WASHINGTON — Backers of the banking industry raised concerns about a burgeoning rift on the Federal Deposit Insurance Corp. board of directors that could come into public view at a scheduled meeting Tuesday.
Last week, the board's three Democratic members voted to seek public comment on bank merger policies without including the Trump-appointed chair of the agency, Jelena McWilliams. She claimed the move was invalid because it did not adhere to the board's typical process, and called for greater collegiality on the board.
In a letter dated Monday, the American Bankers Association suggested that the group disapproved of the procedure followed by the three Democratic board members, and that the episode had sparked confusion in the industry.
"Multi-member boards and commissions are designed to bring together different points of view. Policies certainly change over time. That is understood and expected. But collegiality and a shared responsibility for maintaining market stability historically have overcome the forces that push and pull at non-independent agencies, allowing for gradual change," the ABA and its state affiliate groups wrote to McWilliams, Consumer Financial Protection Bureau Director Rohit Chopra, acting Comptroller of the Currency Michael Hsu and board member Martin Gruenberg.
"And when change comes, it is vital from a governance and regulatory expectations standpoint that federal banking agencies not create ambiguity about what constitutes an official action," the letter said.
The U.S. Chamber of Commerce went a step further. Tom Quaadman, the executive vice president of the Chamber's Center for Capital Markets Competitiveness, accused Chopra, Hsu and Gruenberg of trying to "circumnavigate" McWilliams' authority in order to meet policy objectives outlined by the Biden administration.
“Attempting to circumnavigate the FDIC Board Chair, or any independent agency chair, to achieve political objectives singled out by a White House Executive Order erodes the agency’s independence and endangers the public trust," Quaadman said in a press release issued Monday.
“Partisan actions today that break from well-established precedent will politicize the banking regulations of tomorrow regardless of who is in power."
The agency's principal leaders could give signals of the depth of the board's divisions when they meet publicly Tuesday to discuss the FDIC's operating budget and the status of the agency's deposit insurance reserves.
Chopra and Gruenberg announced Dec. 9 they had voted in writing to approve a request for information on how the FDIC reviews bank merger applications. The move came as a shock to many in the nation’s capital, since the FDIC chair traditionally controls the board’s voting agenda.
The two Democrats said they acted on the legal authority of board members to approve votes by notation without meeting publicly. Although Hsu did not join Chopra and Gruenberg's statement, he did vote in favor of the request for information.
But the ABA letter suggested that their action threatens the FDIC's independence.
"On behalf of the American Bankers Association and the 51 state bankers associations, we write to reinforce the importance of an independent FDIC and an orderly, transparent policymaking process," the trade groups wrote. "As you know, bank deposit insurance is the bedrock of financial stability, and actions that erode or interfere with the functioning of this critical agency create uncertainty and send signals that are harmful to banks, their customers and the U.S financial system."
"Independence, adherence to longstanding institutional norms, and an orderly, public policy process are important elements of the FDIC’s 88-year tradition, and they are also key ingredients in the safety and soundness of the world’s largest and most diverse financial system," they added.
Quaadman concurred with the ABA, arguing that the FDIC’s public mission and role in the financial system is “grounded in the willingness of its independent board members to act as honest brokers and strive to build consensus."
“We encourage all FDIC Board Members to work in an honest and collegial manner, especially on matters where they disagree,” he said.
