Financial firms in the U.S. are pushing back against the wave of new regulations from President Joe Biden’s administration. They are emboldened by a judiciary that is more sympathetic to their cause.
The new rules, including fair lending requirements, increased investor disclosures, and bank capital hikes, pose a threat to the profits and compliance costs of lenders and other financial companies.
Biden’s regulatory appointees have been tasked with addressing issues like income inequality and climate change, which they believe were exacerbated by policies introduced during the previous administration. The recent bank failures have further fueled their resolve.
Many industry executives argue that the rushed and ill-conceived regulations will ultimately hurt consumers, investors, and the economy. This has led to a surge in litigation against financial regulators over major rules and supervision issues.
Most of the lawsuits are based on violations of the Administrative Procedure Act (APA). Regulators are accused of cutting corners, giving short comment periods, and not following the APA process.
The U.S. Chamber of Commerce and other industry groups have taken a more litigious approach, filing multiple suits against the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB).
Industry groups like the Managed Funds Association (MFA) and the Alternative Investment Management Association (AIMA) are also entering into litigation to address what they see as regulatory overreach by the SEC.
While the financial regulators have been sued in the past, the industry is currently emboldened by a more conservative judiciary that is wary of regulatory overreach. Trump’s appointments to the federal courts have significantly impacted the environment for these lawsuits.
Overall, the industry’s willingness to sue has increased due to concerns over regulatory practices, and the increase in conservative-leaning judges in the court system.
The legal challenges against the regulators are expected to continue as the industry becomes more comfortable seeking recourse in the courts when they perceive unfair or wrong practices. The repercussions of these legal battles on the financial industry remain to be seen.
The industry may be moving towards the courts as a last resort, but they remain motivated to seek justice and accountability in the regulatory process through litigation.
(Additional reporting by Douglas Gillison, Chris Prentice, Pete Schroeder, Nate Raymond, Jody Godoy, Megan Davies and Paritosh Bansal; Editing by Nick Zieminski)