FS Vector on Election Fintech Implications with Ashwin Vasan and Peter Freeman

In this episode of Fintech Layer Cake, Reggie Young sits down with Ashwin Vasan and Peter Freeman, partners at FS Vector, to discuss the evolving regulatory landscape and its implications for fintech and banking innovation. From personnel changes in Washington to the future of digital assets and data privacy, Ashwin and Peter provide actionable insights on what’s shaping the fintech industry in the wake of election outcomes.

Transcript

Reggie Young:

Welcome back to Fintech Layer Cake, where we uncover secret recipes and practical insights from fintech leaders and experts. I'm your host, Reggie Young, Chief of Staff at Lithic. On today's episode, I chat with Peter Freeman and Ashwin Vasan, who are both partners at FS Vector.

We get into it in the episode, but FS Vector is a strategic consulting firm that helps fintechs and banks succeed with innovation. The firm has a host of subject matter experts like Peter and Ashwin, so I wanted to get them on the podcast to tease out the fintech implications of the election. We're big fans of FS Vector at Lithic, so I was really excited for this conversation. I particularly love their insights on what practically changes at financial regulators during an administration turnover, as well as what rules are likely to be undone or left alone.

Fintech Layer Cake is powered by the card-issuing platform Lithic. We provide payments infrastructure that enables companies to offer their own card programs. Nothing in this podcast should be construed as legal or financial advice.

Listeners, welcome back to another episode of Fintech Layer Cake. I am super excited for today's episode. We have some great experts from FS Vector. We're big fans of FS Vector at Lithic. If folks aren't familiar, you should check them out.

Ashwin and Peter, why don't we start with some of your backgrounds and maybe a brief overview of what exactly FS Vector does and entails. I know you guys touched many things over there.

Ashwin Vasan:

Yeah. FS Vector, we're an advisory firm consultancy for- anything kind of innovative financial services is how I like to say it, but that's a pretty broad bandaid itself. Perhaps uniquely, we do everything from licensing, creation of new businesses, new product launches, all the way to sort of public policy advocacy, lobbying work. The team here has a really great sense of everything that's happening in Washington and how it impacts fintechs and banks and others trying to do new things in innovative finance.

Ashwin Vasan, and I'm a partner here. I spent a bunch of my career at the CFPB, both first under Director Cordray in the early years, helping to build the agency, and most recently with Director Chopra for the last three years, running most of the policy work. Joined the team here at FS Vector about a year ago.

Peter Freeman:

Peter Freeman, helped head up the advocacy team here as a partner at FS Vector. I spent most of my career on Capitol Hill working for Republicans on the House side, Financial Services Committee, Foreign Affairs Committee, and House leadership as well. Really excited to have Ashwin on the team. We've got a depth of experience on both sides of the aisle, regulatory experience, Capitol Hill experience. It's a fun group to work with every day. Got people on the Hill right now. I got to run up there in a couple of minutes and go see what Congress is up to. It's going to be a pretty exciting year.

Reggie Young:

Yeah, love it. I'm endlessly impressed with where I see FS Vector folks continually pop up. You guys seem to be working on anything and everything related to fintech and banking and financial innovation. Excited for our conversation because I reached out to FS Vector to see who the best folks to talk about election implications would be, and both of your names immediately popped up.

That's where I want to orient today's episode around. I guess I'll just open it up broadly. What do you think are some of the more likely changes or impacts that we're going to see from the election outcome? Feel free to slice it in a couple of buckets or however you want. There's crypto and there's traditional fintech. There's sponsor banking. There's specific areas like BNPL or earned wage access that the Bureau has maybe put out some potentially controversial proposals around recently. Feel free to slice impacts any way that you think makes sense.

Peter Freeman:

I think the biggest thing is obviously the administration. The House and the Senate are both Republican, but the majorities are so slim, real, lasting changes, generally going to have to be bipartisan still. So the biggest changes, personnel at the administration, the SEC in particular. If you're thinking digital assets, I think enforcement activity is not going away, but it's definitely going to change demonstrably. I think that that is the single biggest change is going to be CFPB, SEC. You start going through where exposure, uncertainty, potential negative implications of things like interpretive rulemakings. You just mentioned BNPL, EWA. I think a lot of that goes away and is replaced by regulatory sandboxes, opportunities to innovate some sort of regulatory certainty or protection. It's going to be a sea change within the fintech world.

I think there's an opportunity also within the banking regulators. Chartering has been a word that we’ve heard at the state level over the last four years. We'll start to at least have a conversation about what’s a federal payments charter look like, what types of opportunities will there be. The day 1 shift will be felt more in pending rulemakings, rulemakings that get shelved and reconsidered. That's not across the board, though. We could talk a little bit about open banking and some of the areas where there's bipartisan support for doing something and trying to have lasting change at the regulatory level. But I think that that's going to be the initial impact.

Reggie Young:

Yeah. Ashwin, I want to get your take on the answer, but something that Peter said that is always fascinating to me, I'd love to hang on for a second, is this idea of personnel changes. The administration can change. I was talking to a lawyer at one point early this year who worked at the CFPB during an administration change. His comment was, my day-to-day job didn't change. I just sent enforcement recommendations, and they went nowhere. It was just like you set it up and that seemed to be where the difference was, is the day-to-day exams.

I think about this in terms of sponsor bank exams. It's like, I don't think the exams are going to change. It's not like examiners are going to stop asking about AML oversight. But I'm curious to hear from both of you, what do you think are the actual tactical changes when administration turns over in the day-to-day personnel context?

Ashwin Vasan:

Bunch of thoughts. A lot of times, we talk about or clients ask us, if I just look at CFPB, which I know well, I think on the supervision and enforcement side, you're exactly right. A lot of activities in those divisions are inherently long-tailed activities, actually, in the case of supervision, activities that have to be planned well in advance to coordinate with other regulators, to coordinate with states.

90% of exams, I feel, will continue as planned, as scheduled. There tends to be a little bit of flex in how you can move the tanker as it were. I was part of the transition team between Trump 1.0 and the Biden administration. I remember at that time, it was COVID, there were a lot of questions that we did a horizontal review of mortgage servicers. But even in trying to squeeze out that capacity, your degrees of freedom relative to existing streams of work, all of which when you look at, that feels like it's important, but it's hard to squeeze out.

Similarly, on the enforcement side, there has been meaningful growth in staffing on the enforcement team, new investigations being launched with that staffing. Investigations can take years. Many of the things that matured under Director Chopra were actually initiated under Director Kraninger. I think you're exactly right, your colleague saying what happens is that the staff will keep working, the memos will get to a place, and the speed and attention with which the political leadership gives to those memos and makes decisions around them is probably the difference. That being said, it's very hard, especially for clear violations of law.

Typically, institutions that actually maybe even have a little bit of malintent, it's actually most principals will look at that and be like, I want to do something with my job, and we'll enforce the law accordingly. We should probably see less of as you look at the current leadership, and I think there's been certain very key focus areas, and whether or not those focus areas last is an open question.

The other thing I'd say is all the changes Peter talked about is going to be super interesting to watch. It's not clear what the North Star is. I think there'll be a lot of undo-everything energy. But once you start to look at individual policy questions, especially as the merging of left and right populism has more and more green shoots, you might see some surprising results. I was just looking at the FTC's narrowed but final junk fee rules. The fact that the term junk fee has now probably codified itself is going to have some staying power. That was a term that didn't exist four years ago and has proven to have, at least in this administration, a lot of interest politically. But to have a four-to-one vote, existing ongoing persistence will be interesting to see. I think you'll see that in a lot of different areas. We could talk about the Bureau's late-stage activities, but I think you can read a lot of that in that life.

Reggie Young:

Yeah, it makes sense. Peter, you mentioned something that I'd love to return to, this idea of some rules are going to change and others aren't. I think 1033 is a great example, so maybe we start there. I'm curious to get a lay of the land, what do you think is going to be immediately pulled back? What do you think has enough support that it's not going anywhere? Curious for your top thoughts.

Peter Freeman:

The Congressional Review Act plays into this as well. If you think you can pass a Congressional Review Act challenge through the House and the Senate, that obviously changes the calculus on whether you could do something similar in the future. And so that plays into it and whether you want to do that process and whether you can win a vote.

Reggie Young:

Maybe just for listeners, it's a fascinating niche thing that folks who aren't tracing policy closely may hear in their ears shut off pretty quickly. But I think it's interesting, so maybe what's the TL;DR of Congressional Review Act?

Peter Freeman:

Congressional Review Act allows for recently passed rules within a 60-day congressional calendar, which is not 60 days, it's usually months. We're talking back into June. I'm not sure what the reachback is, but recently passed rules.

Ashwin Vasan:

I heard they're going to work harder this time.

Peter Freeman:

It allows for Congress basically to review those rules and pass basically a disapproval of whatever rule was passed. If they are able to pass it through the House and the Senate and be signed by the president, then basically that rule is null and void. Even more than that, they can't then pass something substantially similar to that rule, which is the key to this, because otherwise you just null and void, wait four years, change administration, do it again.

It creates some interesting calculus. We were talking about this as the overdraft rule that just came out. There had to be a conversation with some of the folks that really want to see this overdraft cap. Do we want to roll the dice on potential CRA and not be able to do this in the future? I think it's a gamble. What Ashwin mentioned earlier, I think you're hoping that the economic populism on the right now will keep something like that from being overturned. We will see. There's clearly an interest with some members of the Senate Banking, House Financial Services, but you got slim majorities, you got to be able to take some to the floor of the House. There might be enough Republicans that like to see a cap on overdraft that you can't do it.

Some of this has played into larger participant rulemaking. If you look at the digital wallets and payment platforms, that was narrowed who would apply to. The number, in terms of the number of companies impacted by that LPR, was narrowed because I think they were, again, trying to ensure that it wouldn't be susceptible to a Congressional Review Act overturning. I think that was probably taken into the calculus a little bit. Ashwin might have some opinions.

Ashwin Vasan:

You have such tight margins, particularly in the House. You're just hoping that you have three people that, for whatever reason, balk at some of these things. Even overdraft, which I would say has probably one of the stronger political coalitions to just knock on every member of Congress' door. There are probably groups that are not just necessarily consumer groups that feel like that is the right answer. It's a $5 safe harbor, but you can go higher if you can just show it with the data.

It's a little bit of a dare to say, you should try it. And then if the president wants to sign reversing that, whether or not outside groups at that point or Democrats can exact a political tax, it's a little bit of a bet, but that's the idea. The same thing with the larger participant rule. There's a bet that the banks and others want to see that enough, and the entities underlying it represent big tech, broadly speaking, that there might be enough votes on the other side.

With each of these late-stage acts, I think you're seeing a little bit of that. How much of it will persist and how it plays out, it will depend on, again, a lot of the principals. There've been a few names around the CFPB director, but nothing that's been super specific yet, at least in the transition planning.

Peter Freeman:

You mentioned specifically EWA and PL where there's two interpretive rulemakings. My guess is that those get pulled back pretty quickly and replaced by some process by which companies can seek regulatory clarification. Whether that's a sandbox that takes in terms of how companies can act remains to be seen. They could be CRA, too. If EWA has not been finalized at the pace CFPB is going, it wouldn't surprise me if something happened before the inauguration on that front. So that's another question.

Obviously, a lot of these are being challenged in the courts as well. That plays into some of the calculus as well. Even on 1033, there's likely going to be- need to be changes, but I do believe that one will go forward.

Reggie Young:

Yeah. I feel like the past month and a half in particular, I've spent a lot of time, folks asking like, oh, what are the implications of this? I’m like, let's figure it out at the end of January because there's an unlikely chance all this stuff is going to get immediately undone, and we'll see where it goes from there.

Ashwin Vasan:

I will say just one thing about immediately undone, which is, even when we did the transition planning, I remember things on our list that were day 1 things and month 1 things. The day 1 things quickly become the month 1 things. The month 1 things could become the first-six-month things. Trying to establish goals and outcomes in the private sector and stick to them is hard enough, but reality hits.

In the government, typically on day 1, you only have one person, the director at best, if you execute the transition day. And then you've got to navigate, whether it's PPO or other hiring authorities, to get other people to help effectuate your goals. While I think people may feel like the staff and the Bureau, deep state democratic, there are many ways, there are agenda items that we had that people push back against. When people are making legal arguments or policy arguments, you have to engage a little bit. Outside groups start knocking at your door. So things get complicated pretty quickly.

I agree, Peter, I think BNPL, EWA, those are not rulemakings. They're guidance documents. You can just put out a statement during day 1 saying, we're pulling these back. But things have a way of getting complicated quickly on the path to getting the thing out the door. So everything tends to get stretched out a bit.

Peter Freeman:

Yeah. And the Bureau did that, if we're talking EWA specifically. But it took some time for them to pull back what was like a letter, basically, a clarification for one company. They basically said, we're going to pull this back and we're going to do something. How many years did it take to do this something? We're talking years. We kept hearing next month, next week, tomorrow. EWA interpretive rulemaking took years. So that was right on. Some of these things are going to take time.

There's ways of getting around like staffing. Treasury will always have senior advisors that get named right away. You don't have assistant secretaries or desk, but you get these senior advisors in and you can start working pretty quick. It is a process. CFPB, you've got folks very close to the president who don't think it should exist in some form. We have questions around the structure of how it's funded and what the future of that looks like in terms of whether Congress could do something, whether they could do that through a process called reconciliation that only requires 50 votes in the Senate. You could do some things with Republicans only.

Most of what we're talking about long term is going to take Democratic votes. We want to do earned wage access and really regulate and have certainty for these companies, you need 60 votes in the Senate. You need to pass legislation, or we end up in this yo-yo world, which is whoever the president is, whatever party is in power, is going to determine which is the worst-case scenario for these companies. Just going back and forth between extremes on regulatory certainty versus potential enforcement action. It's just not a good place to be when you're trying to grow something and create a product for consumers.

Reggie Young:

Yeah. No, that all makes sense to me. It's funny, I almost view it as like new administration will have a year and a half because then we'll get midterms and that'll probably change the composition. And then that process of getting 60 votes, it's going to become even harder. To Ashwin's point, too, in reality, things take a lot longer than folks think sometimes. Yeah, there's a whole, I'm sure, laundry list that the new administration would like to change, but what percent of that they're actually going to get to is a TBD question.

I would love to see regulatory sandboxes, too. I know Upstart is a great example of the company that tried to do alternative lending with a lot of safeguards in place, and they had to do it through a no-action letter. And they've said it was just ridiculously expensive, took too long, don't recommend anybody ever doing that. Other countries at this point have rolled out regulatory sandboxes. But again, that's not like one month and it's going to be an up-and-running thing. That's like maybe in two years, it would be ready to go.

Ashwin Vasan:

I'd love to see that done a little bit differently in a way that minimizes the yo-yo. When I was first at the Bureau, we did this effort called Project Catalyst. It's now been rebranded two times, and it's the Office of Competition and Innovation. But there was the initial group that ultimately gave Upstart the no-action letter. In hindsight, some of that sort of quasi VC picking winners and losers activity tends to backfire one way or another, because you pick a company that then someone feels excluded from the process of that picking, they are upset about it. And then investors may see it as a good thing, but they may see it as a bad thing. And then once the administration changed, there's a skepticism.

Some of these consumer-facing companies or end user-facing companies that want to be in a little bit of a regulatory spotlight, often for investor and growth reasons, I find that to be a risky proposition now for everyone involved. But I can imagine, though, when you look at fintech today and you look at innovation today, there's so many solutions at the actual risk mitigation level, trying to advance in a smart software-driven way, like the ultimate goals of public policy, it could be complaint handling, it can be AML, it can be various monitoring, whatever, like credit risk monitoring, fair lending risk. There's so many products and services out there that work with banks, but also work with partner banks and fintechs and help make that whole compliance cycle efficient.

For those companies, I would love to see a sandbox that's actually a little closer to the examination core, whether it's at the FDIC or the CFPB, not something that's stuck to the front-office principal level, because that ends up feeling a little performative. It's like, oh, the head of this agency goes and met with the CEO of this company and talked about innovation being great. That'll happen, too, but practically in a durable way, I think it's better if supervision leaders are engaging with 10 AML solutions and understand how they actually work and do they actually minimize risk, and is that something that we can signal without maybe blessing how they want to see companies use that. That seems win-win for companies, but also for the public policy goals that underlie supervision and examination. So something of a sandbox framework for that would be great.

I worry about the other one. I almost worry that the real problem that Peter mentioned, we've all gone through enough cycles now that I almost feel like capital won't buy it. Maybe they will in the short run, maybe speculators will. See the price of Bitcoin, right? They probably imagine that there's some kind of momentum around these things. But for anyone who's longer investing, you can't see any kind of shift in election creating a durable advantage. So I think a question for everyone is how do we create those rules so that that can still happen. I think, increasingly, that points to getting something done in a bipartisan way, as Peter mentioned.

Peter Freeman:

I think that is a real concern, that when it's one company that gets clarification. We saw this in earned wage access. That's what happened under Trump 1.0. There was a backlash against that company as well by consumer groups, administrative, even by the general council of the CFPB saying, you're misrepresenting what was there. Obviously, there's some marketing opportunity if you're the company that gets the letter, but then in the long run, what is that benefit versus the cost when you do have springs back and there's stems and control of the administration.

I tend to agree, we need clarification that helps the industry writ large or the specific sector writ large. That takes more time. You have to do interpretive rulemaking, or you need something that's more impactful. So that's a real concern. That's why legislating is the right way to do this, and legislating takes bipartisanship, at least where we're at right now in the Senate. That's the best outcome if you look at any of these innovative spaces, including digital assets where there may be movement in Congress.

Reggie Young:

It’s a great segue to my next question. I think a lot of our conversation so far has been focused on existing initiatives, but I'm curious to hear what you both think is some of the most likely or more interesting potential, like net new regulatory initiatives. Digital assets I think is probably- given the amount of money that was spent on lobbying this past election, that seems like we'll see some likely movement there. Whether it makes it through a legislative process, different question, but I'm curious to hear what net new regulatory initiatives are you all keeping a close eye on.

Peter Freeman:

Digital assets is obviously one where there's been movement in Congress. One of the key legislators in that space, Congressman French Hill from Arkansas, just won selection from the House Republicans and the Steering Committee to be the new chairman of the House Financial Services Committee. So he's going to be in a very consequential seat working on some of those same issues.

The two big legislative initiatives that have been circulating, deal with stablecoins and then a larger, what we term, market structure bill. FIT 21 was the name of the bill. So there are starting points with these pieces of legislation that had some Democrats support as well. I don't think it's like, take it off the shelf and go and pass it as is. There's been the Supreme Court decision, Loper Bright may impact a little bit of how you reconsider how much authority you give to the SEC or the CFTC to write rules versus Congress, establishing some of that at the outset. You've got Paul Atkins who's been nominated for the SEC chair position. There's going to be new personnel, new players at the SEC, the CFTC, Treasury, that will want to put some stamp on these major legislative initiatives in the digital assets space. That is one of the major things that could pass.

As you said, Reggie, I think it's a year and a half, maybe less than that, maybe a year, we're really talking about a calendar year, before you start running out of room and the potential for- historically, the president's party doesn't do so well in the midterm elections. You lose the House, you lose a little bit of that ability to set the agenda and move things through. So yeah, the clock's ticking.

One of the other really interesting areas that we want to talk about here, housing finance reform and impact on the market, and whether you recap and release the GSEs is something we're following very closely as well. French Hill, when you look at folks that have some expertise in housing, he's probably at the top of that list as someone who's worked with Jack Kemp and worked in the Senate Banking Committee and ran a bank, someone that can understand the market.

That's what it's going to take, too, because it's not going to be an easy process. You're going to have to politically push back against some folks that just want to make some money in this process. Really, what we need is a functioning secondary market without housing costs going skyrocketing. Two things that I'm following that are on different ends of the spectrum, more like traditional financial services, housing, the core of our economy, and then digital assets, which is the new frontier and really could use a holistic regulatory frame.

Reggie Young:

Yeah, I was smiling ear-to-ear on that because I just happened to consider it. At Lithic, we're just like, my head is so oriented at Lithic around cards. Housing stuff is just like something I don't spend a ton of time on, but that's a really interesting point. That's such a fundamental core piece of the economy that a lot of folks feel really strongly about it. So it makes sense.

Peter Freeman:

It's a whole nother podcast.

Reggie Young:

I was really tempted to double-click on that, but that would take three hours. Ashwin, I'm curious for your answer, what are you keeping an eye on for some of the top potentially net new regulatory initiatives?

Ashwin Vasan:

Regulatory or legislative, Peter, you mentioned the whole [inaudible] Act could come back in some form. That’s probably a whole nother podcast to discuss, the extent to which that is a real versus perceived problem, and if it's real, what's the right way to manage risk and the regulatory architecture we live in.

I think data privacy will be really one that's interesting to watch. The 1033 rule, as I'm sure your listeners know, have restrictions on secondary use of consumer permission data. Assuming that rule generally stays- architecture of it generally stays the same. There's this lawsuit for BPI. But at the same time, I expect that many components of that rule, if they can be reworked, would stay, and I think that might be one of them. So then in the world of financial data, you have at least one place where there's real use restrictions.

When we were at the Bureau, we made a deliberate choice to avoid a disclosure regime for that secondary use under the belief that GLBA protections were insufficient, but any kind of disclosure-based regime for data use in the economy we live in today. And so the question is how much of that gets picked up for other things. You saw that the data broker rule, which is the Bureau's attempt to propose something, using FCRA authority, but getting to a place where, essentially, they, again, draw a line in the sand on how much consumer data can be shared without permission, I think that's the philosophical point.

So you have these two pieces out there, one is a proposal, one is a final rule. Peter would know better than me on all the proposals that have been floating around Congress. I think the question is, if there is an external event or something else that motivates it to the finish line, something to watch. I think that's the fundamental underlying trend in the economy. Whether it comes through a crisis or deliberate choice to be predictive will show up in one way.

The other thing I think that fits that category is where payments are accelerating and the proliferation of scams. I don't think people think of that as a bipartisan issue, but it always struck me as one that, again, if there are enough victims, enough media, enough constituent calls, the sympathy and the empathy will grow. The challenge on that is that the solutioning is very hard. Every country around the world is facing this. I don't think anyone's found exactly how to stop people from insisting on sending money and then realizing that it was a total scam. I think it's a real hard policy problem.

You might see just more education efforts there, other things like that. But I think the real solutions are probably a little bolder. Whether we get to them, I don't know. But that's another topical area I would watch, just because payments are faster, there's going to be more adoption, and ultimately, there will be the vectors. The front vectors keep moving, but I would expect at a certain point, some things will happen, bubble up. The Dems on the Hill will keep oversight on it for sure. You have this dynamic where it'll be top of mind.

Those are things that I think could happen, maybe not with the certainty of ending the scourge of crypto founders being neglected. I think that'll be the top priority. But then after that, I can see other things potentially.

Peter Freeman:

Reggie, on privacy, I keep thinking it's got to happen. 1033, we've had huge data breaches, too, that you think would put this in the forefront. But I've been working on privacy legislation on the Hill since the end of years. 2003, I think, was the first bill that I worked on. It just seems like there's multiple committees. You've still got this energy and commerce, financial services rub that always comes up. And then you've got the judiciary involved when there's penalties, and you start to look at what that aspect of it is.

We got close last Congress where you had Maria Cantwell, a senator, Democrat, Washington State, Cathy McMorris Rodgers, Republican, same state, there's something in the water in Spokane, they got together, they said, we can do this. And you still couldn't get something through because you still had some opposition on both sides, whether you have private right of action, do we preempt the states on this, it's just become so difficult to move something.

I'm increasingly hopeful, but hope for me in DC of moving a bill is like 20% chance. It’s optimistic. I tend to agree with Ashwin, there's more and more happening. You look at AI, we haven't even touched on that. You look at open banking, open financial services. There's a whole number of reasons why we need to do this, and whether or not we'll have the will and can break the stalemate on the Hill, which seems to be a lot driven by jurisdictions and differences of opinion of how to regulate certain types of companies.

Reggie Young:

Yeah. It's such an authority. I think a few colleagues from law school have gone on to be privacy lawyers, and they all just constantly complain about the state of privacy. They're all like, this is just dumb, the patchwork we have, each sector has its own, it's not comprehensive. We need to get to the federal level. It is one of those Eisenhower matrix where it's like, this is really important but not really urgent. For most folks, it's going to take some massive data breach that targets congressional representatives to actually get some movement.

Peter Freeman:

We had that. We had PPO breach for the Chinese.

Ashwin Vasan:

When you see that in the Bureau's rhetoric on the proposed data broker rule, it's about service member data being sold to the Chinese. All these things are entirely real. There's a salience to it that we're missing. I think that's probably what will push us over the edge.

Peter Freeman:

The number one talking point with Republicans is always do you want California writing your privacy laws? It seems to resonate. I do think that with Republicans in control, there may be more of an interest from the industry, let's do it now, because for a long time, it's like, well, we can deal with the patchwork. The patchwork is better than just layering on top of it without federal preemption, which is where Democrats have been traditionally. California still gets to be California, and then we'll add on top of that federal standards.

When you're a financial services company, who's regulated under Gramm–Leach–Bliley already, you don't want that. So we can deal enough with the states. We've got GLBA. So there really hasn't been that impetus. Maybe with open banking, with a whole host of new technological changes around AI and other places, maybe the wool is there, and it's probably more ripe with Republicans in control. But again, the clock is ticking.

Reggie Young:

Yeah. Maybe the crypto lobbyists can lump that into their crypto charter. The last topic, while we have a few minutes left, is jam on bank charters. I know that was big under the prior administration. There's push to expand bank charter options. I'd be curious, there's several options for bank charters. Crypto is going to try and lobby for legislation around the crypto-friendly charter safe harbors of some sort. There's discussion of like, oh, general payments charter for fintechs. There's ILC scrutiny on that, or the closer scrutiny. I'm curious, do you all think we're going to see progress? Again, there's the problem of a year and a half to actually do anything legislative, but I'm curious if you think there's any types of bank charters that you all are going to be keeping your eyes on.

Ashwin Vasan:

I expect there to be movement on maybe new bank charters to traditional processes along with bank mergers, acquisitions. I think that, I can imagine, especially with leadership changing and the FDIC changing, moving forward. Payments charter is the big one. I feel like we'd need to pass some sort of stablecoin first as a model. Square competing interests and whether or not that gets folded into a payments charter, TBD. Obviously, there's always a battle between the federal government and the states on this one.

We've been seeing recently some sort of state activity on more bespoke charters and companies interested in that and seeing how they can use that to build products and access markets. I think maybe we'll see a little bit more of that. Those are at least my questions. I don't know, Peter, if you have others.

Peter Freeman:

No. I think there's going to be discussion on- I don't think we're going to move quickly on some sort of new chartering. But I do think that this is another area where we'll see hearings on the Hill, discussions about what it looks like. That includes what service providers look like under the bank fintech model and not just chartering, but how do we treat Banking-as-a-Service. We're not talking about the Wild West. I think there's still concerns when you talk to some of the Republican board members at the FDIC. The two that we talked to there are likely to be in other positions within the administration.

There's still risk assessment. They're still looking at how this functions. There's also concern about tech in financial services and big tech and financial services, which is shared across the aisle. When we look at the ILC debate, there were Republicans that had concerns about who we open up the potential for an ILC charter to. Those rubs are still going to exist, and it's not going to be just like silly season for chartering. But there will be opportunities, because basically it's been shut down, even traditional banking. We haven't seen a lot of de novo chartering at the credit unions, banks. I think there's going to be a discussion of what that looks like. I think it's going to be a slower process. It's not going to be just opening it up for chartering of digital asset providers or whatever.

It's going to be very serious conversation that likely starts on the Hill, maybe in the Financial Services Committee in particular.

Reggie Young:

Yeah, definitely interesting to watch. Peter, Ashwin, this has been a great conversation. Thank you so much for coming on. If folks want to get in touch with either of you or find out more about FS Vector, where should they go?

Peter Freeman:

Fsvector.com is our website. My email is pfreeman@fsvector.com. Ashwin's is similarly situated. So feel free to reach out.

Reggie Young:

Awesome. Thank you both so much for this conversation. It's been enlightening.