FDIC chief accuses Democratic board members of ‘hostile takeover’

WASHINGTON — Federal Deposit Insurance Corp. Chair Jelena McWilliams accused the Democratic members of the FDIC’s board of a partisan ploy to try to “wrest control” of the agency from her.

In an op-ed published in the Wall Street Journal, McWilliams held little back in decrying efforts by the three Democrats — who make up a majority of the board — to advance FDIC policy without her approval.

The board’s conflict came to light Dec. 9, when Consumer Financial Protection Bureau Director Rohit Chopra and fellow FDIC board member Martin Gruenberg announced the board’s approval of a request for information on bank merger reviews. (Acting Comptroller of the Currency Michael Hsu also voted in favor of the request.)

But McWilliams, the only Republican on the board, opposed the measure and has deemed it invalid. She argues that longstanding agency practice grants the chair of the board — who is in effect the FDIC’s CEO — with sole authority to bring an item up for a vote.

“This episode is an attempt to wrest control from an independent agency’s chairman with a change in the administration. More than that, it’s an example of the erosion of America’s democracy. Many government institutions are built on norms and practices that encourage parties to work together,” McWilliams wrote in the op-ed published late Wednesday.

“This episode is an attempt to wrest control from an independent agency’s chairman with a change in the administration," said FDIC Chair Jelena McWilliams.

“This episode is an attempt to wrest control from an independent agency’s chairman with a change in the administration,” said FDIC Chair Jelena McWilliams.

Bloomberg News

“This foundation depends on agency leaders who recognize that the long-term benefits of cooperation outweigh the short-term incentive to blow up institutions in pursuit of immediate partisan gains. Since the FDIC’s founding in 1933, all 72 board members have respected that foundation. Until now.”

McWilliams said Chopra deviated from over 80 years of precedent in late October, when he presented her with a draft version of the request.

“The FDIC has long-established processes for working on policy documents, which are initially drafted by career staff with subject-matter expertise and decades of experience,” she wrote. “That the CFPB director would serve the FDIC chairman with a finished document requesting public comment about the FDIC’s merger review process and insist on its publication was unprecedented.”

She said she had been willing to work collaboratively on a version developed by FDIC staff, but the three board members instead asked staff to mark up Chopra’s original document, according to McWilliams. On Nov. 26, she said, an aide to Chopra attempted to circulate a vote that McWilliams said was invalid.

Right after a staff version was given to board members on Dec. 6, they “responded by attempting to vote” again on Chopra’s document, she said.

“Of the 20 chairmen who preceded me at the FDIC, nine faced a majority of the board members from the opposing party, including Mr. Gruenberg as chairman under President Trump until I replaced him as chairman in 2018,” McWilliams wrote. “Never before has a majority of the board attempted to circumvent the chairman to pursue their own agenda.”

But critics of McWilliams say she was undermining the authority of a majority on the board by denying them the ability to vote on the measure. In a recent statement by Chopra following a board meeting earlier this week, he challenged the claims of FDIC officials that the agency’s bylaws prevent board members other than the chair from raising matters for discussion.

“We have provided extensive legal support for why this vote was valid but have received no reply at all from the General Counsel to defend his extreme view,” Chopra said in the statement.

“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,” he added. “Once this normal order and rule of law is accepted by all, it will set the stage for a functional and collaborative board.”

Asked to comment, a CFPB spokesperson referenced Chopra’s earlier statement. An aide to Gruenberg did not immediately respond to a request for comment.

McWilliams said the three Democratic board could have worked more collaboratively with her and the agency’s staff.

“This conflict isn’t about bank mergers. If it were, board members would have been willing to work with me and the FDIC staff rather than attempt a hostile takeover of the FDIC internal processes, staff and board agenda,” she wrote.

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