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The Senate finally confirmed Martin Gruenberg and three others to serve on the FDIC board, but — in an rare omission — did not confirm Gruenberg to serve as chairman of the agency. Thomas Curry, however, was confirmed as Comptroller of the Currency.
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Senate GOP leaders moved to block the confirmations of Marty Gruenberg, Tom Hoenig and Thomas Curry because the Obama administration refused to promise it wouldn't use its recess appointment powers for the CFPB and other agencies.
December 19
WASHINGTON — Surprises in politics are rare.
But observers witnessed one last week when the Senate confirmed Marty Gruenberg for an extended term on the Federal Deposit Insurance Corp. but unexpectedly failed to confirm him as the agency's leader.
Instead, the Senate created an unprecedented situation in the agency's nearly 80-year history — ensuring that all five board seats to the FDIC are filled without formally designating a chairman.
What was behind the incident and what does it mean for the future of the FDIC? We offer the following frequently asked questions to get to the bottom of it.
What exactly happened?
The Senate confirmed three nominations — Gruenberg, Tom Hoenig and Jeremiah Norton — to the FDIC board and Thomas Curry as the Comptroller of the Currency (who automatically sits on the board). Even though Gruenberg and Hoenig were separately nominated as chairman and vice-chairman, the Senate did not act on those nominations.
So who is running the FDIC?
Gruenberg. By statute, the sitting vice chairman — in this case Gruenberg — automatically becomes acting chairman. In his current role, Gruenberg has all the power to run the FDIC as if he were permanent, although because he does not have formal Senate backing, he must still proceed cautiously.
Why didn't the Senate confirm him for the job then?
It's a presidential election year. Senate Minority Leader Mitch McConnell is reserving the right for a potential Republican administration to nominate its own chairman. Had the Senate confirmed Gruenberg as chairman outright, he would have had a five-year term, meaning that he could not be removed until 2017, past even the next presidential election cycle.
Democrats, meanwhile, were unwilling to allow Hoenig to serve as the agency's vice chair because it would have, by law, put him in charge of the agency. As a result, Gruenberg retains his vice chairman status, and Hoenig serves as an independent board member (along with Norton, who was nominated for that role).
What does that mean for the agency's future?
Here's where things get particularly interesting so bear with us a second.
By law, the White House can only appoint three members of the same political party to the FDIC board. The other two must be filled with members of the opposite party.
As it stands now, there are two Democrats — Gruenberg and Richard Cordray, the director of the Consumer Financial Protection Bureau — and Curry, an Independent chosen by the Dems. Hoenig and Norton fill the Republican slots.
If a Republican wins the White House, he will be unable to dismiss Cordray, Curry or Gruenberg from the board at least in the short term — Cordray's recess appointment will expire at the end of 2013. Unless they persuade someone to voluntary step aside (which is harder than it would seem), the Republican White House would have to nominate Hoenig or Norton as chairman or wait for their terms to expire.
So if Mitt Romney wins, Hoenig or Norton will be FDIC chairman?
Not so fast.
While Gruenberg and Hoenig were confirmed for their own six-year terms on the FDIC board, Norton was technically confirmed to fill former FDIC chairman Sheila Bair's board slot, which will expire in July 2013 (Bair's term as chairman expired in July of last year, but board seat designations are a different deal).
In what some insiders called an "elegant" solution — one that has not been previously reported — a Republican administration would be free to nominate its own FDIC chairman candidate within six months of inauguration. Romney (or Rick Santorum, if you prefer) could, of course, still pick Hoenig or Norton for the job, but he wouldn't be constrained from picking another candidate.
What about the OCC?
Perhaps the most significant thing to happen was the confirmation of Curry as comptroller for a five-year term. While some Republicans believe that if they win the White House they could ask Curry to leave, the law suggests that the comptroller, like the FDIC or Federal Reserve Board chairmen, does not serve at the pleasure of the president. In other words, if Romney asked Curry to leave the job, and Curry did not voluntarily agree to do so, there would be a legal fight over the issue.
To date, however, presidents have just skirted the issue entirely, leaving a comptroller to complete his term. John Hawke Jr., a Clinton appointee, fulfilled his term well into President George W. Bush's administration, while John Dugan, a Bush appointee, served out his term until August of 2010.
Unless Curry acts in a bizarre manner, like declaring federal preemption null and void or dressing up as Harry Potter, it's unlikely to be an issue.
Can Romney appoint Hoenig or Norton to serve as acting FDIC chairman if he is elected president?
No. According to several sources, the law is quite clear: the FDIC's vice chairman must serve as acting chairman unless a permanent choice is confirmed by the Senate.
This effectively leaves Gruenberg in charge of the agency for the foreseeable future. While the chairman slot has a distinct five-year term, the vice-chair position does not, meaning that Gruenberg can serve in that position until Congress confirms someone else as vice chairman or a successor to Gruenberg's seat in 2018.
Even if Republicans win the White House and control of the Senate, they will be unable to confirm any Republican nominee as FDIC chairman without Democrats' assent. Whatever the outcome of the election this fall, the Democrats will maintain enough seats to block any potential nominee.
Whether they will do so is another matter. Republicans angered their colleagues on the other side of the aisle by holding up the nomination of Cordray for months over a battle on the CFPB's structure. At the very least, Democrats may not be inclined to move quickly.
What about Cordray? Romney would probably nominate a successor, right?
Cordray isn't going anywhere until the end of 2013 unless a court challenge to his controversial appointment succeeds (one hasn't even been made yet) or Democrats accede to a change in CFPB leadership. The two parties will have to work together on a nominations package, a process that — as we see in the current scenario — is fraught with delays and complications.
What happens if President Obama wins re-election?
If that were to occur, observers expect Gruenberg and Hoenig to be confirmed as chair and vice-chair in the lame duck session of Congress immediately following the election. Republicans have no substantive reason for holding up those nominations once the election is over.
