Ever since at least the 1970s, Congress hasn’t modernized the banking system – regulators did. Congress did ratify change long after it occurred – think interstate branching or electronic-funds transfer, grandfathered controversial charters – unitary thrifts, nonbank banks, and made retroactive repairs – FIRREA, FDICIA, and of course Dodd-Frank. But, for real change, look to the regulators and for what’s coming next, check out Acting Comptroller Brooks.

As we noted, Mr. Brooks opened with a bang. Acting on what he calls Silicon-Valley – not DC – time, his beginning was followed in awesomely short order by two ground-breaking proposals. As detailed in our in-depth analyses, the first of these is a concrete proposal to rewrite the national bank and federal savings association (FSA) charters in ways big and small. The second, advance proposal is an open-end invitation for all comers to lay out all of the ways the OCC could use the powers increased in the first proposal to craft a new, digital future for federally-chartered companies and their counterparties, partners, and customers across the spectrum of retail and wholesale finance.

At one fell swoop, these proposals could lead banking to gain ground on fintech and bigtech innovators. With COVID’s hard experience and all their advantages – access to the payment system, FDIC insurance, and so much more, national banks and FSAs could even overtake some of the most powerful companies that seemed just a few months ago to be taking over from regulated banking.

But, which national banks or FSAs would be the better for the OCC’s charter redesign? The rules will almost certainly not differentiate between legacy and new charters, but history suggests strongly that beneficiaries will be the largest banks with the biggest tech edge, specialty banks sometimes characterized as rent-a-banks, and new entrants. Legacy banks, especially small ones, may protest many of the changes Mr. Brooks seems to have in mind, but they will be run over by the combination of regulatory power and market innovation unless they craft their response with care.

Of course, the OCC is not omnipotent. Smaller banks and state regulators have sometimes successfully challenged OCC actions. Most recently, they have taken on the OCC’s special purpose fintech charter. They could stop not just this charter, but also these rules, but that remains to be seen. The near-term test is the legal battle over the fintech charter. If its opponents lose, the charter combined with new rules could become a powerhouse.

Indeed, Mr. Brooks has his eye on other special-purpose charters. A recent podcast from Rob Blackwell finds the Acting Comptroller announcing his plans also to construct a new charter for payment companies. These charters may well need access to the Fed’s payment system even more than the fintech ones, with the Fed so far showing no signs of ending the banking industry’s monopoly-access rights. However, one of the OCC’s proposals opens up the ability of national banks to join payment systems they might like better than the Fed. The OCC’s proposal is replete with cautions, but it would still enhance the odds of successful private challenges to the Fed and even of new, far more innovative options – even including Libra should it accede to new prudential standards.

Of course, what an Acting Comptroller says or even puts in the Federal Register is far from a done deal. The OCC’s proposals and any charters that flow from them are subject not just to legal challenge, but also to political protest. Usually, this is painful, but ineffectual – as I noted, Congress generally bars innovations it comes to dislike only after these innovations are permanently lodged in the national banking fabric. Still, political pressure can change an agency’s point of view. And, Mr. Brooks is only acting and acting office-holders can be made ex office-holders in a nanosecond when elections change who’s in the White House. Although Mr. Brooks has, as noted, decided that regulators can also move fast and break things, his leash is shorter than Mark Zuckerberg’s. Still, all the innovation Congress opposed and then left largely intact gives the new Comptroller a lot of leeway.