonathan McKernan, that if a large asset manager is truly passive as it claims, it should have no problem complying with such an agreement.”

McKernan also appeared to support strengthening financial regulation to avoid future bank failures. In the same January 2024 speech, he stated, “[w]e should then plan for those bank failures by focusing on strong capital requirements and an effective resolution framework….”  McKernan also supported a proposed rule last year to improve record-keeping for deposits after the failure of Synapse Financial Technologies, a go-between Fintechs and FDIC-insured banks, but also cautioned that a final rule should stay within the FDIC’s statutory authority, stating that the risks evidenced by the failure “merit consideration by regulators for potential action within congressionally defined mandates and powers.” 

These seemingly reasonable views regarding financial regulation do not presage that he’d have the same burn it down goal as the current Acting Director of the CFPB.

What Does This Mean for the CFPB?

For now, the only certainty at the CFPB is more uncertainty.  It does appear that Acting Director Vought plans to keep the agency closed and non-operational until it is abolished through legislation.  He reportedly terminated expert witness contracts today.  And on February 11, he reportedly terminated about 70 probationary CFPB employees, some of whom were in the agency’s enforcement office.  These actions signal that enforcement actions and litigation, especially cases that would have used such expert witnesses, will be withdrawn.

But is the McKernan nomination, as someone who supported at least some financial regulation in the past, a sign that the Trump administration is now interested in re-opening and keeping the CFPB?  That is the big question.  McKernan is staring down the barrel of a tough Senate confirmation process.  Congressional Democrats are fuming regarding Acting Director Vought and DOGE’s actions at the CFPB, and litigation is already underway in response to DOGE’s and Vought’s efforts to shut the agency down.  There will likely be a lot of questions about his plans for the CFPB.  Stakeholders in the CFPB should pay close attention to this Senate confirmation process for indicators of whether McKernan plans to keep the agency up and running (though hopefully with a focus of keeping it within its statutory bounds), or if McKernan plans to follow what appear to be the current Trump administration’s plans to keep the CFPB shuttered until legislation to abolish the agency is enacted.  Recall that after Seila Law (which I wrote about here), the President can fire the CFPB director at will, which means any future CFPB Director serves at the pleasure of the President.  Trump’s reported statements to the press this week, where he lamented the “bad group of people” running the CFPB and called it a “waste,” seem to indicate that he supports what Acting Director Vought and DOGE have been doing with the CFPB.  But things can change quickly, as we’ve seen over the past couple weeks.

But there is at least some hope that the CFPB continues to live (perhaps with some structural changes, which I support as I discussed here) and gets a director who believes in smart financial regulation that stays within statutory and constitutional limits.

I’ll be tracking this closely.  Also, I spoke yesterday on an October Research webinar on the recent happenings at the CFPB, which was great and expertly moderated by the esteemed Mary Schuster (you can find it here).  More to come as this plays out. 

Please reach out to me at rich@garrishorn.com if you have any questions or would like to discuss.