Pushes from Wall Street and Capitol Hill’s most ardent Wall Street opponent have launched a battle over the direction, reach, and power of New York’s top financial regulator, leaving the New York Department of Financial Services without a leader or a direction.
Earlier this week, Anthony Albanese, who is currently serving as the interim superintendent of the NYDFS, announced that he will be leaving the position later this year, amid rumors of tension between the NYDFS and the office of New York Governor Andrew Cuomo.
Albanese inherited the role from the first NYDFS superintendent, Benjamin Lawsky, who announced his departure from the agency he helped found earlier this year.
Albanese served as Lawsky’s chief of staff, and said upon his resignation that his appointment to NYDFS superintendent was not supposed to be permanent.
"It has been an honor and a pleasure to serve the Governor, and I am deeply proud of what we have been able to accomplish with his support,” Albanese said in a statement provided to HousingWire.
“After four years at DFS, I decided it was time to return to the private sector and I have accepted another opportunity outside of government,” he continued. “This was always intended to be a temporary position to help smooth the transition process."
But the transition process has been anything but smooth, according to a report from the Wall Street Journal.
The Wall Street Journal reported Friday that Albanese and other NYDFS officials have “butted heads” with Cuomo’s office over the department’s regulatory efforts, including requests to approve document requests and subpoenas before they are sent out by the NYDFS, a practice that apparently did not take place during Lawksy’s tenure.
From the Wall Street Journal:
In recent months, (Cuomo’s) deputy secretary for general government and financial services, Brendan Fitzgerald, instructed DFS that any document requests or subpoenas it intended to issue must first be approved by him or the governor’s office.
That provoked a backlash at DFS, and Mr. Albanese resisted the order. Mr. Albanese said Monday DFS has sole discretion over issuing subpoenas.
The NYDFS rose to prominence under Lawksy, securing massive settlements like the $150 million settlement with Ocwen Financial (OCN) in December 2014, as well as for putting an indefinite freeze on a $2.7 billion mortgage servicing rights deal between Ocwen and Wells Fargo (WFC), which was eventually abandoned.
According to the Wall Street Journal, Cuomo’s office has “faced pressure from Wall Street and the insurance industry to ease its aggressive oversight” in the wake of Lawsky’s departure.
But Wall Street isn’t alone in trying to exert influence on the direction of the NYDFS.
The Wall Street Journal also reports that none other than Sen. Elizabeth Warren, seen by many as the scourge of Wall Street, has been involved in searching for Lawksy’s replacement.
From the Wall Street Journal:
Over the summer, the search to replace Mr. Lawsky attracted the involvement of one of the banking industry’s harshest critics: U.S. Sen. Elizabeth Warren (D., Mass.), the Journal reported in June.
Ms. Warren placed calls to top staffers Mr. Cuomo and others assigned to identify a successor, urging them to tap Rohit Chopra, the former student-loan ombudsman and assistant director of the Consumer Financial Protection Bureau, which she helped start.
It isn’t clear whether Mr. Chopra has been considered for the job. Asked about the hiring situation at DFS, Ms. Warren on Thursday called the agency “New York’s cop on the beat.”
According to the WSJ report, Cuomo’s office has reportedly reached out to at least a dozen candidates to replace Lawsky and Albanese, a figure that a Cuomo spokesperson denied.
“I don’t know who you are talking to, but we haven’t approached anywhere close to 12 people,” Cuomo spokesperson Dani Lever told the WSJ.
But with diametrically opposed rivals engaged in a tug-of-war over Cuomo’s office and the future of the NYDFS, who is the ideal choice for the NYDFS, if one even exists? And who would want the job given this much pull from both sides?
Whichever way it goes, the candidate is that is finally chosen to run the NYDFS will go a long way to determining the future of financial regulation in New York.
Will the NYDFS continue to be a fiercely zealous regulator with long reach and serious clout, or will the NYDFS become more of a friend than a foe to Wall Street?
In the end, it really comes down to which side exerted more influence on Cuomo. Will Wall Street’s deep pockets and strong influence win the day or will Wall Street’s fiercest foe have her way?
We’ll soon find out.