Bank regulator erupts in partisan split as Democrats go rogue

The Federal Deposit Insurance Corp. (FDIC) on Thursday rebuked a move by Democrats on its board to seek public feedback on ways the agency analyzes potential bank mergers, a stunning break in nearly a century of stable relations between agency leaders.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra and FDIC Director Martin Gruenberg had asked for public feedback Thursday on the ways the FDIC analyzes potential bank mergers. The regulator disavowed the request, saying the document was not approved or vetted during a meeting of the board.

“The FDIC has longstanding internal policies and procedures for circulating and conducting votes of its Board of Directors, and for issuing documents for publication in the Federal Register. In this case, there was no valid vote by the Board, and no such request for information and comment has been approved by the agency for publication in the Federal Register,” the FDIC said.

The FDIC is chaired by Jelena McWilliams, a Republican and former bank executive appointed by former President Trump in 2018. McWilliams, however, leads a board consisting of three Democrats: Chopra — who is automatically a member of the FDIC board as CFPB director — as well as Gruenberg and Michael Hsu, who as the leader of the Office of the Comptroller of the Currency is also a default member of the FDIC board.

Chopra and Gruenberg’s decision to release the document on behalf of the FDIC without the agency’s formal approval is a remarkable breakdown in trust among leaders of the bank regulator. While members of the FDIC board have often sparred over regulatory proposals, agency officials said Thursday that the release of one on behalf of the agency outside of the formal process is unprecedented.

Several Republican lawmakers accused Chopra and Gruenberg of orchestrating a “coup” at the FDIC.

“This failed, publicity-seeking attempted coup is exactly the kind of lawless overreach that Senate Republicans warned about with Rohit Chopra. His reckless behavior today undermines the independence and integrity of the FDIC,” said Sen. Pat Toomey (Pa.), top Republican on the Senate Banking Committee.

“It represents a radical politicization of a long-respected financial regulator. There’s no legitimacy to this supposed ‘vote’ or Mr. Chopra’s tweet.”

Rep. Blaine Luetkemeyer (R-Mo.), long a critic of the CFPB and its structure, said Thursday’s incident made clear the need to replace its director with a commission.

“Director Chopra is not only weaponizing the CFPB to attack U.S. industries, but he is now trying to control an entirely different regulatory agency,” Luetkemeyer said in a statement.

“The FDIC has been run by a board for nearly 90 years. The fact that Chairwoman McWilliams publicly and unequivocally denounced Mr. Chopra’s fraudulent and unprecedented statement is not only an embarrassment for the Bureau, but it further proves how radical and power-hungry President Biden’s handpicked regulators really are.”

The document from Chopra and Gruenberg said the FDIC approved a request for information as part of a “careful review” of the regulators’ standards for approving bank mergers. The request for information was published and released by the CFPB on its website, but did not appear on the FDIC website.

In a blog post on the CFPB’s website, Chopra also said “the FDIC’s Board has voted to launch a review of the agency’s Bank Merger Act policies,” but the FDIC said Thursday that no such vote occurred.

“The FDIC has a proud 88-year history of Board members working together in a collegial manner. This history has spanned many Presidential administrations, and countless philosophical differences on substantive issues among Board members over the years,” the agency said. 

“Notwithstanding the actions taken today, the FDIC expects this time-honored tradition of collegiality and comity to continue.”