Obama's GOP Nominee May Break Logjam at FDIC, OCC

WASHINGTON — President Obama's nomination of a Republican to the board of the Federal Deposit Insurance Corp. is fueling optimism that there may yet be a way for the Senate to confirm several pending financial nominees.

Conventional wisdom in Washington has been that Senate Republicans will not allow any nominees — including those to lead the FDIC and Office of the Comptroller of the Currency — to move forward because they are still critical of the president's controversial recess appointment to the Consumer Financial Protection Bureau.

But some saw hope in the nomination of Jeremiah Norton, a JPMorgan Chase & Co. executive and former Treasury official in the Bush administration, to the fifth FDIC board seat.

Observers said the nomination clears the way for a deal where Republicans agree to move forward on the two Democratic nominations in return for the two GOP ones.

"There's a deal to be had there, and that's what it looks like," said Wayne Abernathy, who worked both on Capitol Hill and at Treasury, and is now executive director for financial institutions policy at the American Bankers Association.

To be sure, however, that deal is far from assured. Republicans are still smoldering over the recess appointment of Richard Cordray to the CFPB and three others to the National Labor Relations Board, arguing they were unconstitutional.

Many GOP lawmakers also are pinning their hopes on retaking the White House this year, freeing them to make their own appointments to the FDIC and OCC.

Still, Democrats say they still see a way forward.

"Democrats are not giving up on the financial regulator nominees," said one Democratic aide. "We would like to work out a bipartisan package deal."

Such deals have been commonplace in the past. By law, the FDIC's five board seats can only include three members of the same political party, with the other two selected by the minority party's leadership. Senate Minority Leader Mitch McConnell recommended Thomas Hoenig, the former president of the Federal Reserve Bank of Kansas City, as the FDIC vice chair last year, but it took months for the Obama administration to clear the other GOP pick: Norton.

Under a potential deal, the Senate would approve both Democratic nominees — Marty Gruenberg as chairman of the FDIC and Thomas Curry as comptroller — as well as Hoenig and Norton.

"I would have been surprised if the president went forward" nominating Norton "without some kind of indication from [Senate Minority Leader] McConnell that they would be ready to proceed with these four nominees together as a deal," said Abernathy. "I don't know if they opened up, or if they never quite closed on these particular nominations."

Insiders also see a potential opening in the fact that the GOP caucus, while stepping up challenges to Cordray's hiring, has not definitively said the other nominations are off the table.

Norton is expected to get a hearing before the Senate Banking Committee, which could be combined with other pending nominees for the Federal Reserve Board and the Office of Financial Research. (The committee has already approved Gruenberg, Curry, Hoenig and Cordray.)

"With nobody saying no, it's a real possibility," said a source familiar with situation, who spoke on the condition of anonymity. "It's not at 50-50, but most people were at 5% odds when Cordray was recess-appointed and it's getting better."

Yet filling the board seats is still a tough proposition given the continued angst over the recess appointments. In December, the mere threat of the White House using the tactic led Republicans to block votes for Gruenberg, Curry and Hoenig. The opposition has not wilted since Cordray became CFPB director.

Just last week, McConnell and 38 other Republicans said they would file an amicus court brief supporting challenges to the constitutionality of both Cordray's appointment, and Obama's recess appointments to the NLRB. (Republicans argue the Senate's "pro forma" sessions meant the chamber was not actually in recess.)

Even though some Republicans, including Senate Banking Committee ranking member Richard Shelby, have voiced support for certain FDIC nominees, it would only take one GOP member to block them on the Senate floor.

Meanwhile, the nation's focus on the presidential election, and Republican hopes that a victory in November potentially means a whole new slate of nominees, are additional factors complicating the process.

One Republican aide, while not ruling out individual confirmations, said big obstacles still remain.

"The President changed the game with his illegal appointments at the CFPB and NLRB," the aide said. "And though there isn't a formal block of all nominations I wouldn't expect smooth sailing for any nominee. While it is possible that some nominees could be approved piecemeal it is more likely that they run into roadblocks during the confirmation process."

Although the industry has joined the criticism of Cordray's appointment, Abernathy said bankers benefit from a complete FDIC board.

"We never weigh in on one nominee, but all things being considered the banking industry prefers a full board to one that isn't full, because that brings more points of view together," he said.