Who Is Jonathan McKernan, the Nominee for CFPB Director?

On February 11, the White House announced the nomination of Jonathan McKernan to serve as Director of the Consumer Financial Protection Bureau (CFPB). McKernan was most recently a member of the Board of Directors of the Federal Deposit Insurance Corporation (FDIC). Until McKernan is confirmed, the agency likely will continue to be led by Acting Director Russ Vought, who is also the Director of the Office of Management and Budget.

Background and Tenure on FDIC Board

McKernan graduated from the University of Tennessee and Duke University School of Law. After several years in private practice at large law firms, McKernan joined the staff of Senator Bob Corker as a senior financial policy aide and then held other policy advisor roles at the Treasury Department, the Federal Housing Finance Agency before becoming Counsel to Ranking Member Pat Toomey on the Senate Banking Committee.

McKernan was nominated by President Biden to serve as a Republican member of the FDIC’s Board in 2022, to maintain the partisan balance required by law. The Senate confirmed his nomination by voice vote, and he was sworn in on January 5, 2023. During his hearing before the Senate Banking Committee, Senator Toomey praised him as “an exceptional nominee” with a “commitment to public service.”

During his service on the FDIC Board, McKernan served as co-chair of a Special Committee that oversaw an independent review of allegations of sexual harassment and professional misconduct, and other workplace culture issues, at the FDIC.

McKernan resigned his position on the Board of Directors on February 10, citing the requirement that the Board have no more than three members from the same party (the remaining three Republican members of the FDIC Board are FDIC Acting Chair Travis Hill, Acting Comptroller Rodney Hood, and Acting Director of the CFPB Russel Vought).

Notable Public Statements

McKernan has made a number of speeches and public statements as FDIC Director suggesting his potential approach as head of the CFPB.

• Opposes Undue Regulatory Burden and Supports Responsible Risk Taking
• McKernan stated that regulators “should avoid the temptation to pile on yet more prescriptive regulation or otherwise push responsible risk taking out of the banking system.”
• He regularly pushed the FDIC to “not mandate duplicative regulatory notices or otherwise add undue regulatory burden.”
• McKernan criticized a “bias against bank mergers” that he viewed as “bad policy and contrary to law.” He pushed for “a clearly defined, tailored approach to assessing competitive effects in rural markets,” among other things.
• He has also expressed a desire to avoid government bailouts of struggling institutions and chided his fellow regulators for refusing to admit that recent resolutions of large institutions were actually bailouts. McKernan encouraged regulators “to accept that bank failures are inevitable in a dynamic economy,” and urged them to “have the courage and conviction to pull the trigger and resolve a large failed bank without a bailout.”
• Favors Regulatory Transparency and Has Criticized Certain Rulemakings
• When discussing a brokered deposit rule, McKernan stated “As I have said before, it is important that the FDIC make a case for its rulemakings. I am unable to support this proposal without a more compelling case for some of its more significant changes.”
• In the context of bank formation, McKernan criticized the FDIC’s lack of transparency in its approach to considering applications by industrial banks and called for the agency to issue a revised policy framework stating that the agency “does indeed harbor a presumption against deposit insurance and other applications by captive industrial banks.”
• McKernan opposed the FDIC’s final rule implementing the Community Reinvestment Act. Among other things, he criticized the length and complexity of the rule: “The approximately 60,000 words of rule text (including appendices), which contains more than 40 benchmarks and 20 metrics, are enough to preclude anyone from comprehending the rule as a whole.” He also questioned whether “the regulators have statutory authority to prescribe important aspects of the rule,” arguing that an assessment of whether a bank is meeting the credit needs of the community may be “outside a bank’s facility-based assessment areas.”
• Concerned About Regulation Being a Barrier to Entry
• In a speech in July 2024, McKernan addressed third-party risk measures (a regular focus of the CFPB), suggesting that guidance should be clearer and activities-based to help enable new fintechs to compete with established market participants. He elaborated, “It’s important that we make sure that this regulatory framework does not entrench the incumbents, does not pose undue barriers to entry, unduly impose an impediment to innovation.”
• Critical of DEIA Programs & Skeptical of Climate Risk Guidance
• On X, McKernan criticized DEIA programs, including the DEIA office established at the FDIC, stating that “[d]o to others as you would have them do to you … was the true north long, long, long before we had DEIA offices. And we don’t need DEIA to get back to that.”
• He objected to proposed FDIC guidance on “climate risk,” stating that it was too narrowly focused and should instead address “emerging risk,” which could include climate risk. He concluded, “Policy decisions like this should be left to our elected leaders. Our involvement will just further politicize the bank regulators and distract us from our safety and soundness mandate.” He elaborated on X, stating “This guidance’s singular focus on climate risk exposes the real intent: enlisting regulators and banks in service of the green energy transition.”
• Concerned About Overcapitalization Following Basel Endgame
• McKernan expressed concern that U.S. regulators are taking a “big leap of faith” by their willingness to adopt the Basel Committee’s recommendations.
• In the same speech, McKernan criticized US regulators for failing to explain their rationale and failing to adopt US-specific approaches that would avoid certain institutions becoming overcapitalized.
• Led a Push for Oversight Against Large Asset Managers
• While at the FDIC, McKernan led a push to enhance the FDIC’s oversight of large asset managers who hold sizeable investments in banks to ensure that they are not exerting undue influence over the institutions.
• McKernan led the effort that resulted in a December 27, 2024 agreement with Vanguard that provides for annual monitoring by the FDIC to ensure that it is abiding by these commitments.

Initial Thoughts and Observations

Given that McKernan was very recently confirmed by the Senate on a voice vote, it is unlikely that his nomination will face any significant opposition on the merits, barring any unknown issues coming to light.

Some of McKernan’s early challenges in the role will be navigating the agency’s staffing and funding in light of Acting Director Vought’s layoffs and refusal of the CFPB’s upcoming draw of funds from the Federal Reserve, as well as the administration’s various directives regarding the need to reduce the overall size and budget of the federal government. Also notable will be who McKernan selects in key deputy roles, particularly those related to supervision and enforcement.

In sum, McKernan brings serious credentials and an established track record to the role. Similar to President Trump’s pick of Kathy Kraninger in his first term, McKernan appears to be an “establishment” pick with substantial government experience. His past statements reveal a view of financial services regulation that broadly aligns with the traditional Republican approach that is skeptical of the benefits of regulation and favors regulatory frameworks that promote innovation in the industry more broadly.

Additional Impressions from Hearing

On February 27, McKernan testified before of the Senate Committee on Banking, Housing, and Urban Affairs (along with three other Trump nominees). As is typical of these hearings, his prepared statement and his responses to questions during the hearing did not contain any surprises, but he did provide some additional hints at how he might manage the agency:

• CFPB Overreach: One recurring theme of McKernan’s testimony was his belief that the CFPB has acted beyond its statutory authority. McKernan argued that the Bureau “has acted in a politicized manner” and “offended our basic notions of fairness and due process when it has regulated by enforcement.” He argued that because of this, “the CFPB suffers from a crisis of legitimacy.”
• Scope of CFPB Work: Another theme was that if confirmed, McKernan will ensure the Bureau executes its statutory functions. He referred to himself as “an Article 1 guy” and responded to several questions from Senators that the Bureau would carry out all statutorily-mandated functions.
• Goals and Objectives: McKernan said he supports President Trump’s “pro-growth agenda” and would ensure that the Bureau is accountable to lawmakers. He also said that he would not evaluate the Bureau’s success based on the number of enforcement actions or the amount of funds returned to consumers, but that it is important to provide redress when consumers are harmed by bad actors.
• Prudential Regulator: When asked if he believed that the CFPB is a prudential regulator, McKernan said it was not.
• Data Privacy: McKernan complimented prior Director Chopra on his work related to data privacy, stating that there are “very significant policy issues posed by data collection” involving data aggregators and data brokers.

Want to know more? Ask one of the authors: John Coleman, Jay Williams, Amanda Lawrence, and Leslie Meredith.

For more information and coverage on developments related to the CFPB, visit Orrick’s “CFPB Pause: Where From Here?” resource center, which is updated daily with the latest news and analysis, and follow our InfoBytes Blog for the latest consumer financial services news.