FDIC chief spikes Democratic vote on bank merger guidelines

The Trump-appointed head of the Federal Deposit Insurance Corporation (FDIC) and Democratic members of the bank regulator’s board clashed Tuesday over who sets the agency’s agenda, with Democrats on the board seeking to buck the chair.

FDIC Chair Jelena McWilliams rejected a request from Consumer Financial Protection Bureau Director Rohit Chopra — one of three Democratic members of the FDIC board — to take up a request for comment approved by him and his Biden-appointed colleagues last week.

Chopra, FDIC Director Martin Gruenberg and acting Comptroller of the Currency Michael Hsu voted last week to approve a request for public feedback on how the FDIC analyzes bank mergers. The FDIC said the approval of the request for comment was not a valid agency action, leading to an unprecedented split between the chair of the FDIC and the board.

During a livestreamed remote meeting of the FDIC board, Chopra asked McWilliams to include a record of the Thursday vote in the agency’s minutes. McWilliams declined, saying she was not legally authorized to consider the rogue vote an official act of the agency.

While the meeting was largely collegial and focused primarily on other issues, Chopra condemned McWilliams in a statement following the meeting for what he called an “attack on the rule of law.”

“To retain our standing and credibility in the markets and in the world, we must clearly communicate to Corporation management and the public that no individual board member, even the Chairperson, can unlawfully veto a supermajority of the board,” Chopra said.

Hsu offered a less confrontational statement Tuesday — his first comments on the conflict — expressing support for the review of bank merger practices but also concern “that legal or procedural quicksand may ultimately limit our ability to act on this issue in a timely manner.”

“I believe the views of the majority of the FDIC Board members should influence the Agency’s agenda and actions. As a Director on the FDIC Board, I will continue to consider each issue on its merits,” Hsu said.

The partisan battle at the FDIC marks a stunning break from 88 years of relative cooperation among the agency’s directors. While FDIC directors have long sparred over policy proposals, the Democratic attempt to undercut the will of McWilliams raises new questions about who can legally set the FDIC’s agenda.

Liberal lawmakers and bank industry skeptics have long pushed regulators to be more questioning of bank mergers. Rapid consolidation in the banking industry, they argue, leaves customers with fewer, riskier options.

Regulators appointed by former President Trump have largely brushed off those concerns, and Republican lawmakers say overbearing regulations imposed by Democratic administrations are a key driver of consolidation.