On Friday, the White House defended three board members from the Democratic Party at the Federal Deposit Insurance Corporation (FDIC) who moved to seize control away from the Republican chairman of the banking agency – tactic Republican representatives blasted as a coup. Furthermore, the political clash erupted after Democratic leaders who make up most of the board voted to take the honest opinion on possible changes to the bank merger approval procedure.
Jelena McWilliams, the Chairman of the FDIC, didn’t participate in the vote, and he was the appointee of former Republican President Donald Trump. FDIC released an official statement and said that the action was not valid. The Biden government is backing the board members who evaded McWilliams. Two are President Biden’s appointees – acting Comptroller of the Currency Michael Hsu and the Consumer Financial Protection Bureau Director Rohit Chopra – while the other, Martin Gruenberg, served as chair of the FDIC under former Democratic President Barack Obama.
A White House official said that they don’t think that Gruenberg should try to prevent actions that most of the board directors of the FDIC legally seek to pursue. Moreover, he added that they support the decision of the board to go ahead with its actions there. The decision of the White House to support the three regulators from the Democratic party will possibly further provoke tensions with GOP on Capitol Hill, who argue the end-run around FDIC chair violated the rules of the agency.
McWilliams is a Direct Threat to the FDIC Independence
Senator Thom Tillis tweeted that an effort by Rohit Chopra and his facilitators to overthrow McWilliams is a genuine threat to the FDIC independence, undoing eighty-eight years of institutional norms. A progressive ally of Senator Elizabeth Warren, Chopra, was already a target for GOP leaders because of his leadership post at the Consumer Financial Protection Bureau (CFPB). Republican representatives sought to rein in the customer bureau since its formation in 2010 Dodd-Frank law, and GOP Senators vigorously condemned the nomination of Chopra to lead the agency.
The attempt by Rohit Chopra and his enablers to overthrow FDIC Director Jelena McWilliams is a direct threat to the independence of the FDIC, undoing 88 years of institutional norms.
— Senator Thom Tillis (@SenThomTillis) December 10, 2021
The top GOP on the Senate Banking Committee, Senator Pat Toomey, said that this failed, publicity stunt effort coup is precisely the type of lawless overreach that Senate GOP leaders warned about with Rohit Chopra. Senate Banking Chair Sherrod Brown and Warren supported the move and argued that it was necessary to improve the surveillance of bank mergers. Maxine Waters, the Financial Services Chair of the House, sent letters yesterday to bank regulators, including McWilliams, pushing them to impose a pause on improving any big bank M&A more than $100 billion while these reviews occur.
The Biggest Banks Have Gotten Even Bigger over the Last 30 Years
On Twitter, Warren said that during the last thirty years in the United States, the biggest banks grew even bigger, resulting in putting the whole financial system of the country at risk. In addition, the bank merger process primarily broke, and it is time to end the rubber printing by regulators. She said that she is happy the Federal Deposit Insurance Corporation Board implements its authority.
Over the last 30 years, the biggest banks have gotten even bigger — putting our entire financial system at risk. The bank merger process is fundamentally broken and it’s time to end the rubber stamping by regulators. I’m glad the @FDICgov Board is exercising its authority. https://t.co/GYcX2XP6tV
— Elizabeth Warren (@SenWarren) December 10, 2021
The staff memo of a CFPB on the matter mentions several provisions that highlight the authority of the FDIC board, including language that says the Corporation administration shall vest in a Board of Directors. In addition, CFBP officials said in the memo that the U.S. Supreme Court standard clarifies that, unless a statute indicates otherwise, a big part of the quorum of a several-member agency is eligible to act on behalf of the agency.
The FDIC Chief Stonewalled Chopra on the Matter
According to an anonymous agency official, McWilliams circulated a staff draft before the blowup and requested a comment on bank merger policy that she agreed to use as a basis of dialogs. However, a CFBP official having knowledge of the matter said that McWilliams refused the CFPB director and his staff on the issue, and the FDIC chief was offering a damaged version of the bank merger document. The official also said that they were assessing the next steps.
The CFPB website published the request for feedback on bank mergers. Gruenberg and Chopra argued that the FDIC required to rethink the circumstances that consider whether to allow more merging in the banking industry. Acting and serving comptroller, Hsu has been significantly quieter as the saga unfolds. However, he voted to support the bank merger request for comment and his fellow Democratic leaders.