WASHINGTON–There is a “growing rift” among members of the FDIC board, according to one new report.
The latest sign, and in this case one open to public viewing: as CUToday.info reported here, the Federal Deposit Insurance Corp. (FDIC) recently released a statement in which it said its “statement” should not have been included in an earlier Consumer Financial Protection Bureau statement.
In that case, two FDIC board members announced a notice seeking public comment on the subject of bank mergers. The notice wasn’t actually on the FDIC’s own website, and soon afterward, the FDIC issued a statement that it had not approved any such request.
“The standoff was a small sign of a bigger rift brewing at the FDIC, which has a hand in overseeing all U.S. banks but focuses closely on the smallest ones,” the New York Times reported. “The chairwoman of the FDIC, Jelena McWilliams, is a Republican and a Trump appointee — one of the few remaining in an alphabet soup of federal bank regulators that includes the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.”
Asserting ‘Power’
The Times noted the other members on the FDIC board, including Martin J. Gruenberg and Rohit Chopra, the newly confirmed director of the Bureau, are Democrats. “And by posting a notice on Thursday without Ms. McWilliams’s approval, they took a step to assert their power over the organization she leads,” the Times’ analysis stated. “Their ultimate goal, experts say, is to paint Ms. McWilliams’s resistance to posting the notice as justification for gaining control of the board and potentially even removing her.”
“This is the first shot across the bow, seeing what the chairman’s response might be,” Todd Phillips, a director at the progressive think tank the Center for American Progress, who has argued that Democrats should take control of the FDIC’s board away from McWilliams, told the Times. “If they do end up being victorious on this issue, I think we’ll see the progressive directors throwing their weight around to move the FDIC in a direction that it hasn’t been in the past few years.”
The Board Structure
The FDIC is governed by a five-member board whose members serve six-year terms. The Times noted its political makeup is supposed to generally allow input from both parties and that at any time a fully seated board will consist of two Republicans, two Democrats and a chair appointed by the president for a five-year term. One of the five seats is currently empty; the others are held by McWilliams, Gruenberg, Chopra and another bank regulator, the acting comptroller of the currency, Michael Hsu, also a Democrat.
The report stated that under McWilliams the FDIC has adhered to Republican ideological lines on topics such as climate change and a general tendency to let banks take on more risk while holding less capital in reserve.
“If she left, the FDIC would very likely embrace President Biden’s agenda, which involves shifting the federal government’s stance on big issues like climate change and income inequality,” the Times added.
In October, the Times noted McWilliams abstained from a vote on adopting a report on the risks climate change poses to the U.S. financial system by the Financial Stability Oversight Council, which includes NCUA. NCUA Chairman Todd Harper has indicated support for including climate change-related risks to credit unions as part of the agency’s examination process.
Into Public View
“The FDIC board members’ internal disagreement spilled into public view on Thursday afternoon after Messrs. Gruenberg, Chopra and Hsu voted over email to produce a request for public comment on the subject of bank mergers — and then posted their notice on the website of the consumer bureau, which Mr. Chopra runs,” the Times reported.
“The trio argued that the FDIC had contributed to the overall instability of the banking system when, in 2008 and 2009, it encouraged regional banks to buy up smaller institutions that had failed as a result of the global financial crisis,” the Times analysis continued. “Then came the fireworks. The FDIC’s public affairs office, which Ms. McWilliams controls, released a statement: ‘Earlier today, the Consumer Financial Protection Bureau (CFPB) posted on its website a document, purportedly approved by the FDIC, requesting comment on bank mergers. No such document has been approved by the FDIC.’”
For several weeks, Ms. McWilliams and her staff had been privately trying to counteract Mr. Chopra and Mr. Gruenberg, two people briefed on the matter who were not authorized to speak publicly told the New York Times. After learning of the effort to create a bank mergers public information request, Ms. McWilliams proposed an alternative text for the document, the people said, which the other board members quickly rejected, the report added.